Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Saturday, April 09, 2005

The British Monarchy

When I first accepted a job in Canada, someone asked me, "How does it feel to have a Queen?" I don't know why, but I actually enjoy the tradition of the monarchy.

I really smiled when I read Bill Sjostrom's comments about today's wedding. Here is an excerpt:
Prince Charles notwithstanding, I like the British monarchy. It draws attention away from the more annoying celebrities, and the monarchy are the only British celebrities who are actually expected to behave themselves (although granted, they do not always do so).
"Prince Charles notwithstanding..." Priceless.

Tenure at Academic Institutions

My friends, John Chilton and Phil Miller, have an on-going discussion about tenure at Market Power. Phil Miller says, in part,

Getting the chance at tenure is one of the benefits of the job. Generally speaking, assistant professors are willing to take a lower rate of pay to have the chance at tenure. If tenure were abolished, many would likely move out of academia if they were not compensated with a higher salary. I imagine this is especially true of professors from disciplines that are well-represented in the private sector (economics, finance, engineering, chemistry, medicine, etc.)

John Chilton comments, in part

My university doesn't have tenure. It has rolling contracts. Once on a rolling you get an in depth review every x years, at which point if you get terminated you still have a guaranteed y more years.

I don't want to be at a place where others want tenure. I'd be glad if contracts were at will. Deans and Presidents could use the threat of firing faculty to good effect.

For my own part, I'd be happy if universities got rid of tenure. Tenure does little or nothing to protect academic freedom, and it is silly to make a decision after four - six years about whether you think a person is going to be productive for the next 25 - 40 years. Unlike The Emirates Economist, though, I would not be all that eagre to teach at a non-tenure institution if nearly all the others had tenure -- that would create a strange and thin market.

Meanwhile, Alan Adamson, my co-blogger at Curling, works for IBM. Nobody has tenure in that labour market. The discussion at Phil's blog is good.

Update: and Bill Sjostrom's views on academia are absolutely priceless.

Friday, April 08, 2005

New Curling Blog

Back in February, I posted a diatribe on both The Sports Economist and The Eclectic Econoclast about the poor deal that the Canadian Curling Association made with the CBC for televising the major curling events in Canada. That posting led to an e-mail exchange with Alan Adamson, and we have recently launched a new blog, Curling, which is devoted entirely to the sport of Curling -- it strategies, the media problems, techniques, etc.

If Canada wins the tie-breaker this afternoon (so that CBC will be interested in televising the game at 6pm EDT this evening), I will be live-blogging the game as it progresses.

What Is It about Economists and Horse Manure?

Yesterday, many of my blogosphere colleagues posted about an economics professor at Harvard who was arrested for stealing a truckload of horse manure. See the Emirates Economist here, who raises some interesting questions about the case; also see here, here, and don't miss Phil Miller's exposition here; also Tyler posted about horse manure here a week ago.

I'm surprised that no one has link to the classic case in property law that we studied when I got my two-week law degree from one of Henry Manne's summer programmes.

On the trial it was proved that the plaintiff employed two men to gather into heaps, on the evening of April 6th, 1869, some manure that lay scattered along the side of a public highway, for several rods, in the borough of Stamford, intending to remove the same to his own land the next evening. The men began to scrape the manure into heaps at six o'clock in the evening, and after gathering eighteen heaps, or about six cart-loads, left the same at eight o'clock in the evening in the street. The heaps consisted chiefly of manure made by horses hitched to the railing of the public park in, and belonging to, the borough of Stamford, and was all gathered between the center of the highway and the park; the rest of the heaps consisting of dirt, straw and the ordinary scrapings of highways. The defendant on the next morning, seeing the heaps, endeavored without success to ascertain who had made them, and inquired of the warden of the borough if he had given permission to any one to remove them, and ascertained from him that he had not. He thereupon, before noon on that day, removed the heaps, and also the rest of the manure scattered along the side of the highway adjacent to the park, to his own land.

The plaintiff and defendant both claimed to have received authority
from the warden to remove the manure before the 6th of April, but in fact neither had any legal authority from the warden, or from any officer of the borough or of the town. The borough of Stamford was the sole adjoining proprietor of the land on which the manure lay scattered before it was gathered by the plaintiff. No notice was left on the heaps or near by, by the plaintiff or his workmen, to indicate who had gathered them, nor had the plaintiff or his workmen any actual possession of the heaps after eight o'clock in the evening on the 6th of April.

It is a great case for asking
  1. What are the risks?
  2. Who is the least-cost bearer of the risks?

Cruelty to Animals

Is it cruel to horses and oxen to release them live in wild animal safaris so lions and tigers can kill them and eat them? Or is it cruel to lions and tigers not to provide them with simulated hunting experiences?

I am sure reasonable people can disagree about the extent to which different aspects of maintaining wild animal safaris and zoos would be considered cruelty to animals.
No matter what, from my perspective, cruelty to animals does not include hunting, even though I have never hunted in my life.

My candidates? Horse racing, dog racing, and "catch-and-release" fishing. The animals are kept alive only to provide sport for humans. I'm not sure that's morally wrong, but I have an uneasy feeling about it.

I have been thinking about this question for many years. Recently, however, I came across Tyler Cowen's paper, "Market Failure for the Treatment of Animals." Here is the abstract:

I examine the welfare economics of how humans treat animals, using
ordinal welfare economics and the standard of willingness to pay. I therefore assume that animals count in the social welfare function only insofar as human animal lovers care about them. I do not defend these assumptions as the best available moral theory, but rather treat them as a minimalistic approach that counts animals as little as possible and looks for robust conclusions. Even under these assumptions we find systematic and significant market failure in the treatment and allocation of animals. Many of the common recommendations of animal rights advocates, however, fail to consider secondary consequences and therefore may decrease animal welfare. The effects of mandatory animal care standards, subsidies to animal care, and taxes on meat consumption all differ. Piecemeal and systematic reforms do not generally have the same effects on animal welfare. The results of this paper do not require any particular judgments as to exactly how much animal welfare counts, relative to human welfare.
Fascinating stuff. You can read the whole paper on line or read a section of it here.

Personal Data and Regulation
Internalizing an Externality

Is there a good economics argument for regulating the collection of personal credit information? Why can't or don't markets for information work best without gubmnt intervention? Maybe they do. However, Kip thinks the externality argument creates a reason for some intervention.

... [I]n the case of personal data, it seems to me that some regulation
is warranted for the same reason that (valid) regulation ever exists: there are externalities to be corrected.

ChoicePoint, credit bureaus and the other personal data companies make money off me, and you and everyone else. Yet we get no compensation for what could be deemed a "free rider" problem. In fact, we have to pay them for the "service" of accessing our own data. (Note: Some states mandate free access.)

So is it too "un-libertarian" to advocate internalizing the externality by requiring any company that makes a market in personal data to allow free self-access to that data? I think not. (Note: The news article [link added here] does not indicate whether ChoicePoint would make the access free or fee-based.)

Of course, if the cost of correcting the externality is greater than the externality itself, then it makes no economoc sense to correct it. But I would think that there is a rebuttable presumption that the cost of free online (or "SASE") access would be de minimus.

The externality appears to be twofold. One is the dissemination of information about an individual, but that isn't much of an externality in a real sense. The second is the risk of dissemination of misinformation. That risk imposes costs on individuals about whom the data are compiled: for example, the risk of having a bad credit rating, the cost of checking to make sure one's credit rating is correct, and the cost of correcting misinformation.

It is this combination of costs that leads to the economic argument that it would be efficient for individuals to receive low-cost access to their personal information on large personal information data bases.

Thursday, April 07, 2005

Monopoly, Entry, and Technological Change

When there appears to be a monopoly in a particular industry, the profits act as an incentive, inducing others to try to enter the industry. The negative effects of the monopoly are relatively short-lived because competition eventually drives prices down. Furthermore, technological change is often stimulated because of monopoly: people work pretty hard to figure out a way around the monopoly. All-in-all, the long-run effects of monopoly are not nearly so bad as they seem in the short run.

One of the best examples is telephone service.

In many developing countries, gubmnts maintained tight monopoly control over the land-line telephone service. Prices were high, installation charges were astronomical (with up to two-year waits in some countries), and service was downright horrible. But with the technological development of cellular phones, many of these countries were ripe for change. Growth in telephone service was astronomical, but it was mostly cellular-based. People who never imagined having telephone service ten years ago, now gleefully carry cell phones. Essentially, gubmnt monopolies in telephone service were eroded by the technological developments in cellular telephones.

Not quite so in Lebanon [thanks to The Emirates Economist for this link to the Lebanese Political Journal]:

Due to the government's failure to provide reliable fixed-line services, the LibanCell-Cellis "duopoly" made a killing over the next eight years. In a country of just 3.5 million people, nearly 800,000 have cell phones today (over 22% of the population, compared to 2% in Egypt). The government, which controls pricing, allowed the two companies to set subscription fees that were nothing short of highway robbery. Whereas mobile telephone calls cost around 3-8 cents per minute in other Arab countries, in Lebanon the cost was 13 cents per minute for dedicated lines and 35 cents per minute for pre-paid phone cards....

There's much more there, and be sure to read the comments, which add considerable additional insight.

My question:

Is cellular service in Egypt that much worse than in Lebanon, or is land-line service that much better? or are there other reasons for such large differences in cell-phone penetration rates in the two countries?

Type I and Type II Errors in Law Enforcement

A typical standard of proof in criminal trials is "guilty beyond a reasonable doubt". This standard is accepted because we would rather make type II errors (allowing a guilty person to go free) than make type I errors (convict someone who is innocent).

The English do not extend this concern for minimizing type I errors to mopeds, however.

English police blow up parked scooter

The fear of terrorism has reached the English city of Ipswich.

Heidi Brown says she was told she could park her new motor scooter outside the vehicle registration office in Ipswich, while she waited to get number plates. However, it was blown up by the army in a controlled explosion after someone reported it might have been a bomb.

Police say the moped was chained to a fence outside the building, but officers were not able to identify whose it was because there were no number plates on it.

The 22-year-old care worker appeared soon after the blast with her new plates but too late to identify her vehicle.
Thanks to BrianF, who wonders just how long it takes to get a moped license plate in Ipswich

What Is Appropriate Attire for a Graduation Ceremony?

Different universities have different degrees of pomp and circumstance in their graduation ceremonies, ranging from the US mega-school approach of, "Would all 10,000 graduates please stand? Thank you. You have just graduated from Mega-University," to walking across the stage single file and shaking the hand of some dignitary, to ceremonies like the ones we have at The University of Western Ontario, which involve kneeling before the chancelor or a pro-chancelor (we do undergrads in threes) and being admitted to the degree. My role in these ceremonies, Esquire Bedel (ceremonial mace carrier), is depicted below.

I have been to many different ceremonies, but I have never seen a university impose a dress code on the graduates. Understandably Cambridge took some flak when they tried to ban kilts:

CAMBRIDGE University last night showed signs of backing down after banning students from wearing kilts to their graduation ceremonies.
The English university told male students they must only wear formal dress of a black morning suit and white bow tie. But the interdict sparked fury among patriotic Scottish students, and the university has been inundated with e-mails from angry alumni demanding that the dress law be removed. Yesterday, officials at the university admitted they were prepared to make exceptions for those who felt strongly about wearing their national dress.

[h/t to BF for the pointer]

Wednesday, April 06, 2005

Growing U.S. Protectionism

Not only has the US refused to abide by WTO decisions that the US is in violation of its trade agreements with its anti-dumping shinanigans, but now the US is imposing protective tariffs against Chinese textiles. This is beginning to border on the alarming.

The US declared a Trade War on Chinese textiles today. By initiating the safeguard action itself, instead of waiting for the US textile industry to file a complaint, punitive tariffs could be applied in as soon as five weeks, after a 30-day comment period.

China promptly responded by downgrading its delegation to the mid-April IMF and G7 meetings, substituting more junior ministers. In the understated world of diplomacy, this gesture is equivalent to an upraised middle finger, accompanied by dropped trou and bare butt.

The article goes on to warn about a recurrence of the problems engendered by the Smoot-Hawley Tariff that contributed to the contractions during the Great Depression. To see my similar concerns, click here.

Trademark Infringement

Remember way back, when I decided to rename this blog because an economics consultant in Dallas, Texas, didn't like my use of the name "Econoclast" (even though I'd been using it for nearly two decades) because he had registered the name?

No problem. In fact the current name suits the blog better.

But I wonder what Kevin is going to do at Always Low Prices. His blog has tended to defend Wal-Mart against the anti-big-box forces, and now Wal-Mart has threatened him with legal action for his use of the phrase "Always Low Prices". And, of course, his hit rate is suddenly astronomical!

What a bunch of doinks [a technical term in economics meaning people who do not understand when someone is doing them a favour]. I understand the importance of protecting the firm's copyright, but this is a dumb way to go about doing it.

Mugabe's Fat Farms

For a good look at what is happening in Zimbabwe, I recommend this piece from last November's Sunday Times. It explores the confiscation of land, the dramatic declines in production, and the growth of secret police and terrorism in stark detail [thanks to BenS and Clive for the link].

One example of Robert Mugabe's near or apparent insanity is this:

ZIMBABWE has come up with a bizarre proposal to solve the food crisis threatening half its population with starvation. It wants to bring in obese tourists from overseas so that they can shed pounds doing manual labour on land seized from white farmers.

The so-called Obesity Tourism Strategy was reported last week in The Herald, a government organ whose contents are approved by President Robert Mugabe’s powerful information minister, Jonathan Moyo.

Pointing out that more than 1.2 billion people worldwide are officially deemed to be overweight, the article exhorted Zimbabweans to “tap this potential”.

“Tourists can provide labour for farms in the hope of shedding weight while enjoying the tourism experience,” it said....“Tour organisers may promote this programme internationally and bring in tourists, while agriculturalists can employ the tourists as free farm labour.

I am willing to donate labour to many causes.
Robert Mugabe's dictatorship is way, way, waaayyyyy down on the list, though.

Does Creating a New Gubmnt Also Create Wealth?

Did the devolution of Scotland help save the country's economy from a recession? Yes, according this article.

What is surprising about the findings is that the setting up of the parliament not only helped the economy in the same way that citing a major corporate headquarters would, but that it brought enough economic firepower to alter the course of economic history.

The findings have been revealed by a team of three professors from the Fraser of Allander Institute and Strathclyde University who have studied the Scottish economy at the time of devolution in 1999 when the electronics industry hit a massive trough.

How did this work?
What were the scarce resources doing before the Parliament was set up?
Were there massive amounts of unemployed resources that were miraculously put to work when Scotland set up its own Parliament?
Did the Scottish Parliament implement changes that made all the productive activity in Scotland more efficient?
Or did the Parliament create make-work jobs that produced little or no additional wealth?

Professor Brian Ashcroft, along with Peter McGregor and Kim Swales, examined the information which has now become available about the Scottish economy before, during and after the establishment of the parliament.
Ashcroft and his colleagues concluded: "Scotland is doing better than would be expected on the basis of the past relationship - and this improved performance coincides with the establishment of the Scottish Parliament."

They add that the growth rate has been higher than they would have expected under devolution; there was "evidence consistent with a stimulus to private sector services"; and that this is "compatible with devolution being good for the Scottish economy to date".

Ashcroft told The Scotsman that using the parallel with a new company headquarters, the growth may have come from companies, public bodies and the voluntary sector hiring lobbyists and other staff whose job it is to interact with the new politicians and the civil service. The increased media presence around the parliament may also have contributed.

Again, I have to ask, "How would these scarce resources have been used if the Scottish Parliament had not been created?"
Was the aggregate supply curve horizontal?
Was the production possibilities curve being shifted outward, or was the economy just moving from an interior solution to a frontier solution?

As BrianF said when he sent me this link, "I feel a Bastiat moment coming on..."

Only at the end of the article, do we read
The Strathclyde team point out that their results do not establish that
devolution has caused higher growth.
Interestingly, when I Googled the three authors of the study referred to above, I found a list of Strathclyde discussion papers, but not this one. Elsewhere, however, I found this:

An Analysis of National and Devolved Economic Policies
Peter McGregor, Brian Ashcroft , Julia Darby, John Ireland, Chris Kotsogiannis, Kim Swales, Nicola Viegi

In Brief
This project will use econometric techniques and a computable model of the UK economy and its territorial components to examine the scope devolved institutions have to shape economic policy in their territories. It will also assess the potential benefits and dangers that interaction between UK-level and devolved institutions in economic policy-making may bring.

The Barnett squeeze has a real resource impact on the Scottish economy which could lead to a contraction of Scottish employment by 3.9% (over a relatively long time period)

Upward use of the tartan tax would have significant contractionary effects on GDP, employment and population.

Oops journalism at work again...

The Tim Horton's Lottery

The Canadian doughnut and coffee shop, Tim Horton's has been running its Roll-Up-The-Rim-To-Win Contest for about a month. According to their website, there is about a 1 in 9 chance of winning something, most likely a donut, but possibly a cookie or muffin or coffee, and maybe a bigger prize like a plasma television or an SUV.

Food Prizes: Eligible "winning" RIM TABS have been distributed as
follows: approximately 111 contest cups per medium case of 1,000, approximately 111 cups per large case of 1,000, approximately 111 cups per extra large case of 1,000 are printed with "winning" RIM TABS. ... For the “winning” RIM TABS for food prizes, 50% are donuts, 20% are coffees, 15% are muffins, and 15% are cookies.
Last year, when completing our large art project, my son and I wanted to make sure that we had absolutely no winning cups in our sculpture, and so, along with his daughters, we checked every single cup that we had collected. The result was that we found approximately 40 more winners among the 3200 cups we collected. These were all discarded cups -- cups that people had bought coffee in. We concluded they were either cups that people had not bothered to check or cups for which people had not bothered to collect the prize.

This, year, we have bought maybe 35 cups of coffee from Tim Horton's while the contest has been on. We have not won a single thing. At first, I thought the odds of not winning even a doughnut must be pretty small with that many trials, but I guess it isn't. The purchases were pretty close to random, independent events, since we made them at different times at different Tim Horton's outlets.

The probability of not winning any prizes in 35 purchases? (8/9)**35, which is roughly one in sixty.

Tuesday, April 05, 2005

Brit Universities Debate Boycott
of Israeli Universities

I have never understood why so many British academics are so determined to attack Israeli academics who, for the most part, are much more democratic and much more oriented toward academic freedom than academics at many other universities in the Middle East. Maybe it's because they hold some grudges about having lost the Middle East as a protectorate after WWII? Maybe it is because of horrible guilt about having done such a poor job as protectors during their interwar regime? I don't know, but they are still at it [thanks to BenS and Clive for the link]:
The Association of University Teachers' annual council, which
begins on April 20 in Eastbourne,
will also debate whether to boycott three of Israel's eight universities - Haifa University, Bar Ilan University and the Hebrew University in Jerusalem - over their "alleged complicity with the government's policies" on the Palestinian territories.

...The boycott being proposed is in response to a call from a PLO-front group, "The Palestinian Campaign for the Academic and Cultural Boycott of Israel," which called for a boycott last year. They have been joined by a host of other anti-Jewish organizations and web sites. In autumn 2003, Oxford University suspended Andrew Wilkie, a professor of pathology, for two months after he refused to accept an application from an Israeli student for a PhD because he had a "huge problem" with Israel's "treatment of Palestinians." We know of no British academic who boycotts Palestinians for the treatment by the PLO of Jewish children on buses.

... One of the most comic accusations by the British boycotters concerns my own university, the University of Haifa, whom they accuse of "restricting the academic freedom of researchers whose theses were critical of Israel." What they are referring to is a fraudulent MA thesis that was prepared by a far-leftist aging student political activist under the supervision of Ilan Pappe, Israel's academic answer to Lord Haw-Haw, in which they fabricated a non-existent "massacre" of Arabs that supposedly took place in 1948, perpetrated - they claimed - by the Hagana Jewish militia. It was a "massacre" that Arab journalists on the scene in the village in question never witnessed and for which no evidence at all has ever been uncovered. The Hagana vets sued the student for libel, and the student - in the presence of his lawyer in court - signed a confession that he had invented the enitre "massacre." For full documentation of the affair, see here. Pappe was not fired for the fraud, although he should have been, nor was he "suppressed." None of that matters to the British boycott pogromochiki.

I would urge a counter-boycott of these British universities if they had anything to offer that might be worth boycotting.

Window cleaning in United Arab Emirates

Some time ago, The Emirates Economist posted a link to nearly a hundred photos of different aspects of daily life in UAE. I've slowly been going through the pictures, fascinated by the different slices of life, by the art, and by the different cultures. I was especially intrigued and amused by this unique window-cleaning technology.

Congestion and Price Elasticity of Demand

London, England, charges a fee for driving in the central area. The effect of the fee is twofold: it reduces congestion in the central core, and it raises revenue for the city.
[h/t to BF for these stories]
London's congestion charge is to rise to £8 this summer, a 60 per cent increase on the £5 daily rate faced by drivers in the centre of the capital....

The charge, which was introduced in February 2003, has been credited with reducing congestion in central London by 30 per cent, or by 70,000 vehicles. It raised £79.8m in its first year and was projected to raise about £100m annually in subsequent years. ...

Mr Livingstone [London Mayor] said: "Congestion charging has achieved its key objective of reducing congestion and has also provided an additional stream of revenue to help the funding of other transport measures within my transport strategy. The charge increase will maintain the benefits currently witnessed in the zone and build upon its success, cutting congestion even further and raising more revenue to be invested in London's transport system."

There is no need to estimate the price elasticity of demand here; the mayor knows it is less than one; otherwise, raising the fee would not lead to increased revenues.

This story illustrates how the goal of reducing congestion might be in partial conflict with the goal of raising revenue: If demand is price inelastic, raising the fee will have less of an impact on deterring driving in the city core but will raise revenue for the city; but if demand is price elastic, raising the fee will actually raise less total revenue, but will have a much bigger impact on reducing congestion. In the long run, the elasticity is likely to be greater as people find alternatives for driving in the central zone. Eventually, businesses will relocate, as will traffic, to areas outside the core. And so, if revenue generation is a goal, more tolls will be needed on additional roads outside the core.

well, son of a gun....

In a later, but related piece, we learn that the authorities are also considering congestion tolls that would vary with the time of day on other roads.
The blueprint would cover all roads within the M25 and see drivers charged different rates on every road according to the distance they travelled and the time of day. For example, motorists would pay up to £1.30 a mile for the busiest roads such as the North Circular at peak times, while quieter routes or times of day would be free or carry a lower levy.
I was pleased to see that the planners have taken into consideration the effect that tolls on some roads might have on the traffic on non-toll roads.
The CfIT has not yet finalised how to deal with all the details of the scheme, for example how drivers would be informed of what charges they were paying. In addition, there would be uncertain knock-on effects. For example, drivers may divert off onto smaller “rat runs” that would then in turn become congested.
The primary detail to be worked out involves monitoring and transaction costs. It appears they will rely on some combination of satellite tracking and electronic tags.

More Anti-Semitism at Columbia University

There was considerable evidence of anti-semitism in the Middle-Eastern Studies programme at Columbia University, but not according to a carefully selected panel:

The stacked deck produced a whitewash.

That's the take many observers have of things at Columbia University, where last week a panel of Israel-phobic academics found "no evidence" that professors in the Middle Eastern studies department made anti-Semitic remarks meant to bully Jewish students.

Here's the wrinkle: How can anyone trust the committee's findings,
given its members' clear prejudices?

Of the five panelists, two signed a petition demanding that Columbia divest from Israel. One member is a dean who recruited some of the professors accused of hectoring Jewish students. Another panelist has in the past ignored complaints from these students. The fifth, history Prof. Mark Mazower, merits special mention for having likened Israel's
occupation of the West Bank to the Nazis' World War II occupation of Eastern Europe.

How's that for a fair and balanced panel?

Why isn't their president [Lee Bollinger] under as much fire as Larry Summers?
[thanks to BenS for the link]

Monday, April 04, 2005

Time to Change the Will, Dad

from Today's Papers (Slate):

The president of the 16,000-member Michael Jackson Fan Club, a Texan legal secretary named Deborah Dannelly, is leading prayer vigils, tap dancing, and other festivities at a rally on behalf of the pop star. She almost missed the activities because her father suffered a stroke and is in poor health. She said the sudden illness was "almost a wake-up call to say you have to stand by the people that you love," and so Dannelly decided to leave her father and travel to Jackson's trial.

Sticky Wages and Labour Shortages

The NY Times (registration req'd) reports that there are shortages in factory labour in many of the manufacturing regions of China. The intensely neo-classical economist in me wants to shriek out:

There's no such thing as a shortage! What is perceived as a shortage would disappear if wage rates rose.
The empiricist in me recognizes that there are, nevertheless, reports of serious labour shortages, not only in manufacturing in China, but also in the trades in Australia [and let's not forget those substitute teachers in Denver].

In each instance, wages are below the market-clearing wage rate. In the case of substitute teachers in Denver, the problem is easy to understand -- wages are set administratively and the recent wage reduction was made without reference to market conditions.

In the most recent example - manufacturing in China - wage rates are slowly rising. Factories that used to pay as little as $50/month are now finding it more difficult to attract workers because other employers are offering as much as $150/month. Demand for manufacturered goods from China has raised the derived demand for Chinese labour.

No one thinks China is running out of workers. But young migrant workers coveted by factories are gaining bargaining power and many are choosing to leave the low pay and often miserable conditions in Guangdong. In a nondemocratic China, it is the equivalent of "voting with their feet."

Rising wage rates in China will, in turn, alter comparative advantages in Asia (see Anomaly UK for more on this result; also see the New Economist for too-brief comments on the competition for labour in developing areas):

It's not the end of the great China manufacturing story," said Jonathan Anderson, the chief Asia-Pacific economist for UBS. "But you're no longer going to be talking about China having labor so radically cheap that it will capture all the investment flows. This is an opening for Vietnam, it's an opening for India and Cambodia."

These slow responses to sticky wages tell us a something about macroeconomic models that assume rational expectations with instantaneous adjustment and full information -- they are not likely to be very useful for short-run analysis of these situations.

Labour Shortages and the Minimum Wage

As I posted just above this piece, there is apparently a labour shortage at current wage rates in the major Chinese manufacturing regions. I cannot help but wonder why employers don't raise the wage rates. Is it possible that even though the Chinese economy is no longer anything like the bad-old days of centralized, complete command, employers still tend wait for politicians for guidance? If so, they will not have long to wait.
[T]he local authorities are taking action. Officials in different Guangdong cities, as well as the adjacent special economic zone of Shenzhen, are competing with one another to raise their local minimum wage. In early March, Shenzhen announced that it would raise its minimum to $83 a month from $74.

My guess is that this is yet another example of administrators doing little more than following, and possibly ratifying, strong market trends. I find it difficult to imagine that raising a minimum wage that is less than the market clearing wage should have any effect in the long run.

Larry LaPrise

I realize this is dated. 9 years ago today, the writer of "The Hokey Pokey" died.

Creator of 'The Hokey Pokey' dies
(CNN) -- Every child in America, and almost every adult, knows the Hokey Pokey. You just put your right foot in and put your right foot out to perform one of the best-known circle dances in American history.

Its popularity belies its age, and conceals its author. The man who wrote the song, Larry LaPrise, died last week at 83 in Boise, Idaho.
He wrote the tune for the Sun Valley, Idaho, ski crowd in the late 1940s, but it took a recording by big band leader Ray Anthony to make the
Hokey Pokey a nationwide phenomenon. (It appeared on the B side of the "Bunny Hop" single.)

LaPrise didn't receive royalties for the song until the 1960s, when its rights were purchased by country star Roy Acuff's publishing company.

In recent years, LaPrise worked in the post office in Ketchum, Idaho. Children often wrote him notes addressed to "The Hokey Pokey Man."

For another perspective, with considerable documentation, see the Wikipedia article about LaPrise.

Getting him into his coffin at the mortuary was a challenge. They put his right leg in, ....
[h/t to JohnH]

Sunday, April 03, 2005

They Should Call It a Conference, Not a Festival

JC from the Emirates Economist sent me this Reuters piece, "No Sex, please. We're from Manchester."

Organisers of a major erotic festival are closing for business in Manchester due to a lack of interest, which they blame on recalcitrant northern men.

Erotica Manchester opened on Friday, selling a range of sex aids, clothing and footwear, but ticket sales have been poor and organisers say they will not be coming back.

"We've tried to warm this city up for more than two years but northerners just haven't responded in sufficient numbers," said event director Savvas Christodoulou on Friday.

Perhaps they could increase interest in their operation if they followed the lead of the scholars at The University of Western Ontario and called it a "conference" instead of a festival.

Twenty - three

That's how many clocks and watches we had to reset in our house this morning for daylight savings time. And it doesn't include my collection of knock-offs [oops, "replicas"].

I guess I never took to heart the wonderful Chicago song,

"Does anybody really know what time it is?
Does anybody really care?"

It seems I do.

Update: I missed one in the bathroom. We're up to 24 and counting....
Be sure to read this interesting piece at Anomaly UK about the economics of changing clocks.

The Price Elasticity of Supply for
Doing God's Work

One might expect that those who dedicate their lives to the church would tend not to be responsive to pecuniary incentives. After all, doing God's work is all that is important, isn't it?

After having spent two years in theological seminary, I can assure you that seminarians discuss pay, benefits, and pensions when talking about job/placement prospects. But my experience was with one of the more "secular" standard brand religions -- the Congregational branch of the U.S. United Church of Christ. I wondered how monks and priests might respond to pecuniary, worldly rewards. Here's a partial answer [h/t to BF for this link]:

ONE hundred and eighty outraged priests in a Spanish parish near Valencia have launched an unprecedented rebellion against their bishop, who last week slashed their wages and asked them to make up the difference by dipping into the collection box.

In a response, at least one aggrieved priest yesterday sought advice from the socialist trade union federation, the UGT, which claims never to have come across a case of its kind.
If priests respond in part to pecuniary incentives, one might expect moves like this to reduce the quantity supplied. Look for standards for admission to the Spanish priesthood to decline over time. (see what happened with Australian teachers when they were unable to maintain high standards and still fill all the slots in teachers' college).

I left seminary after two years, having read Elmer Gantry. It struck a chord.

Give 'Em Jobs in Denver

In an earlier piece, I noted that Denver had reduced the amount they pay substitute teachers and, as a result, faces a severe shortage of people willing to work for the current wage rate. Maybe they can hire some of these folks from Australia:

UNIVERSITIES are awarding places in teaching courses to students who failed or barely passed Year 12 and the current funding regime encouraged the practice, Education Minister Brendan Nelson claimed yesterday....
Dr Nelson revealed a Tasmanian student had told him that one university had allowed a student entry to teaching with a mark of 35 out of 100 that had been "scaled up".

"She said to me, 'How can we have quality teachers if you can get into teaching with a mark of 35?"' Dr Nelson said.

[thanks to BrianF for the link; he suggests sending them to trade schools so they can get jobs paying $90K per year.]
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