Tuesday, May 31, 2011

War Is a Government Program

Must read article

Economics Professors’ Favorite Economic Thinkers, Journals, and Blogs (along with Party and Policy Views)

A sample of 299 U.S. economics professors, presumably random, responded to our survey which asked favorites in the following areas: Economic thinkers (pre-twentieth century, twentieth century now deceased, living age 60 or older, living under age 60), economics journals, and economics blogs. First-place positions as favorite economist in their respective categories are Adam Smith (by far), John Maynard Keynes followed closely by Milton Friedman, Gary Becker, and Paul Krugman. For journals, the leaders are American Economic Review and Journal of Economic Perspectives. For blogs, the leaders are Greg Mankiw followed closely by Marginal Revolution (Tyler Cowen and Alex Tabarrok). The survey also asked party-voting and 17 policy-view questions, and we relate the political variables of respondents to their choice of favorites.


Monday, May 30, 2011

Book Reviews

Book Reviews

EH.Net Review offers reviews of new releases of interest to scholars and teachers in the fields of economic history, business history, and the history of economics. All book reviews are posted to the EH.Net-Review list, then added to EH.Net's book review library.

Waves of Innovation

Sunday, May 29, 2011

Economics at Community Colleges

I will be attending the workshop Teaching and Learning Economics in Palo Alto, CA, May 30 - June 1, 2011.


•Learn how academic disciplines are supporting community college instructors and use this information to initiate new projects across disciplines

•Describe and evaluate innovative workshops for discipline-based faculty development related to teaching at community colleges

•Develop plans for regional workshops to support economics instruction in the project's second year

Saturday, May 28, 2011

Who Benefits from Regulations

Boyes asks the question "Who Benefits from Regulations?"

This question is at the heart of the work of Buchanan et al in Public Choice Economics.

The answer is

Individually we all potential gain.

Collectively we all will lose.

The logic here is clear - gains from regulation are concentrated upon those who advocate for regulation, while the cost is diffused throughout society.

This leads to a moral quandry - do I accept a regulatory benefit that costs society - both currently and in the future?

The answer is, I do and we all do. At my institution there is a union and collective bargaining. The union requires certification (a regulation) for employment. Thus Bill Gates, Warren Buffet and Steven Jobs cannot be employed at my institution, due to regulation.

Do I receive a benefit from this regulation? You bet. Do I decline the benefit. No. Do I advocate against the regulation? You bet.

My brother, self employed in the private sector, labels the above hypocritical. He asks, why not take your labor to an unregulated part of the economy?

My response - there are only less regulated areas of our economy. This is, of course, an unsatisfactory response.

My second response - I advocate for a free and responsible society from my position - as a protected by regulation, public sector employee. This is, of course, an unsatisfactory response.

It is a curious moral dilemna in which I find myself. Regulation allows me to earn a rate of compensation far, far above the market. Further, I enjoy complete job security, fringe benefits far above the market and a pension (defined benefit) that is essence a transfer from taxpayes to . . . . me.

I spend some time reflecting on this paradox - I hold deeply to the views of liberty and responsibility - how responsible am I, really.

And am I representative of Joe Lunchbucket? Nope, Joe Lunchbucket does not have the protected rents I enjoy.

Who Benefits from Regulations

A Mechanic writes at Mises.org: (see full article at:

“Who benefits from regulations? The list includes the politicians who use these issues to their advantage regardless of the truth. It includes the government bureaucrats who want more power to justify their own salaries and positions. It also includes reporters who can't wait for the next "breaking news" about an "environmental threat," or "dire emergency." And it includes university professors and other academic elites who come in to petition for huge government grants and to get paid to speak as "experts." The dark irony is that all these supposed protectors are really engaging in a self-serving round robin of deceit.
The truth is they are horrifically destructive to the prosperity and well-being of all Americans. But because their public faces hide the despicable truth, they have been able to get away with it.
Our only hope is to get these people out of business — literally and figuratively. I've got to be honest, though. It won't be easy. They are fighting for their livelihoods, too.”
This is not necessarily news to anyone who has thought about the reasons for regulations. As I have posted before, professors seek grants from government on any topic the bureaucrats deciding to allocate money to find of value. For instance, look how much federal government money has been allocated to the supporters of “global warming” or “climate change” and how little to critics – none, as far as I know. As A Mechanic says, it is also true that once one receives several grants one becomes an “expert” and is able to testify about the topic, thereby adding additional support to the growth of government. I always maintained that government and the federal reserve act as the largest employment agency for economists. The growth of government creates an increased demand for economists, who then discover “market failures” to which additional government must be applied – a vicious circle. The Federal Reserve hires many economists, most of whom have the objective of demonstrating how important the Federal Reserve is.
The question I keep asking and pessimistically answer is “Will this cycle ever stop?”


About EH.Net

The Economic History Association owns and operates the EH.net website and mailing lists to provide resources and promote communication among scholars in economic history and related fields. The Economic History Society (U.K.), the Business History Conference, and the Cliometric Society also support the site.

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These services include research abstracts and book reviews, a collection of course syllabi, a directory of economic historians, the EH.Net Encyclopedia of Economic and Business History, several databases, and numerous links to websites related to economic history.

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Teaching Economics and Research in Economic Education

I will be attending the conference below:

June 1-3, 2011
Palo Alto, CA
The AEA Committee on Economic Education, in cooperation with the Journal of Economic Education, will host a national conference on Teaching Economics (at the undergraduate and graduate levels) and Research in Economic Education (all levels, including precollege) from June 1-3, 2011.

The venue for the conference will be the Stanford Institute for Economic Policy Research.

Plenary sessions at the conference will include:

•Vernon Smith, "Bringing Experiments and the Scottish Enlightenment into the Classroom"

•B. Douglas Bernheim, "What Have We Learned About the Effects of Economic and Financial Education on Household Financial Decisions?"

•John Taylor, “Lessons from the Financial Crisis for Teaching Economics”
The conference will begin at 1:00 p.m. on June 1 and end at 11:00 am on June 3.

Friday, May 27, 2011

State Authoritarianism

Over the past two years, Boyes and I have explored the dynamic free market, the static public sector and the apparent evolution in our society toward the former. This stimuli for this evolution are far from clear, although we have discussed the role played by intellectuals and pundits, the success that interventionists have played in controlling the commanding heights of formal institutions - media, government and academy, as well as the possibility that security may be a higher value than freedom for a broad segment of society.

Boyes poses the following questions based upon the recent ASET book club:

"Why do so many myths surround the leftists and not the free markets types?" This led to the question of "Why do so many countries follow the leftist road rather than toward free markets and liberty?" This led to the real question we have to face today: "Why aren't there any societies like the U.S. in the late 18th century and early 19th century?" Is it inevitable that societies tend to move toward larger government no matter where the society begins? I think, sadly, it is.

The current posting over on 5 books speaks to these points.

Dambisa Moyo is author of New York Times bestseller Dead Aid. In 2009 Moyo was named by Time magazine as one of the “100 most influential people in the world”, so she seems to be a public intellectual working within the mainstream media. Her work suggests a thoughtful consideration of the tradeoff between freedom and security as well as an informed analysis of the alternatives of capitalism and, what she calls state authorianism.

She makes the following point in the above blog posting:

Do you sympathise with his idea that state authoritarianism has advantages?

Yes, I’ve written about that. But when you say advantages, it depends what you’re talking about. If you’re asking me if democracy is a prerequisite for economic development, clearly it’s not. China is not democratic, nor is Singapore, nor was Chile in the manner in which we define democratic process. There are numerous countries around the world that have achieved long-term, sustained economic growth and lifted millions of people out of poverty without living in a classical democracy. So that’s not up for debate. The question is, as a long-term strategy is it possible for countries to have sustained economic growth with a large role for the state? Also, what happens when you have a large, critical middle class who demand greater political franchise? We don’t know what the answer to that is.

In taking a longer view, I think the argument can be made that free markets are a relatively new institutional framework and authoritarian systems that vest control centrally have been the dominant organizational form over the past 2000 years. Looking at the past 500 years there does seem to be evidence that free markets stimulate growth for some parts of the world. Of course, the challenging factor here is time and the inability to impose the institutional support for free markets. In particular, the informal institutional support for free markets seems to have preceeded the actual development of capitalism in both formal institutions and practice.

This beening the case, I wonder if free markets may be the exception rather the rule in human experience.

I am not certain if this is related to the questions raised by Boyes, but an interesting tidbit was posted over on Greg Mankiw's blog. Some years ago, Boyes spoke at the ASET conference on causes of the "Great Recession". In a presentation that anticipated the subsequent events, Boyes centered on the immorality of rent seeking as an expansive government worked to shape macroeconomic conditions through intervention in specific sectors of the economy. To advance this argument, Boyes used Barney Frank and, I believe Chris Dodd as examples along with Freddie and Fannie Mae/Mac and other "quasi" or actual government agencies.

Mankiw reports

Perhaps because Barney Frank is my congressman, I took a special interest in this interview of Gretchen Morgenson, New York Times reporter and coauthor of Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon:

DAVIES: What's fascinating about this story is that you have this entity [Fannie Mae], which you said became the largest and most powerful financial organization in the world, you had this entity, which has government guarantees and government subsidies, although perhaps indirect, but it engages in major political contributions and lobbying expenses. How big a player were they in terms of contributing to politicians and lobbying?
Ms. MORGENSON: They were very large. The numbers might not seem large in today's terms, but they were extremely shrewd and, you know, took great care, especially of the congressmen that were on the House Financial Services Committee and the senators on the Banking Committee.
They knew that these were very important people to their livelihood and to maintaining the government perquisites as they were.
One of the really big beneficiaries, albeit indirectly, was Congressman Barney Frank of Massachusetts. Back in 1991, when Congress was writing the legislation that would, you know, enhance or improve the oversight of Fannie Mae, or so they thought, Frank actually called up the company and asked them to hire his companion, who had just gotten an MBA from the Amos Tuck School of Business.

Of course the company was happy to provide a job for his companion and rolled out the red carpet in a series of interviews with a variety of executives, and it ultimately did hire the man. And he stayed there for I believe seven years.

So that was an example of the kind of thing that Fannie Mae would do. Now, when I asked Mr. Frank about this, I asked him, did it have any impact on his approach to the company. You know, was it a conflict? Did he feel that it had been a conflicted, put him in a conflicted spot? And he said absolutely not, that he didn't really remember being interested or having much to do with the 1992 legislation.

But the record shows that he was very aggressive and really tough on those who were testifying in Congress about reining in Fannie Mae and Freddie Mac. He was very aggressive to, for instance, the head of the Congressional Budget Office at that time, who was trying to call for increased capital requirements and to call for a focus on safety and soundness at Fannie Mae, that Frank really took him apart in testimony.

DAVIES: Right, and you write there were a number of occasions on which he defended Fannie and their record of promoting home ownership but in the end had a different view of the company, right?
Ms. MORGENSON: Well, after the taxpayers had to take it over, he, you know, came around, finally. But by then it was too late. He said: Well, we should shut them down. But, you know, it really was far too late, and he had been such a vocal supporter for so long that it was sort of an odd turnabout.

I share this not to argue that Boyes was right early on. Rather the reaction to Boyes keynote at ASET illustrates, I think, the informal institutional antagonism to capitalism and active willingness to sacrifice liberty in favor of hoped for security by a wide segment of society. Certainly at my institution of "higher" learning the response to Boyes was critical and negative. The chief academic officer at my institution, a Phd in history, considered Boyes' presentation to be "insane". This measured response was shared by a number of the participants, many of my students who attended and some of my colleagues in economics.

If this is the response to a reasoned critique of the state at a conference in which one would hope to find open minded consideration of the tradeoff between liberty and perceived security, then it would appear our society has moved rather far down the road to serfdon.

The Che Myth

We had a nice discussion based on the book "The Che Myth" Thursday evening at book club. The boo0k itself is enlightening for those who have not been aware of what Che Guevara was. But, the importance of the book to the club was the discussion it led to. A question was posed, "Why do so many myths surround the leftists and not the free markets types?" This led to the question of "Why do so many countries follow the leftist road rather than toward free markets and liberty?" This led to the real question we have to face today: "Why aren't there any societies like the U.S. in the late 18th century and early 19th century?" Is it inevitable that societies tend to move toward larger government no matter where the society begins? I think, sadly, it is. I like the optimism in Ridley's "The Rational Optimist", but I have a hard time making it seem logical. A study of history does not provide any basis for the continuance of a free or libertarian society if one should arise. Democracy breeds rent seeking and increased roles for government. A Republic form of democracy leads to a breakdown of the Republic and a move to empire. A study of Rome, for instance, shows the pattern of the development of a Republic and a gradual decay to empire and then collapse.

Tuesday, May 24, 2011

GDP is Misleading

We economists have all been taught the Keynesian tautology that GDP = C + I + G + (X-M). I was thinking about this definition of the output of the economy wondering why we include G. After all, to have G is to have taken income from the private sector or to have borrowed in order to spend. At best, this G is another application of Bastiat’s broken window fallacy: G merely replaces what would have been done by the private sector. How can this increase output and standards of living? At worst, increased G reduces GDP relative to what would have occurred without it. The government multiplier effect has been estimated to be far below 1 so that each dollar taken from the private sector and spent by government does not provide a dollar of income but something much less than a dollar. In other words GDP is a misleading statistic. I have used it for 30 years as an indicator of standards of living, showing how rich the U.S. is relative to other nations, etc. I don’t know why it took until now for the lightbulb to come on.

Realizing that anything I discover or innovate is likely to have been discovered previously by someone else, I did a search on the internet and found some people calling for the use of a private sector GDP instead of GDP. This would be GDP less government expenditures. Another suggestion is to use something called a “structural” GDP. This would be GDP not financed by debt. So here is a comparison of these measures.

To provide an instructive illustration of the difference consider the period just after World War II when soldiers were coming home and the federal government was downsizing. In fact, the U.S. Government went from 43.6% of GDP to 11.6% in 1948. What happened? Measured by GDP, the nation had two short sharp recessions as the private sector figured out what to do with all the talent released from government employment, and real per capita GDP flat-lined. But, focusing on the private sector we get a totally different picture. From the peak of government expenditure in 1944 until 1952, the per capita real Structural GDP, the GDP that was not merely debt-financed consumption, soared by 87%; the Private Sector GDP, in per capita real terms, jumped by more than 90%.

"Control" of the Money Supply

Boyes identifies an important component of society - money. As economies mature the importance of money increases. The functions of money as well as the related functions of financial institutions are an institutional matrix that becomes critical for development and growth.

As with critical functions one can consider the costs and benefits and consequences of locating decision making - privately with individual agents using their own knowledge in pursuit of their own aims, or centrally by the state. This opposing forms of decision making generate an array of incentives that lead to radically different costs, benefits and consequences.

Before considering the alternative to the status quo, I find it useful to consider the formal and informal institutional framework that emerges to support a free and responsible society, what Adam Smith called a systemn of natural liberty. This framework is far from anarchy or even laissez faire, the government is responsible for defining and enforcing property rights, preserving the sanctity of contracts, and administering justice. These formal institutions develop after the informal institutional support - beliefs, conventions and norms emerge that support freedom, liberty and responsibility. But the key point for me is the essential role played by the state and an understanding of the areas (most) in which the absence of state action, centralization and planning leads to a more moral society and a higher order of outcome for society - greater economic welfare. This dual consequence - a more moral society with greater economic welfare is the general outcome from a system of natural liberty and the absence of the state.

So, money. Why would the government grant itself a monopoly on money, if the outcome is an immoral society with diminished economic welfare.

Well, it would seem that first, informal institutions - beliefs, norms and conventions have emerged that shape public support for government central banks, heavy intervention in financial markets and a state monopoly over the money. In other blogs, Boyes and I have commented on the emergence of this informal institutional view that is shaped by elites and intellectuals. This emergence has been, in the course of our history, far from constant. During two periods in the 19th century - the so called free banking or wildcat banking periods - there was pushback against central control by the state of money and financial institutions.

That said, the direction of public opinion toward intervention has been increasing in the 20th century and the early 21st century.

Boyes does a nice job of outlining the costs and consequences of this intervention by the state. Those of us who advocate a responsible and free society must acknowledge that this increasing intervention is supported by the vast majority of elites and intellectuals and, unsurprisingly, the general public.

As Boyes and I end our teaching careers I look to the young generation of thinkers and scholars who, after an analysis of the costs and benefits of comparative economic systems, advocate for liberty and responsibility with respect and some trepidation. Given the path dependence of informal institutional evolution, the current climate and public opinion, their importance has never been greater and their job more daunting.

More on grade inflation


Monday, May 23, 2011

Indebtedness for What?

Pratt referred to the piece about the indebtedness of the class of 2011. A major part of the reason that it costs so much to go to college is the support of the federal government for activiies at the universities. Research support grows, student loan programs grow, so that tuition and fees grow. This requires more student loans and more grants. It is a vicious cycle that is sure to end, most likely because the university disintegrates replaced by free market solutions. The university is an anachronism buoyed by the faculty who are supported through government grants and the bureaucracies supported by government monies. Forcing students to take required courses in women's or ethnic studies, secularism, society and the world, etc., etc., is merely a way to maintain support for faculty in those areas -- faculty that could not get real jobs in society. Such requirements do not enhance the job prospects of the student. I did an internet search on titles of government grants provided to universities and came up with a couple of comical lists. Here are a few just by the Department of the Interior:

National Park Service- Climate Change Impacts on Key Carnivores in the Northern Rockies: the Combined Effects of Climate Change, Fragmentation, and Human Activities on Grizzly and Wolverine Populations in the Transboundary Flathead and Glacier Park Ecosystem Total Funding: $113,000

National Park Service - Using mtDNA and Microsatellites from Current Reference Populations and Museum Specimens to Explore the Heritage of Cutthroat Trout in Rocky Mountain National Park. Total Funding: $50,490

National Park Service - Systematic Monitoring of Thermal Springs and Features in Yellowstone National Park for Estimating Heat Flow and Detecting Change. Total Funding: $119,999

National Park Service- Expansion of Behave Research and Program (Cows Eating Weeds). Total Funding: $31,000

Polar Bear Co-Management (I'm surprised the government hasn't unionized the bears). Total Funding: $375,000. Awards: $100,000.

Westfield River: Westfield Wild and Scenic River Assistance. Total Funding: $334,000

National Park Service - Monitoring Landbirds in Northern Colorado Plateau Network Park Units and Yellow-Billed Cuckoos at Dinosaur National Monument. Total Funding: $41,507

National Park Service - Mountain Pine Beetle Altered Forest Fuel Influences on Wildfire in Glacier National Park. Total Funding: $40,000.

Estimation of Chinook Salmon Escapement in Togiak River Watershed. Total Funding: $145,755 Award: $46,765

Co-management for Subsistence Use of Pacific Walrus. Total Funding: $200,000.

2010 Request for Proposals - Seabird Monitoring Program. Total Funding: $150,000 Award: $50,000

Four Corners Sustainable Tourism Projects. Total Funding: $80,000 Award: $20,000

Sean Hannity’s research department complied a list of :
“The 102 worst ways the government is spending your tax dollars”:
102: Protecting a Michigan insect collection from other insects ($187,632)
101: Highway beautified by fish art in Washington ($10,000)
100: University studying hookup behavior of female college coeds in New York ($219,000)
99: Police department getting 92 blackberries for supervisors in Rhode Island ($95,000)
98: Upgrades to seldom-used river cruise boat in Oklahoma ($1.8 million)
97: Precast concrete toilet buildings for Mark Twain National Forest in Montana ($462,000)
96: University studying whether mice become disoriented when they consume alcohol in Florida ($8,408)
95: Foreign bus wheel polishers for California ($259,000)
94: Recovering crab pots lost at sea in Oregon ($700,000)
93: Developing a program to develop "machine-generated humor" in Illinois ($712,883)
92: Colorado museum where stimulus was signed (and already has $90 million in the bank) gets geothermal stimulus grant ($2.6 million)
91: Grant to the Maine Indian Basketmakers Alliance to support the traditional arts apprenticeship program, gathering and festival ($30,000)
90: Studying methamphetamines and the female rat sex drive in Maryland ($30,000)
89: Studying mating decisions of cactus bugs in Florida ($325,394)
88: Studying why deleting a gene can create sex reversal in people, but not in mice in Minnesota ($190,000)
87: College hires director for a project on genetic control of sensory hair cell membrane channels in zebrafish in California ($327,337)
86: New jumbo recycling bins with microchips embedded inside to track participation in Ohio ($500,000)
85: Oregon Federal Building's "green" renovation at nearly the price of a brand new building ($133 million)
84: Massachusetts middle school getting money to build a solar array on its roof ($150,000)
83: Road widening that could have been millions of dollars cheaper if Lousiana hadn't opted to replace a bridge that may not have needed replacing ($60 million)
82: Cleanup effort of a Washington nuclear waste site that already got $12 billion from the DOE ($1.9 billion)
81: Six woodlands water taxis getting a new home in Texas ($750,000)
80: Maryland group gets money to develop "real life" stories that underscore job and infrastructure-related research findings ($363,760)
79: Studying social networks like Facebook in North Carolina ($498,000)
78:18 North Carolina teacher coaches to heighten math and reading performance ($4.4 million)
77: Retrofitting light switches with motion sensors for one company in Arizona ($800,000)
76: Removing graffiti along 100 miles of flood-control ditches in California ($837,000)
75: Bicycle lanes, shared lane signs and bike racks in Pennsylvania ($105,000)
74: Privately-owned steakhouse rehabilitating its restaurant space in Missouri ($75,000)
73: National dinner cruise boat company in Illinois outfitting vessels with surveillance systems to protect against terrorists ($1 million)
72: Producing and transporting peanuts and peanut butter in North Carolina ($900,000)
71: Refurnishing and delivering picnic tables in Iowa ($30,000)
70: Digital television converter box coupon program in D.C. ($650 million)
69: Elevating and relocating 3,000 feet of track for the Napa Valley Wine Train in California ($54 million)
68: Hosting events for Earth Day, the summer solstice etc. in Minnesota ($50,000)
67: Expanding ocean aquaculture in Hawaii ($99,960)
66: Raising railroad tracks 18 inches in Oregon because the residents of one small town were tired of taking a detour around them ($4.2 million)
65: Professors and employees of Iowa state universities voluntarily taking early retirement ($43 million)
64: Minnesota theatre named after Che Guevara putting on "socially conscious" puppet shows ($25,000)
63: Replacing a basketball court lighting system with a more energy efficient one in Arizona ($20,000)
62: Repainting and adding a security camera to one bridge in Oregon ($3.5 million)
61: Missouri bridge project that already was full-funded with state money ($8 million)
60: New hospital parking garage in New York that will employ less people ($19.5 million)
59: University in North Carolina studying why adults with ADHD smoke more ($400,000)
58: Low-income housing residents in one Minnesota city receiving free laptops, WiFi and iPod Touches to "educate" them in technology ($5 million)
57: University in California sending students to Africa to study why Africans vote they the way they do in their elections ($200,000)
56: Researching the impact of air pollution combined with a high-fat diet on obesity development in Ohio ($225,000)
55: Studying how male and female birds care for their offspring and how it compares to how humans care for their children in Oklahoma ($90,000)
54: University in Pennsylvania researching fossils in Argentina (over $1 million)
53: University in Tennessee studying how black holes form (over $1 million)
52: University in Oklahoma sending 3 researchers to Alaska to study grandparents and how they pass on knowledge to younger generations ($1.5 million)
51: Grant application from a Pennsylvania university for a researcher named in the Climate-gate scandal (Rep. Darrell Issa is calling on the president to freeze the grant) ($500,000)
50: Studying the impact of global warming on wildflowers in a Colorado ghost town ($500,000)
49: Bridge built over railroad crossing so 168 Nebraska town residents don't have to wait for the trains to pass ($7 million)
48: Renovating an old hotel into a visitors center in Kentucky ($300,000)
47: Removing overgrown weeds in a Rhode Island park ($250,000)
46: Renovating 5 seldom-used ports of entry on the U.S.-Canada border in Montana ($77 million)
45: Testing how to control private home appliances in Martha's Vineyard, Massachusetts from an off-site computer ($800,000)
44: Repainting a rarely-used bridge in North Carolina ($3.1 million)
43: Renovating a desolate Wisconsin bridge that averages 10 cars a day ($426,000)
42: 4 new buses for New Hampshire ($2 million)
41: Repaving a 1-mile stretch of Atlanta road that had parts of it already repaved in 2007 ($490,000)
40: Florida beauty school tuition ($2.3 million)
39: Extending a bike path to the Minnesota Twins stadium ($500,000)
38: Beautification of Los Angeles' Sunset Boulevard ($1.1 million)
37: Colorado Dragon Boat Festival ($10,000)
36: Developing the next generation of supersonic corporate jets in Maryland that could cost $80 million dollars each ($4.7 million)
35: New spring training facilities for the Arizona Diamondbacks and Colorado Rockies ($30 million)
34: Demolishing 35 old laboratories in New Mexico ($212 million)
33: Putting free WiFi, Internet kiosks and interactive history lessons in 2 Texas rest stops ($13.8 million)
32: Replacing a single boat motor on a government boat in D.C. ($10,500)
31: Developing the next generation of football gloves in Pennsylvania ($150,000)
30: Pedestrian bridge to nowhere in West Virginia ($80,000)
29: Replacing all signage on 5 miles of road in Rhode Island ($4,403,205)
28: Installing a geothermal energy system to heat the "incredible shrinking mall" in Tennessee ($5 million)
27: University in Minnesota studying how to get the homeless to stop smoking ($230,000)
26: Large woody habitat rehabilitation project in Wisconsin ($16,800)
25: Replacing escalators in the parking garage of one D.C. metro station ($4.3 million)
24: Building an airstrip in a community most Alaskans have never even heard of ($14,707,949)
23: Bike and pedestrian paths connecting Camden, N.J. to Philadelphia, Penn. when there's already a bridge that connects them ($23 million)
22: Sending 10 university undergrads each year from North Carolina to Costa Rica to study the rainforests ($564,000)
21: Road signs touting stimulus funds at work in Ohio ($1 million)
20: Researching how paying attention improves performance of difficult tasks in Connecticut ($850,000)
19: Kentucky Transportation Department awarding contracts to companies associated with a road contractor accused of bribing the previous state transportation secretary ($24 million)
18: Amtrak losing $32 per passenger nationally but rewarded with windfall ($1.3 billion)
17: Widening an Arizona interstate even though the company that won the contract has a history of tax fraud and pollution ($21.8 million)
16: Replace existing dumbwaiters in New York ($351,807)
15: Deer underpass in Wyoming ($1,239,693)
14: Arizona universities examining the division of labor in ant colonies (combined $950,000)
13: Fire station without firefighters in Nevada ($2 million)
12: "Clown" theatrical production in Pennsylvania ($25,000)
11: Maryland town gets money but doesn't know what to do with it ($25,000)
10: Investing in nation-wide wind power (but majority of money has gone to foreign companies) ($2 billion)
9: Resurfacing a tennis court in Montana ($50,000)
8: University in Indiana studying why young men do not like to wear condoms ($221,355)
7: Funds for Massachusetts roadway construction to companies that have defrauded taxpayers, polluted the environment and have paid tens of thousands of dollars in fines for violating workplace safety laws (millions)
6: Sending 11 students and 4 teachers from an Arkansas university to the U.N. climate change convention in Copenhagen, using almost 54,000 lbs of carbon dioxide from air travel alone ($50,000)
5: Storytelling festival in Utah ($15,000)
4: Door mats to the Department of the Army in Texas ($14,675)
3: University in New York researching young adults who drink malt liquor and smoke pot ($389,357)
2: Solar panels for climbing gym in Colorado ($157,800)
1: Grant for one Massachusetts university for "robobees" (miniature flying robot bees) ($2 million)
GRAND TOTAL: $4,891,645,229

Mama, don't let your kids grow up to be academics; Mama don't let your kids grow up and go to university.


The most commonly awarded grade is an A, the second most common grade is a W (withdraw). This has been the trend at my institution over the past 10 years - see here - http://www.maricopa.edu/business/ir/trends/HTML/FallET_DO.htm

Our institution serves a segment of the population that is increasingly deficient in one or more skills necessary for learning. That is, over 50 per cent of incoming students test into remdial English, reading or math and a large number of these students test into all three areas. That said, the rising grade level seems odd given the increasing decline in incoming preparedness of the majority of our students. I wonder if this dynamic is present only at my institution or shared by other segments of higher education.

Higher education can be viewed as consumption, signal, investment and/or entertainment.

Higher education has evolved over time in many ways - evaluation in the form of grading is certainly one of the most obvious and this change may play a role in the mix of consumption, signal, investment and/or entertainment both perceived by society and the participants.

Source: http://gradeinflation.com/

This web site is an outgrowth of an op-ed piece that I wrote on grade inflation for the Washington Post, "Where All Grades Are Above Average" In the process of writing that article, I collected data on trends in grading from about 30 colleges and universities. I found that grade inflation, while waning beginning in the mid-1970s, resurfaced in the mid-1980s. The rise continued unabated at virtually every school for which data were available. By March 2003, I had collected data on grades from over 80 schools. Then I stopped collecting data until December 2008, when I thought it was a good time for a new assessment.

Out of curiosity

Sunday, May 22, 2011

Number of the Week: Class of 2011, Most Indebted Ever.

By Mark Whitehouse
$22,900: Average student debt of newly minted college graduates

The Class of 2011 will graduate this spring from America’s colleges and universities with a dubious distinction: the most indebted ever.

As of December 2010, total student debt outstanding stood at $530 billion in the U.S., up 29% from December 2007. Other types of household debt shrank 8% over the same period. Given the state of the job market, many degree-holders will face a long slog to get debt-free: The Collegiate Employment Research Institute estimates that the average salary for holders of new bachelor degrees will be $36,866 this year, down from $46,500 in 2009.

Saturday, May 21, 2011

The Public Good

Economists are very adept at devising "market failure" arguments for government intervention. The latest surge has been the public good. A public good is a good that is nonrivalrous and non-exclusive. This means that if I consume some of the good it does not reduce the amount left for others. Non exclusive means that individuals can not be excluded from consuming the good. Recently Ben Bernanke said that R & D is a public good so that the government should support research and development. Why would research and development be non-rivalrous or non-exclusive? If I carry out research don't I own that work? Can't I decide who to include or not to include in knowledge about my research? And if I innovate something why can I not make money bring the something to market? In what way would government support generate a good that wouldn't otherwise be produced? Bernanke's argument is simply another dose of urging the government to pick and choose winners and losers. It is the constant failure to recognize Bastiat's broken window fallacy.

I have been in a long term debate with a colleague of mine over control of the money supply. I argue that money should be privately produced and competitively supplied. Seignorage not with standing, there is not a natural monopoly in supplying money. It would be much like a network where the marginal value of the membership in the network increases as the network grows. But in every network, there are competitors, upstarts inducing individuals to switch to another network. There is not just one network -- for instance we have ATT, Verizon, Sprint, ....etc. We have the Mac and the PC and Linux operating systems. If Pratt money is viewed with confidence and trust then people will use Pratt money. But if Jones is able to provide a better guarantee of value -- say by backing with gold or 100% deposit balance -- then people will switch to Jones from Pratt or perhaps use both. People now use Visa, MasterCard, American Express, and other private forms of credit.
But my colleague says money is a public good. To me this does not make sense; how is currency non-exclusive or non-rivalrous?

Although we have seen many public goods myths debunked over time -- such as the claim that the lighthouse, fire and police protection, food safety, and even national defense are public goods -- economists continue to create arguments that this or that is a public good and therefore requires increased governmental role.

UnderstandingSociety: Aggregation dynamics

The social world starts with social individuals. So how do we get more complex social outcomes out of the actions and thoughts of independent individuals? How do the actions and thoughts of individuals aggregate into larger social happenings? How did the various religious, political, and relational attitudes of rural Kenyans aggregate to widespread ethnic violence a few years ago? What sorts of conditions lead to interactions that bring about unexpected outcomes? And, of course, how do larger social happenings impinge upon individuals, leading to characteristic kinds of socialized behavior?

These are questions I've usually addressed from the other angle -- the "dis-aggregation" angle

UnderstandingSociety: Aggregation dynamics

The Difference Between a Tax Break and a Subsidy

Thursday, May 19, 2011

20 Startling Facts About the US Housing Market

Two posts this morning caught my attention. The first is linked above and is familiar ground. The second is an excellent blog - The Sports Economist - and a post on subsidies for sports arenas.

Our recent experience in government involvement in housing confirms a great deal of the underlying rational for the ABCT. That said, given the 20 facts about housing, the continued set of informal institutional support for government intervention in markets and the expansion of government - I wonder to what extent short and intermediate growth in our country will be retarded. Or, will the impact be more severe as Paul Krugman fears and a Japanese style stagnation?

The "Buy-Local" Canard - Tyler A. Watts - Mises Daily

The "Buy-Local" Canard - Tyler A. Watts - Mises Daily

The Small-Time Landlord vs. Big-Time Tenants’ Rights - The Bay Citizen

The Small-Time Landlord vs. Big-Time Tenants’ Rights - The Bay Citizen

Alternative teaching methods . . .

AS DOES much else in the universe, education moves in cycles. The 1960s and 1970s saw a swell of interest in teaching styles that were less authoritarian and hierarchical than the traditional watching of a teacher scribbling on a blackboard. Today, tastes have swung back, and it is fashionable to denigrate those alternatives as so much hippy nonsense.

But evidence trumps fashion—at least, it ought to. And a paper just published in Science by Louis Deslauriers and his colleagues at the University of British Columbia suggests that at least one of the newfangled styles is indeed superior to the traditional chalk-and-talk approach.

Tuesday, May 17, 2011

The Art of Economic Complexity

The take away . . .

These product maps lead to an uncomfortable conclusion about economic development: they hint at how difficult and complex it may be for government planners to kick-start a new industry — while showing that there are new industries that will struggle to get started without help.

Sunday, May 15, 2011

Evaluating ARRA

Tim Conley and Bill Dupor have a new paper on the American Recovery and Reinvestment Act (that is, the Obama stimulus bill). Their empirical findings:

Our benchmark results suggest that the ARRA created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs. State and local government jobs were saved because ARRA funds were largely used to offset state revenue shortfalls and Medicaid increases rather than boost private sector employment. The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services.

Thursday, May 12, 2011


The key to progress seems to be adaptive efficiency and use of knowledge by society. A key element of knowledge is failure and markets embed a set of incentives that are institutionally based to quickly communicate failure. I often tell a colleague that in my view the incentive to fail is the essential strength of capitalism.

Wednesday, May 11, 2011

The State is nowhere to be seen

Thoreau's famous act of civil disobedience — the refusal to pay a tax that supported war — was not the act of a determined political dissident, although he had spoken out against war before. His one night in jail came about only because the state literally knocked on his front door in the form of a tax collector. At that point, when looking the state in the face, Thoreau had to make a choice.

He believed the Mexican-American War was immoral: it violated both his sense of decency and his theory of rights. As long as Thoreau was not forced to participate in this "evil" by supporting it, he seemed content to go about the business of living — of enjoying nature, family, and friends. Participation in the oppression of others, however, was where Thoreau drew a hard line, because it went against his duty to live honestly.

When Thoreau was released from jail, he immediately went on a berry hunt with a swarm of young boys. No bitterness. Thoreau simply returned to living deeply without missing a beat. This post-jail quest for berries occasioned my favorite line from all of Thoreau's writings: As he tramped the trails in search of juicy treasure, Thoreau found himself standing on a high point in a field. He gazed about at the continuous, sprawling beauty that surrounded him and observed "the State was nowhere to be seen."

Tuesday, May 10, 2011

Libertarian Vacation

Very funny - the take away is Dan Klein's comment below.

Daniel Klein February 5, 2010 at 9:28 am
In many cases, government is like a gun, and statism is like the agent firing the gun. Governments don’t kill, statism does.

What libertarians should be against is statism, not government per se. Most agents of government are relatively statist, but not all.

What keeps government from being worse than it is is not so much any democratic mechanism, but the measure of decency and enlightenment nestled within each agent within its structures. It is primarily as a lattice of not-too-terribly-unenlightened despots that government works as well as it does.

Government has at least one important and necessary function: Dismantling other governmental functions.

Monday, May 9, 2011

Euro vs. Invasion of the Zombie Banks

the euro, in retrospect, appears to have been a misguided attempt to equalize the values for some very unequal assets, namely the bank deposits of strong countries and those of weak countries.

To track the risk of a new financial crisis, focus on whether the troubled euro zone economies are seeing bank runs and capital flight. Then comes a fundamental question about human nature, namely: Why do we so often postpone admitting that short-run patches simply aren’t going to work?  

Tyler Cowen is a professor of economics at George Mason University.

Sunday, May 8, 2011

If Supermarkets Were Like Public Schools

Suppose that groceries were supplied in the same way as K-12 education. Residents of each county would pay taxes on their properties. Nearly half of those tax revenues would then be spent by government officials to build and operate supermarkets. Each family would be assigned to a particular supermarket according to its home address. And each family would get its weekly allotment of groceries—"for free"—from its neighborhood public supermarket.

Saturday, May 7, 2011

This is the fundamental question . . .

This seems to me to be one of the fundamental questions facing society. The answer would appear to spring more from belief systems than analysis of costs and benefits. Or more accurately, one's analysis of costs and benefits is so shaped by beliefs as to render faith the overriding concern.

Douglass North and others attempt to understand the role played by informal institutions in shaping the evolution of social order. Beliefs play such a prominent role that a better understanding of belief formation and learning might illuminate the road (path) ahead.

Should the Government Invest, or Try to Spur Private Investment?
Michael Cragg, The Brattle Group
Joseph E. Stiglitz, Columbia University

The U.S. economy clearly needs stimulation, but the Obama administration’s plan for accelerated depreciation is an ‘old economy’ approach to stimulating aggregate investment and unlikely to ease the Great Recession, according to Michael Cragg of Brattle Group and Joseph Stiglitz of Columbia University. The authors suggest alternative policies consisting of carefully designed carrots and sticks.


Unintended consequences

Friday, May 6, 2011

Top 10 Most Useful Languages

One opinion. This type of question seems to me important to the extent it illustrates path dependence.

Top 10 Most Useful Languages

Thursday, May 5, 2011

A Decade of Debt

Click on the link above to view an extension by Peter Boettle expanding on Boyes last post on threats offered by the expanding debt.

Tuesday, May 3, 2011

Americans Rely more on US Aid

Americans depend more on federal aid than ever
By Dennis Cauchon, USA TODAY

A record 18.3% of the nation's total personal income was a payment from the government for Social Security, Medicare, food stamps, unemployment benefits and other programs in 2010. Wages accounted for the lowest share of income — 51.0% — since the government began keeping track in 1929.


Sunday, May 1, 2011

James R. Otteson: What a Teacher Wants in a Student

James R. Otteson: What a Teacher Wants in a Student: One of the things I get asked frequently is what I am looking for from students. Since we are at the beginning of another school year, I thought I would share a few of the things I often say in response.

1. Effort. I would gladly exchange 10 IQ points for sincere effort, any day of the week. Give me a student who has read the material, genuinely engaged it, and is struggling to understand it, and I will give that student everything I have as a teacher. By contrast, give me a brilliant student who gives a half-hearted effort, and it is hard not to be irritated, frustrated, and short with him.

2. Charity. This is much tougher than it seems, because being a good student requires charity on multiple fronts: toward other students, toward the professor, and, just as important, toward the readings. Take them by turns:
(a) You do not want other students to judge your position based on what kind of person they believe you are or based on their suspicions about your secret motives or hidden agendas; you want them to judge your position on its merits. The best way to get others to judge your position on its merits is to judge theirs on theirs. So begin with the assumption that other students offer their positions, arguments, and reasons in good faith, and proceed to examine them charitably. Do not assume bad faith on anyone's part until long experience allows no other possible interpretation.

(b) Your professor is not infallible, but he has spent considerable time thinking about the issues you are examining in his class, and he has developed professional opinions about those issues. Assume, therefore, that your professor has good reasons for what he asks you to read, write, or do, until, again, there is no other possible interpretation.

(c) Finally, assume that what you are reading is worth the effort to understand it. If you think that its argument is obviously wrong or that it has missed or overlooked obvious objections or problems, assume that you have missed something and go back to the text and look for it. Continue to give the reading the benefit of the doubt until you simply can do so no longer. And even then ask yourself what you can learn from it despite its flaws.

3. Practice. Reading carefully and writing well are skills, and, like other skills, they must be practiced. You must do them over and over again. When you make mistakes, correct them and learn from them. Pay attention to details: Why did the author use this term here or this metaphor there? What exactly--not approximately or "sort of" or "kind of," exactly--are the author's reasons for making the claim he does? When it comes to your own writing, revise, revise, revise. Go over your paper three, four, five times; in the morning and at night; let it go a day and then return to it. Do not be afraid to delete, cut, or globally rethink. There is perhaps no single more important key to successful writing than editing. Use it liberally.

4. Preparation. An old quip has it that ninety percent of success is showing up. I would say: Ninety percent of success as a student is preparation. This means reading the assigned materials, mulling them over, asking yourself what their strengths and weaknesses are, being able to give concise but precise and correct summaries of them--all before you step foot in the classroom. When class begins, you are then ready to proceed immediately to all the interesting philosophical, exegetical, and other deep questions.

5. Finally, purpose. Why, exactly, are you here? You need an answer to that question that is plausible. That means it will have to connect up with your goals and ambitions, it will show some awareness of the scarcity of your resources and your resulting allocation of them, and, most important, it shows that you understand that you are a rational and autonomous being and not just a lump of biomass. It is not necessary that you have a complete life plan worked out in all its details. But it is necessary that you have goals and have given them some thought. You are too precious, and your time, talents, and treasure too dear, not to bring your considered judgment to bear. There are many different lives in which my class might play a plausible, if small, part, and thus many different reasons you might be in my class; but please do not let it be that you simply had nothing better to do. You owe me, and, more importantly, yourself, more than that.