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, October 15, 2005

What If....?

AlexK found this parody/spoof amusing. I thought it was really sad:

Persistent rhetoric coming from concerned progressive critics worldwide has finally convinced Israeli officials that the state of Israel has no moral right to exist. "That's it," Prime Minister Ariel Sharon explained at a press conference. "We are dismantling the Nation of Israel. I'm leaving for Poland next week."
It continues with many extensions of the concept. Don't click here unless you want to read a really fine example of satirical reductio ad absurdum (I hope!)

Even More Sudoku:
More Daily on-line games

Here are some more daily sudoku sites:
  • Fingertime. Has moderately easy on-line versions.
  • This site presents puzzles with four different levels of difficulty. It also has the a feature that allows you to put little possible numbers across the top of each square.

According to A Constrained Vision, a person who developed a computer programme to generate these games grossed over $1m in less than a year.

Need Some New Wallpaper?
How about Iraqi Dinars?

Jack sent me this advertisement, which suggests that buying Iraqi Dinars could pay off in the future. I'm very skeptical.

Friday, October 14, 2005

Plastic Bags, Taxes, and Transaction Costs

Nearly a year ago, I posted this about San Francisco's proposed tax on plastic shopping bags, in which I suggested that the proposed tax was much higher than necessary.

Then last month, I posted this set of amusing calculations about the price elasticity of demand for plastic grocery bags, based on data points from Ireland. (note to students: this is a good example of the weird results from calculating arc elasticities).

Recently, Brian Ferguson sent me an article about the proposed tax on plastic grocery bags in Scotland.

SHOPS have warned that plans for a tax on plastic bags could turn into a bureaucratic nightmare because each of Scotland's 23 local authorities will be responsible for the levy in their own area.

... The Scottish Retail Consortium said: "The levy will be collected by local authorities. The complexities associated with retail stores administering different taxation systems, where they operate in more than one local authority, will be hugely burdensome.

"A national retailer could potentially make tax returns to 32 different local authorities via 32 different systems of payment and enforcement."

It added the system was also likely to have an impact on the already over-stretched resources of local authorities responsible for enforcing the levy. And it pointed out the levy would also be more costly for smaller businesses.
Policies which do not take transaction costs like these into account can become a nightmare; at the very least, they are likely not to have the desired results and/or to have serious unintended consequences.

Really Bad Web-Page Reservation Systems

Ted Frank had what sounds like a truly horrible experience with a web-based reservations system for a hotel. When things like this happen to us, we stay somewhere else. I presume Ted did, too.

The Protocols of the Elders of Zion:
a despicable forgery

About 6 or 7 years ago, I was at the local lunch counter, and a guy there started telling me about a publication called "The Protocols of the Elders of Zion" which sets out how Jews created a conspiracy to dominate the world.

Fortunately, I was skeptical. I went home, did a few searches on the internet, and found many different sites that said things like this:

Serge Nilus, a little-known Czarist official in Moscow, edited several editions of the Protocols, each with a different account of how he "discovered" the document. In his 1911 edition Nilus claimed that his source had stolen the document from (a non-existent) Zionist headquarters in France. Other "editors" of the Protocols maintained that the document was read at the First Zionist Congress held in 1897 in Basel, Switzerland.

... in August of 1964 a subcommittee of the Senate Judiciary Committee issued a report repudiating the Protocols, to which Senators Thomas J. Dodd and Kenneth B. Keating appended the following: "Every age and country has had its share of fabricated ‘historic’ documents which have been foisted on an unsuspecting public for some malign purpose. . . One of the most notorious and most durable of these is the ‘Protocols of the Elders of Zion.’."
And from Wikipedia:

The Encyclopædia Britannica describes the Protocols as a "fraudulent document that served as a pretext and rationale for anti-Semitism in the early 20th century".

The overwhelming majority of historians in the United States of America and Europe have long agreed that the document is fraudulent; this has also been stated in a number of court cases worldwide, e.g., as early as the 1930s in Bern, Switzerland. In 1993 a district court in Moscow, Russia, formally ruled that the Protocols were faked in dismissing a libel suit by the ultra-nationalist Pamyat organization, which had been criticized for using them in their anti-Semitic publications.[2]

The Protocols is accepted as factual in some parts of the world in which people hold negative opinions of Jews or Israel, as well as in countries such as Japan, where some believe it can be read as a textbook description of means to obtain power. In the current conflicts in the Middle East, the Protocols is sometimes used as evidence of Jewish conspiracy. [3]

That afternoon, I stormed into the person's place of business with nearly a hundred pages of printouts. The person was quite embarrassed and didn't raise the topic again; his wife gave him a look of "I told you so!"

Sadly, too many people are reproducing the Protocols.
Even sadder is that too many people believe them.

Don't. The document is a fraud.

Thursday, October 13, 2005

Economics, Education, and Freedom;
a podcast with King Banaian, Phil Miller, and the Eclectic Econoclast

This morning, King Banaian, Phil Miller, and I had an hour+ discussion about the economics of education, economic education, and economic freedom. The discussion is downloadable from Jim Reese's radioeconomics blogsite. His summary:

Discussion about the economics of education, economic education, and economic freedom. Items covered: vouchers, student retention, outsourcing of freshman and sophomore courses, comparative advantage, free markets, measures of economic freedom, and recommendations of economics books for non-economists.
Next week, same time, we'll be discussing "The Economics of the World Series".

NYC Passes Health Act to Keep Out Wal-Mart

From the New York Post:

October 12, 2005 -- The City Council voted yesterday to override Mayor Bloomberg's veto of an anti-Wal-Mart bill aimed at making the retail giant and large grocery stores provide health-care benefits to their workers.

The Health Care Security Act, which the council has admitted is an attempt to keep big-box stores like Wal-Mart from setting up shop in the Big Apple, was opposed by the Bloomberg administration.
Kip Esquire, who has written several items about this Act, says,

[T]he Act codifies three simple principles of legislative intent:

--It is better to be unemployed than employed.
--It is better to pay higher prices than lower prices.
--It is better to have less variety than more variety.
Cross-posted at Always Low Prices.

Transaction Costs and Opportunity Costs

The Knowledge Problem has a brief item about a man who has a natural gas well on his property and hence is not worried about the expected gargantuan jump in energy prices this winter because he has "unlimited free heat, hot water, and cooking fuel".

One commenter had exactly the same reaction I did [my paraphrase follows]: Free? What about the rubric, "There's no such thing as a 'free' lunch"? What about "opportunity costs"?

To which the next commenter replied:

He can use his own gas without paying for transmission and distribution, including the associated returns on ratebase to the transmission and distribution entities.

If he sells his gas into the market, his price is a function of the quantity he can provide, the pressure at which it can be provided, his location relative to transmission and/or distribution, etc.

His profit on the sale of his gas into the market is a taxable transaction; his purchase of the quantity of gas he requires for his own use is an after tax transaction.

Unless he is in the position to produce far more gas than he requires to meet his own needs, it would seem that the greatest opportunity cost is the opportunity lost by his attorney and tax accountant.
Good old transaction costs. I keep teaching that they are important, and here is another good example.

More Evidence that an Increase in Supply
Leads to a Lower Equilbrium Price

If there is an increase in the supply of PhD graduates, the equilibrium price (wage/salary) will drop as the supply curve shifts to the right, ceteris paribus. That is what we teach our students, isn't it?

And it turns out to be right. From the SmartEconomist:

Between 1976 and 2000, the fraction of doctoral degrees awarded to foreign students by US universities rose from 11% to 24%. This fraction was especially high in the physical sciences (36% in 2000) and engineering (51%) Furthermore, 71% of all foreign-born doctoral recipients intended to remain in the United States after graduating. Given this influx of high-skilled foreign workers, how was the labor market for domestic doctorates affected? Specifically, did immigration have a negative impact on wage and employment opportunities of competing native workers?

... The author ... finds that the wages paid to foreign-born and native doctorates are affected in a nearly identical way. This is supported by the observation that foreigners and natives who received their degrees in the same field at the same time are paid nearly identical wages.

Since all wages are affected in the same way by immigration, the driving force behind the immigration-induced wage decline seems likely to be an increase in labor supply (regardless of nationality) and not lower wage demands by foreign doctorates. In other words, if the increase in labor supply had been driven entirely by native-born doctorates, the results would have been the same.

The SmartEconomist summary and review refer to an NBER working paper by George Borjas.
For more on immigration and wages, here is a recent piece by Tyler Cowen.

Child Abuse

Oprah has been posting photos and names of fugitive child molesters. Good for her. But sadly most molesters are not fugitives.

I wonder if she will mention this story. It is one of the worst forms of child abuse:
The Shin Bet security service said Wednesday morning said that it had arrested a 14-year-old Palestinian boy from the West Bank town of Nablus on suspicion of planning to carry out a suicide bombing. The boy was arrested Tuesday.

During questioning, the boy said he had an argument with his father and that militants from the Fatah movement in the Balata refugee camp who knew of this attempted to convince him to become a suicide bomber.

According to the boy, the wanted men took him for a motivation talk in an apartment in the refugee camp and even filmed his "video testimony," in which the boy is seen holding a rifle and announcing his intent to carry out a suicide attack.
We know that people respond to incentives. Imagine the incentives created to brainwash a 14-year-old into becoming a suicide bomber.

[h/t GayandRight]

Wednesday, October 12, 2005

The Official Course Gesture

For nearly 30 years(off and on) I have taught a very large section of introductory economics. A few years ago, I realized that often students see me at the mall or the grocery store or Taco Bell, or the beer store or some place, and they would like to say "Hi! I'm one of your students," but they feel a little shy about coming up to speak to me.

So I came up with an official course gesture. They can flash the gesture at me and, a la Lenny Bruce, I smile and say, "Thanks! Same to you!"

. . . . . . . .

linked to this posting (thanks!)
and included this photo:

Sharing Alberta's Oil Wealth

Ralph Klein [Premier of Alberta] should hire The Emirates Economist as a consultant. Here is why:

If the price of oil stays close to $60/bbl or goes even higher [note that futures prices for 2010 and 2011 were under $60 as I wrote this], the oil royalties earned by the Province of Alberta will create some interesting but well-known problems. Everyone will want a piece of the royalties, and rent-seeking could easily become a well-rewarded activity [Thanks to Scoop for getting me to think about this question.

The problems Alberta will face are not new, though. The oil-rich countries of the Middle East have had varying degrees of success dealing with them over the past 50 - 60 years.

Here are some of the problems they have faced and that Alberta must be prepared to deal with:

a. bloated bureaucracy. Deciding what to do with all the wealth causes an increase in the bureaucracy. What are appropriate tax policies? What should or should not be subsidized and how? What investments are appropriate for a gubmnt? How can the wealth effectively and efficiently be distributed among the residents or citizens? These are not easy questions, and initial answers sometimes create unintended entitlements or the belief by many that the programmes are entitlements.

b. creating sloth and unrealistic expectations on the part of the residents. When residents feel entitled to a continued subsidy that is large, the marginal benefits of working are often quite small. Inducing continued productivity requires very careful consideration of the incentive structure.

c. inducing ne'er-do-wells to relocate to the jurisdiction. What if Albera were to implement no-fee health care of the highest quality for all its residents by building the best facilities and paying top salaries to attract the best physicians at all levels? As Ms. Eclectic said, "At our age, we'd move there in a flash."

What if Alberta instituted a monthly guaranteed income for all its residents? I know some folks who would be happy to move there for such a programme, even if (or especially if) it entailed a 100% marginal tax rate [meaning the subsidy would be reduced by the amount a person earned].

These two examples show how the province would/will/might want to have rigid, restrictive, well-defined residency and citizenship requirements. These will necessitate a sizeable bureaucracy; and there will be incentives to reward the bureaucrats privately for favourable treatment.

d. getting good public finance policy will be important. It is easy to think that the gubmnt could get rid of all provincial income taxes. It is easy to think that the gubmnt could eliminate all property taxes. But what about municipalities? Would they have to maintain property taxes to fund themselves, or would they instead be expected to lobby the provincial gubmnt for funding?

e. creating a large body of second-class citizens who go there to work but do not receive the spoils. When people have increased wealth, they often want to purchase more services, and that often promotes allowing non-residents to work there but not share in the gubmntally provided benefit programmes.

If Ralph Klein, Premier of Alberta, has any sense, he will hire this man, an economist with considerable knowledge about oil-rich economies, as a consultant.

Failing that, I'm available. And I'll be in Edmonton late next week.

Live Podcast with King Banaian and Phil Miller

On Thursday morning, October 13th, at 9am Eastern Time, James Reese will be hosting a live podcast discussion between Phil Miller, King Banaian, and me. The topics for discussion will be
  • Economics of Education
  • Economic Education
  • Economic Freedom

and/or anything that happens to strike us as interesting at the time. Because you will be able to log on and listen to our discussion live (using this link, beginning shortly before 9am), you will also be able to type out questions directed to us, which we should be able to address while we are online.

As usual with Professor Reese's podcasts, though, the full discussion will also be available for download so you can listen to it later if you wish.

Thumbs Mostly Down on Miers:
maybe a succession of really smart clerks...

Craig Newmark of Newmark's Door has had several items lately, citing those who defend Bush's nomination of Harriet Miers to become a Supreme (see here and here). I hope he is right, because the odds are good she will be confirmed. [However, I see the price of a bet that she will be confirmed, while still near 70 cents on the dollar, has been dropping at]

But I am skeptical. She has not provided anyone with any reason to believe she is competent to be a Supreme. From David Frum [h/t to Jack]:

Washington's tight-knit and usually close-mouthed network of conservative jurists and lawyers is dismayed by Miers' thin record and weak abilities. One Republican lawyer told me of a briefing session to prepare Miers to enter into her duties as White House Counsel a year ago. A panel of lawyers who had served in past Republican White Houses was gathered together. After a couple of hours of questions and answers, Miers left to return to the office. There was a silence. Then somebody hopefully piped up: "Maybe if we can find her a really strong deputy ..."

...Ann Coulter expressed that rage [about Miers' nomination] in her inimitably astringent way two days after the nomination was announced: "Being on the Supreme Court isn't like winning a 'Best Employee of the Month' award. However nice, helpful, prompt and tidy she is, Harriet Miers isn't qualified to play a Supreme Court justice on The West Wing, let alone to be a real one."

As I said, I hope Craig is right and I am wrong. I hope Miers proves to be much more than a competent crony. But there is no evidence to expect otherwise.

Kip Esquire has much, much more.

Maybe if they can find her a succession of really smart clerks...

Tuesday, October 11, 2005

Islamaphobia or Reality?

Over the past 8 months or so, I have received some e-mail questioning my somewhat anti-Muslim postings. I understand there are many fundaementalists of any religion with whom I would disagree and whom I would not want to have running the gubmnt, but this interview, more starkly put than anything else I have seen, is why I am particularly concerned about much of Islam. Here are some excerpts, courtesy of Melanie Phillips:
A jailed Muslim terrorist, Abu Bakar Bashir, the alleged spiritual leader of Jemaah Islamiyah (JI), spells out the aims of the jihad:

'What can the West, especially the US, do to make the world more peaceful?
ABB: They have to stop fighting Islam. That's impossible because it is sunnatullah [destiny, a law of nature], as Allah has said in the Koran. If they want to have peace, they have to accept to be governed by Islam.
SA: What if they persist?
ABB: We'll keep fighting them and they'll lose. The batil [falsehood] will lose sooner or later. I sent a letter to Bush. I said that you'll lose and there is no point for you [to fight us]. This [concept] is found in the Koran… Osama believes in total war. This concept I don't agree with. If this occurs in an Islamic country, the fitnah [discord] will be felt by Muslims. But to attack them in their country [America] is fine.
SA: So this fight will never end?
ABB: Never. This fight is compulsory. Muslims who don't hate America sin. What I mean by America is George Bush's regime. There is no iman [belief] if one doesn't hate America.
SA: How can the American regime and its policies change?
ABB: We'll see. As long as there is no intention to fight us and Islam continues to grow there can be peace. This is the doctrine of Islam. Islam can't be ruled by others. Allah's law must stand above human law. There is no [example] of Islam and infidels, the right and the wrong, living together in peace.'

China Matters

Brad Setzer writes that there are two major sources of lendable funds in the world these days: China and oil exporters.
China matters. The rest of Asia's current account surplus is shrinking, and its reserve accumulation is falling. China's current account surplus is rising, as its reserve accumulation. China has about $300 billion to invest in 2005; the oil exporters have a bit more than $350 billion to invest. And one way or another, most of those funds are making it back to the USA, since the US is the only country that needs a comparable amount of financing!
Why does the US "need" such a huge amount of financing? There are two answers: massive federal deficits and consumer dissaving. Neither augers well for aggregate demand in the near future.

Massive federal deficits will be putting upward pressure on the demand for lendable funds and driving interest rates upward. At the same time, consumer retrenchment might offset the growth in demand for lendable funds by the feds, but it also means less aggregate demand. Either way, look for aggregate demand to stop growing much over the next year or so. It might even decline a bit.

Mystery Dinner Theatre

In the recent past, I have done a little professional acting (including the Finger Eleven video "One Thing" and a commercial for Blue Cross of Tennessee), but the only acting I do these days is in mystery dinner theatre performances.

Mystery Dinner Theatre involves scripted scenes, a tonne of audience interaction with ad lib and improv work, and really being/living the role the entire time.

Upcoming roles and shows:
  • An over-the-hill circus strongman in "Circus Murder" at The Marienbad Restaurant in London, Ontario. Friday, October 14th. If possible, try to imagine a comic version of Anthony Quinn's Zampano in La Strada.
  • An unusual ballet dancer in "Murder is a Wake" at The Forest Golf and Country Club in Forest, Ontario. Saturday, October 15th.
  • Swami, a fortune-teller, in "Circus Murder" at the weekend mystery at The Forest Golf and Country Club. October 28 - 30th.

These shows are all done with a group called "Mystery Unlimited". We also license their scripts now and then to do shows in the Clinton, Ontario, area through the Clinton Community Players.

The "Nobel" Prize in Economics

Tyler Cowen has a several pieces about Thomas Schelling and Robert Aumann, winners of the 2005 "Nobel" Prize in economics [see here, here, and here]. I especially liked the posting [the content, not the unintended double negative] by Alex Tabarrok, Tyler's co-blogger at Marginal Revolution:
...the thing to know about Schelling is that he is brilliant but you won't find hardly a single equation in his Nobel prize winning work.

Monday, October 10, 2005

Happy Thanksgiving

Today is Thanksgiving in Canada.

From Wikipedia, in the US,

President Abraham Lincoln proclaimed a national Thanksgiving Day, to be celebrated on the final Thursday in November 1863...
Roosevelt tried to change the date but was only partially successful; he got it moved to the fourth Thursday of November.

In Canada:

The first official Canadian Thanksgiving Day was celebrated on April 5, 1872 in gratitude for the Prince of Wales' recovery from serious illness. The holiday was not officially recognized again till 1879, when parliament declared Thanksgiving to be an annual national secular holiday. The date was moved several times, finally being set on its current date (the second Monday in October) in 1957.

When I have visiting positions at US schools which take a holiday for Columbus Day or Discoverers' Day (Hawaii), I make it a point to tell the students that we get the day off because it is Thanksgiving in Canada on that date.

More Things to Read

David Altig, at Macroblog, has a very good list of recent postings to the blogosphere that are worth looking at.

And right below that posting is his update on probabilities attached to different possible November Federal Funds rates. 4% looks like a prohibitive favourite at this time. And 4.25% looks to be leading the pack for December.

In some ways, I hope these probabilities provide a good forecast. But I confess to being torn: on the one hand, I worry about inflated assets; but on the other hand, I worry about the potential drop-off in aggregate demand as the housing bubble deflates. Being a senior admin with the Fed looks to be a thankless task over the next year or so.

Feeling Tapped Out?
Dig Down Again

Many people dug deep to donate for tsunami relief. Many people dug deeper to donate more for hurricane relief for the US gulf coast.

But the recent hurricanes (especially Stan) and the earthquake in Pakistan et al. have created additional reasons to dig deep.

Let the kids know that they'll be receiving only 6 gifts for Christmas instead of the usual 10. Whatever you can do, it is important that private aid not dry up just because we are tired of giving for relief as a result of all these disasters.

I have one important request for your giving. Please do not give to the International Red Cross, which seems to have anti-semitic and anti-Western biases. If you live in Canada, the Canadian Red Cross is a worthy charity, and there are many others.

And let me once again recommend the Posner and Becker pieces on economics and catastrophic risk.

Good, Classic Economics Articles:
available on-line

Hispanic Pundit posted this list of economics articles that everyone should read (the helpful comments are his, not mine; the snide, bracketed comment about Krugman is mine):

One could do well to structure an economics course around these articles.

Was "The Sound of Music" the Best Movie Ever Made?

This is a question often discussed by members of the Philistine Liberation Organization. Indeed, this question is slated to be the lead topic for the second morning session of the organization's upcoming conference.

It is quite likely that Rondi Adamson will be submitting a paper for presentation at the conference. Why? Because on Saturday, October 8th, she wrote in the Ottawa Citizen [$]:

My fondness for The Sound of Music guarantees me lifelong membership in the Philistine Liberation Organization. The latter is a group a friend of mine founded, for people 'who may not know much, but who know what they like.'
She also wrote, challenging the views of her brother [Alan Adamson, my co-blogger at Curling],
My oldest brother once announced, contemptuously, that he could never tolerate a movie where people were shown to be able to hike out of Austria and into Switzerland in only a day. I pointed out to him that no such thing takes place in The Sound of Music. Yes, the von Trapps are shown hiking through Alps at the end of the story, but nowhere is there a caption saying '24 Hours Later.' Nor is there a sign posted in the mountains, as the family trudges onward in their lederhosen and feathered caps, with 'Wilkommen in Switzerland' written on it.
Rondi has her own blog, Begin Each Day As If It Were On Purpose. Students: please note correct use of the plural form of "to be" in the subjunctive mood. Her blog is also known as "Wonkitties".

To learn more about Rondi Adamson and her varied interests and talents, and to read more of her work, see her website. I try to check her work every day.

Sunday, October 09, 2005

New Zealand Badminton Team;
a double entendre in every sentence

MA sent me this item about a New Zealand badminton team which wants to change its name. As you might imagine, the new name has something to do with the fact that the game is played with a shuttlecock. But you'll have to read the item to see what the name is and to join the fun people have been having with the suggested new name. As Stephen Pollard says, don't click on the link if you are easily offended by sexual innuendo.

Exercise and Stay Fit....or....
perhaps there is another option?

Ms. Eclectic and I pretend to work out now and then at a small health club in our town. We also play retirement squash there*.

One of the aerobic work-out machines tells me that for cardio work, I need to keep my pulse up at around 130 beats per minute.

I can remember back when I was young that a can of Jolt Cola and a blue movie were enough to get my pulse into that range.

Unfortunately, when I was younger, I needed a much higher pulse rate for an aerobic work-out. And now that I'm older, Jolt and porn just don't do it any more.

I guess there's no getting away from having to exercise.


*Retirement squash: We try to hit the ball to each other, but we're such inept athletes, we end up running all over the court, just chasing the ball.

SABEEL: A Dangerous Propaganda Organization

I don't mind propaganda very much, in part because the exchange of ideas and arguments helps us learn more. And allowing propaganda certainly beats an alternative of no freedom of speech.

But when the propaganda spreads misinformation and fabrication, I become very concerned, and that seems to be what is happening with SABEEL. Here is short excerpt from someone who attended their meeting in Chicago this weekend:

In three short hours we have already heard about how Israel commits human rights abuses every hour, ethnically cleanses Palestinians, that the time for a two state solution has passed, and that it is no longer possible. We have heard about how Israel confiscates land to build the “wall” and how the wall is about separation, not peace.

George Rishmawi actually told this group that Israel uses special gas that hurts the muscles of Palestinians. When asked the name of the gas, he skirted the issue by saying that the canisters for the gas are always quickly collected by the IDF so that nobody will know what kind of gas is being used.

... Of great concern is the fact that this is the FIRST OF FOUR conferences planned by Sabeel for the month of October. There will be conferences in Toronto, Denver and Cedar Rapids. And, if all of them resemble this one, there will surely be a poisonous ripple affect from these disingenuous presentations. For more information about Sabeel: go to
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