Milton Friedman’s early life

“He was born in Brooklyn in 1912. His parents had been poor immigrants from Carpatho-Ruthenia. Milton and his three sisters grew up in Rahway, New Jersey, where his parents earned a modest living as merchants. His father died when he was a senior in high school, but a state scholarship permitted him to go to Rutgers College, which was then a small private school.

“A high school teacher had taught him to love mathematics, and, like Kenneth Arrow about a decade later, he prepared for a career as an insurance actuary. At the same time, economics courses by Arthur F. Burns, later Federal Reserve Chairman, and Homer Jones, later research director of the Federal Reserve Bank of Saint Louis, aroused his interest in economics. Eventually he majored in both fields.

“Upon graduation in 1932, influenced partly by his teachers and partly by the Depression, Friedman chose a tuition fellowship in economics over one in applied mathematics at Brown University. He described Jacob Viner’s first-year graduate course in economics as the greatest intellectual experience of his life. One of his classmates was Rose Director, who later became his wife, his life-long collaborator, and mother of his two children.”

This is from David Warsh, quoting Jurg Niehans.

I can only say that our gain is the insurance industry’s loss. Warsh’s columns are consistently excellent, you can get a free subscription by following the link above.

Which states donate the most money?

Here is the list, done in per capita terms.

Mississippi, the poorest state in the nation, is number one. Then comes Arkansas, South Dakota, Oklahoma, and Alabama, all relatively poor states. The richer states, Connecticut, New Jersey, and Massachusetts, all lie near the bottom.

Andrew Sullivan tells us that the giving states are those that tend to support Bush and the Republicans, suggesting that Republicans are more generous. Well, sort of, church giving is driving these results. Here is the distribution of giving for 2000, churches get 36.5% of all American donations, the single largest category. Art and culture get 11.4%. No doubt, religious states both give more and support Bush more.


I need a much larger vocabulary to talk to you than to talk to myself.

From James Richardon’s Vectors: Aphorisms and Ten-Second Essays, a recent book of aphorisms.

It is hard to write a good book of aphorisms today, it no longer suits the temper of the times, perhaps a bit like the classical symphony. Some in this book I find trite, such as:

Wind shakes the flame but feeds the fire.


Bryan Caplan, with whom I regularly argue about free will, might like this one:

Determinism: How romantic to think the mind a machine reliable enough to transform the same causes over and over again into the same effects. When even toasters fail!

Tell that one to Gary Kasparov!

More to the point is:

If only we were satisfied to have others think of us what we think of them.

While we are on the topic, here is a web list of favorite aphorisms of Nietzsche. And here is a selection of aphorisms from Schopenhauer, also not a cheery fellow, how about this one:

National character is only another name for the particular form which the littleness, perversity and baseness of mankind take in every country. Every nation mocks at other nations, and all are right.

For aphorisms to fit the spirit of the times, perhaps we need a world where at least some negative thoughts are still shocking.


Hey, I wrote a book called In Praise of Commercial Culture, and even I think movies have stunk this year. The only three compelling Hollywood entries I can think of are Finding Nemo, Kill Bill, Part I (for a dissenting opinion, Gregg Easterbrook offers what is about the most negative serious review of a movie I have ever read), and now Mystic River, directed by Clint Eastwood. See the latter before it disappears from theaters. The celebrity system in Hollywood comes under much attack, but a movie this serious and this expensive probably could not have been made without Clint’s hold on the public imagination.

And, by the way, what would Dirty Harry think of Alex’s recent reassurance, directly below, that the government of Singapore tracks the movements only of “scofflaws”?

Congestion Pricing III

…Alex is asking the American public to give our trustworthy government monopoly pricing power over our ability to get around…We also would have to give that same government knowledge of our daily movements….

Ouch, that really hurts! (The debate so far, Tyler I, Alex 1, Tyler II). Tyler seems to forget, however, that government already taxes gasoline (and automobiles, motorcycles, airplanes – even bicycles). Perhaps we should eliminate these taxes but no one thinks much of the argument that we shouldn’t put a price on bicycles because this lets the government (and bicycle manufacturers) control “our ability to get around.” Road pricing is no different on this score.

The privacy argument is a complete non-starter. Singapore, for example, is rarely considered a bastion of privacy yet its system allows drivers to be fully anonymous. The Singapore system is simple. Drivers buy a cash card, much like a copy-card, and every car has a reader. As the cars move under a gantry the system deducts the toll from the card. No identification is ever necessary. (Only scofflaws who drive under the gantry without enough money on their card have their license plate photographed – a bill is then sent to the owner of the car. Exactly the same system we have here in Virginia at many traffic lights.)

All this is not to say that we shouldn’t be wary of government inefficiently using road prices as a revenue source, but this problem is hardly unique to roads and for those who really worry about government note that road pricing is a necessary first step toward road privatization.

A good mom should be sociable

At least in the world of baboons:

Baby baboons born to outgoing mums who enjoy hanging out with other females are considerably more likely to survive their crucial first year than infants born to less friendly mothers…

And the difference is a big one:

Susan Alberts, at Duke University in North Carolina, and one of the research team was surprised by the significance of sociability. “Eight per cent of infant survival is explained by sociality,” she told New Scientist. That is “striking”, she explains, because “we wouldn’t expect to have a large amount of variation that is deterministic – things that a mother can actually control – it’s amazing.”

Here is the full story. In my family of primates, the wife/mother is definitely the sociable one, at night I like to stay at home and write my blog or read.

Bickering with Alex, again

I agree with much of Alex’s post on road pricing, immediately below. And I favor road pricing in a wide variety of instances. But I don’t think it is so easy either.

Alex notes that people are willing to pay for parking, and that no one finds the idea to be strange. True, but how would they feel if you made them pay for “parking within a half mile of their homes”? Most people would rebel against this idea. They understand the difference between a monopolist (someone who controls a major road), and a parking lot owner, who has little monopoly power. If parking rights were subject to monopoly issues, people wouldn’t want to be charged for that either. So I don’t see the two cases as the same, as Alex suggests.

Here are some cases where toll roads have worked, illustrating Alex’s point. But almost always they are imbedded in a context where free (albeit congested) alternatives are also available. A true solution to the congestion problem would involve a much more widespread use of pricing, thus exacerbating the monopoly issue.

We should not forget previous history. It was originally promised that various bridge and highway tolls would be removed, once the infrastructure was paid for, but of course this never happened. In similar fashion, we can expect more widespread road pricing to become an important means of local and state government finance.

In effect, Alex is asking the American public to give our trustworthy government monopoly pricing power over our ability to get around, and in a time of state and local fiscal crises. We also would have to give that same government knowledge of our daily movements, and thus give up our privacy. Yes, people are irrational (I know that I am!), but I am not surprised that this a difficult political sell.

Congestion Pricing II

Tyler asks, Why doesn’t the public doesn’t accept road pricing? But in fact the public does accept road pricing – at least so long as their vehicles are stationary. I am speaking, of course, about pay-parking. Strangely, no one thinks it odd that they should have to pay for road space at point A and at point B but ask them to rent the space in between and you are thought a kook (or, much the same thing, an economist).

The radical disconnect between two things that are the same, suggests that the public’s lack of acceptance for road pricing is due to poor information, an inability to understand the theory, and the terrible weight of the status quo and is not a rational calculation (contra Tyler and Will Baude). I think, however, that we are on the cusp of major breakthroughs. Singapore has long led the way but London’s plan has been a great success. HOT lanes and toll roads are working in CA, Virginia and elsewhere. It won’t be easy but road pricing is the only solution to congestion in major metropolitan areas like Washington, the San Francisco Bay Area and Atlanta. Once a major city adopts the idea others will follow very quickly.

Addendum: We should pay for parking more often too.

Ways in which movies assume away, or do not assume away, scarcity

Here is a list of twenty ways in which movies alter our usual presumptions about scarcity.

Here is one of my favorites:

6. The ventilation system of any building is the perfect hiding place. Nobody will ever think of looking for you in there and you can travel to any other part of the building undetected.

The entire list is amusing, courtesy of the ever-inventive

Or how about this one:

8. Should you wish to pass yourself off as a German officer, it will not be necessary to learn to speak German. Simply speaking English with a German accent will do.


What does the mutual fund scandal cost?

The mutual fund scandals have received significant publicity in recent times, but how much are they really costing us? The current (November 24th) issue of Fortune offers a useful article on the topic (subscription required):

According to Stanford University business professor Eric Zitzewitz, market timing costs long-term shareholders $5 billion a year, and late trading costs $400 million per year. These losses may add up to 1% or less in lost returns in a given year, he says. That equates to about $10 for each $1,000 invested in a fund.

Of course, in economic terms, the real social cost is given by how much this limits or distorts investment, rather than by the size of the transfer away from investors. The magnitude of this distortion is harder to judge, but investors have been moving out of the funds, and many of them cite the scandals as a factor.

As a very rough exercise, compare this change in returns to the Bush tax cut on dividends. The previous top rate on dividends had ranged up to almost 40 percent, now it is 15 percent. So, tricky questions of incidence aside, you get to keep 25 percent or so extra of your gross dividend return. If the dividend rate on the stock is, say, 4 percent, you gain about one percent on your investment asset value, each year, from the tax cut. Which may be just about how much you are losing back to the mutual funds.

Some work on Eric Zitzewitz’s home page suggests that market timing can costs investors as much as two percent a year (this seems high to me, plus it is odd that Fortune then cites him as saying one percent). Yet another source, taken from his home page, cites a loss of 0.6 basis points on domestic funds, and a startling 5 basis points on international funds.

Plus you must pay expense ratios, which average at least 1.5% a year. Upfront sales commissions, a one-time fee, average more than 4.5% and sometimes run as high as eight percent of asset value or more.

Now mutual funds do not comprise the entirety of investment, by any means, but under this estimate the costs of mutual fund fees and chicanery, on a given investment, could be much more than the benefit reaped from the Bush tax cut.

There are two ways to look at this. First, all these fees may reflect marginal costs within a rational equilbrium. In that case the tax cut will provide a modicum of relief and encouragement.

Second, these fees reflect investor insensitivity to their true returns. This would suggest that the dividend tax cut, in the broader scheme of things, hasn’t done much to stimulate additional investment. I’ll guess-timate that this latter option is more relevant than the former.

The new chief economist at the World Bank

It is Francois Bourguignon. His work on inequality is highly regarded, but how is his policy sense? He recently noted the following:

It’s true that the Bank has focused on poverty and did not insist so much and as explicitly on inequality. I believe we must give more space to the problem of inequality and income distribution in general.

When it comes to growth he gives a “yes but” answer:

Of course, growth is critical to poverty reduction, but we need to analyze more closely who actually benefits from growth, and from the policies, programs and projects undertaken to reduce poverty. Will one or another group, or class, benefit more than others? Are our strategies reducing or increasing inequality? Are they pro-poor, benefiting everybody in the same proportion or benefiting relatively more those who are already better off?

Here is an interview with Bourguignon, including a brief biography, courtesy of

My take: Go for growth, and worry about short-term inequalities only insofar as they pose political constraints. Getting growth is hard enough, and concern about inequality often gets twisted to favor special interests and block reforms. We should never care if a policy is “benefiting everybody in the same proportion”, and of course it never will do so, no matter how good an idea.

Man vs machine, game II

Gary Kasparov (the human!) commits a gross blunder, hanging a pawn, in an even position. The computer pounced and won. will be one source of information, try also

The bottom line: Two games left in the match, and I hope you knew to bet on the machine. At this point you have to conclude that Gary, while the best human chess player in the world, is not the best guy to put up against a computer. Too much emotional baggage, it would appear.

What is love?

When you first fall in love, you are not experiencing an emotion, but a motivation or drive, new brain scanning studies have shown.

The early stages of a romantic relationship spark activity in dopamine-rich brain regions associated with motivation and reward. The more intense the relationship is, the greater the activity.

Here is the best part, or I suppose I should say the worst part:

Early on in a relationship, the images showed that the brain seems to be very focused on planning and pursuit of pleasurable reward, says Fisher, mediated by regions called the right caudate nucleus and right ventral tegmentum. The same regions become active when a person enjoys the pleasure of eating chocolate, she adds…There are also patterns that resemble aspects of obsessive compulsive disorder.

Here is the story from New Scientist, here is related research on the links between love and OCD. The research also suggests gender differences; male love has more to do with lust than does female love.