Happy Constitution Day

http://www.archives.gov/exhibits/charters/constitution.html

Romney Plan?

I received an email from Economists for Romney, asking me to join them in endorsing his economic plan. The email said that

Governor Romney would:

• Reduce marginal tax rates on business and wage incomes and broaden the tax base to increase investment, jobs, and living standards.
• End the exploding federal debt by controlling the growth of spending so federal spending does not exceed 20 percent of the economy.
• Restructure regulation to end "too big to fail," improve credit availability to entrepreneurs and small businesses, and increase regulatory accountability, and ensure that all regulations pass rigorous benefit-cost tests.
• Improve our Social Security and Medicare programs by reducing their growth to sustainable levels, ensuring their viability over the long term, and protecting those in or near retirement.
• Reform our healthcare system to harness market forces and thereby reduce costs and increase quality, empowering patients and doctors, rather than the federal bureaucracy.
• Promote energy policies that increase domestic production, enlarge the use of all western hemisphere resources, encourage the use of new technologies, end wasteful subsidies, and rely more on market forces and less on government planners.

I'm not sure whether this is the plan, but there was no link to to a more detailed plan. It sounds like good stuff, but if there is an actual plan for reducing the growth of Medicare, Social Security and the debt I would like to see it before I endorse it.

Former Students

Scott Drenkard at the Tax Foundation

and Kimberly Suttle at the Lexington Institute

Bad History of Economic Thought

Nicholas Wapshott appears to believe that ignorance of economics should not keep one from writing about it. His editorial in the Washington Post today suggests that the United States experienced hyperinfaltion in the 1970s and that Milton Friedman thought government spending caused inflation and the Fed should manage interest rates to control the economy. In other words, he knows nothing about Friedman or economics more broadly. Nevertheless, someone published a book that he wrote about Hayek and Keynes. Fortunately, the Fredericksburg Free Lance Star ran opposing editorials by Don Boudreaux and Dani Rodrik.

Elinor Ostrom

Her death is a great loss for all the social sciences. Its hard to believe that it has been twenty years since I first read Governing the Commons. It came out in a series that Doug North was co-editing, and he gave me a copy. She will of course be remembered for her pioneering work on common property. I think that in the long run she will be remembered even more for her apprectiation of the diversity of institutions and her insistence upon the need for both rigorous theory and careful empirical analysis. Elinor Ostrom's approach to the analysis of institutional change was not easy, but it was fruitful. I might also note that her papers can used as a model for anyone seeking to write clearly about complicated issues.

More on the 19th Century

What Happened During the 1870s?

Source: Historical Statistics of the United States Millenial Edition series ca 9, ca11 and ca19.  

Shorter papers?

Why does the American Economic Review continue to list some papers as "Shorter Papers" when they are longer than "Articles?" In the most recent issue Schularick and Taylor's "Credit Booms Gone Bust" is in the "Shorter Papers" even though is is over 30 pages long, longer than many of the "Articles." One of the "Articles" is less than 20 pages long. Get rid of "Shorter Papers" and publish the "Articles" in order of perceived importance. Right now it just looks like the editors can't count.   

Dumb Tweets

I just had to delete Brad De Long from the list of people I was following on twitter because he keeps retweeting some guy named Noah Smith. Noah Smith accused Tom Murphy of underestimating the size of North Dakota by a factor of 400. Murphy said that the area of North Dakota was about the same as a square with sides of 425 km. North Dakota is pretty much a rectangle with height of 340km and width of 545 km. Hard to see how he could be off by a factor of 400.

Earlier he said a paper by Michael Bordo and Joseph Haubrich was "bullshit." He appeared to be suggesting that the paper said there were financial crises in 1972 and 1982. The table on page 23 of the paper clearly states that there were not financial crises associated with those business cycles.

I don't know who Noah Smith is or why Brad De Long keeps retweeting him, but I'm not going to waste any further time or energy reading them.

Free stuff

One of my favorite books on American Economic History, Robert Higgs' The Transforamtion of the American Economy, 1865-1914, is available here. Thanks to the Mises Institute and Bob Higgs.

Informal Rules and Food Trucks

Planet Money has a great podcast about the food truck business in New York City. It discusses regualtions that make every parkinjg place illegal, how vendors identify good spots, the economics of location and how it is influenced by product differentiation. But my favorite part was the discussion of informal rules that govern the use of parking spots: If someone has been in a spot for 10 years that is his spot; if there is already a taco truck on the block, don't park your taco truck there.

RIP Levon Helm

http://youtu.be/-VShpcqd3zE

Reply All

Don't use it. This morning I received an email regarding attendance at a conference that I am not planning on attending. It turns out that it was sent to a list of people who should not have received it. I then received over 40 emails from people who were hitting reply all. First, a number of people thought it was necessary to inform everyone that they did not know why they were receiving the email. Then other people started replying to all that they should stop replying to all. These were professors at places like the LSE, Univ. of Chicago, and USC. Can't we all just hit delete?

Saudi Women and the Olympics

Saudi Arabia plans to send zero women to the Olympics this summer. What will (should) the IOC do? 

Good news for me

From the Wall Street Journal

And Selgin's review of Bernanke's history of the Fed

Here.

The History of the Fed

Here is a video of George Selgin lecturing on the history of the Federal Reserve.

Here is a video of Ben Bernanke lecturing on the history of the Federal Reserve.

They do not entirely agree about the benefits of the Federal Reserve System.

Double Blind Studies

The Economist reports on the pseudo placebo effect in randomised control trials.

"In a new paper, Erwin Bulte of Wageningen University and his colleagues conduct a double-blind test of an agricultural intervention—that is, the treated don’t know whether they are receiving the treatment or the placebo. The treatment is a modern seed of cowpeas, the placebo is the traditional seed. As a second experiment in a different set of villages, they do a normal RCT where the treated know that they are receiving the modern seed. Comparing the results of both experiments reveals some striking results. When the farmers don’t know which seed they are planting, there is no difference between the modern and the traditional seed in terms of yield. When they do know that they are being treated, the modern seeds yield considerably more. What the authors call the “pseudo-placebo effect” therefore accounts for the whole effect that a typical RCT would have found."

La Ceiba Microfinance Institution video

La Ceiba is a micro lending agency developed by Professor Shawn Humphrey and students at the University of Mary Washington. It emerged out of work they were doing with Students Helping Honduras. Here is a video describing what they do.

bikes for girls

Great video from the International Growth Centre about giving bikes to girls so they can go to school, explaining the research they used to determine the effectiveness of the program.

free stuff

gretl free econometric analsysis software (also very easy to use)

PANDA-glGo free computer Go (fun but addictive)

Colleges Are Controlling Costs

Recently President Obama received a lot of attention for effectively warning colleges to keep costs under control.Unfortunately, there is a lot of confusion about college costs. Many people confuse cost, posted tuition, and net tuition. . The cost is the full amount spent educating a student, regardless of who pays it. The posted tuition is what is listed on the college web page, but many students do not pay this amount. The net tution is what a student actually pays.

This graph is from the Delta Project it shows, for the Mid Atlantic region, the average full cost per full time equivalent student, what part is paid by the student, what part is paid by someone else, and how these have been changing. Clearly colleges have been containing costs; the total amount spent has increased very little. What has changed is the part that is paid for by the student.

Econ Talk

At Econ Talk Russ Roberts talks to Daren Acemoglu, the Kieth Richards of economics, about why nations fail.

Bad Economics: Krauthammer on Oil Prices

Charles Krauthammer criticizes President Obama for suggesting that "Drill, Baby, Drill" wil nott lowee oil prices. He writes: "So: Decreasing U.S. demand will lower oil prices, but increeasing U.S. supply willl not? This is ridiculous. Either both do or neither does. Does Obama read his own speeches?"
Who is right. On this point it is the president. Yes, price is determined by both supply and demand, but not everyone is a large enough part of supply or demand to influence the price. If I decide to stop working it won't change the salaries of professors. If I double the amount of eggs I consume it won't increase the price of eggs. Why? Because in each case I account for a small part of the total supply and demand. The U.S. accounts for a fairly small part of supply. In terms of proven reserves it was less than 2% of the world total 2009. On the other hand, we accounted for over 20% of world consumption. Thus, changes in U.S. consumption are more capable of influencing the price than changes in U.S. production.

All of this does not imply that we should not increase oil production. Domestic oil production will generate income and create jobs. It won't, however, lower the price of gas

Paper for Business History Conference

This is the abstract of the paper we are presenting at BHC at the end of the month.
Bradley A. Hansen and Mary Eschelbach Hansen

Business and the Evolution of Debt Collection Laws: Garnishment and Wage Assignment in Illinois, 1880-1930

In the 1870s and 1880s legislation and court rulings combined to make the wages of a head of household almost completely exempt from garnishment in Illinois. Yet by the 1930s, Illinois was regarded as one the states where it was easiest for a creditor to claim a large share of a debtor's wages. We argue that the driving force behind the evolution of garnishment and wage assignment in Illinois was the conflict between two groups of business people: large employers and businesses that supplied credit to wage earners. Large employers regarded garnishment and wage assignment as costly nuisances and sought to restrict their use. Businesses that provided credit to wage earners regarded garnishment and wage assignment as important tools and sought to minimize restrictions on their use. Each group pursued change through legislation, through the judiciary, and through private contracting. Because the conflict between large employers and businesses that provided credit was meditated through the political and legal systems, the outcomes were also shaped by the influence of other interest groups and by the ideologies of judges. By the 1930s, this combination of forces left Illinois with a relatively moderate garnishment law but virtually unrestricted use of wage assignment.

Economic Theory and Prediction

I was listening to a podcast at New Books in Law with Lynn Stout discussing her recent book Cultivating Conscience: How Good Laws Make Good People. She was arguing against the assumption of rational self interested behavior and pointed to the large amount of evidence that people often behave in ways that are not narrowly self interested. She then noted that some economists have tried to get around this by saying that people can value things other than money.  She, however, claimed that doing this eliminated the ability to make predicitions because you could explain anything by making the right assumption about what people value: "They did this because that is what they want to do." I think this misinterprets the sort of predicitions that can be made with economic theory. Economic theory enables us to make predicitions about how groups of people will respond to changes in constraints. Assuming that people value giving money to charity does not prevent me from making predicitions. I predict that, in general, if we lower the cost of giving to charity people will give more to charity. I predict that if we increase the cost of voting, in general, people will vote less. One of the fundamental assumptions in economics is that people like lots of different things and that they have tochoose between them. Assuming that one of those things is a nice house and another is feeding the poor presents no problem.The problem is not assuming that people value things other than money, the problem is using changes in those preferences rather than changes in constraints to explain behavior. For instance, explaining financial crises as a result of greed, as if people have become more greedy, tends not to hold up to scrutiny.

Interestingly enough, Professor Stout later noted that if you want to get people to behave ina pro-social fashion you need to make sure that the benefits of selfish behavior are not too great.