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, November 05, 2005

Time to Stand Up and Be Counted;
Time to Have the Courage of Your Convictions

Ask the Italian foreign minister, Gianfranco Fini, about having integrity.
Thousands of Italians demonstrated Thursday night outside the Iranian embassy to protest against that country's president call for Israel to be "wiped off the map."

But Italy's foreign minister, Gianfranco Fini, skipped the rally, saying he feared Tehran might retaliate against Italian interests, although he encouraged others to join the protest.
He offered a defence, but let's face it: he's a hypocrite.

He belongs in this book.

[Thanks to BenS for the link]

An Interesting Birthday/Anniversary Wish

Thank you to everyone who sent their best wishes on the first anniversary of the creation of The Eclectic Econoclast. Here is the, um, unique and so very relevant congratulatory posting by Paul Synnott. Thanks, Paul!

Friday, November 04, 2005

A Year Ago Today.
The one-year anniversary of The Eclectic Econoclast

It has been a year since I started writing The Eclectic Econoclast (originally called "The Econoclast"). I had no idea it would evolve into the blog it has become. I figured I would write maybe one or two things a week, if that. In fact, I referred to it as a "bloggette" initially.

Many thanks to everyone who has read the blog (the hit count is about 10 times higher than I ever imagined it might be). Also, I would like to thank everyone who has contributed to and assisted with the blog, with special thanks to:

and many, many others.

Do as I Say (Not as I Do);
Profiles in Liberal Hypocrisy

There is an intriguing new book out, published last week, called Do As I Say (Not As I Do); Profiles in Liberal Hypocrisy. Here (courtesy of BenS) is a summary, excerpted from Judith Blinder's e-mail list:

"I don't own a single share of stock!" filmmaker Michael Moore proudly proclaimed.
He's right. He doesn't own a single share. He owns tens of thousands of shares – including nearly 2,000 shares of Boeing, nearly 1,000 of Sonoco, more than 4,000 of Best Foods, more than 3,000 of Eli Lilly, more than 8,000 of Bank One and more than 2,000 of Halliburton, the company most vilified by Moore in "Fahrenheit 9/11."
... Other examples:
House Minority Leader Nancy Pelosi, who proclaims her support for unions, yet the luxury resort, the vineyard and the restaurants she partly owns are strictly non-union. While she advocates tough new laws enforcing environmental regulations on the private sector, the exclusive country club she partly owns failed to comply with existing environmental regulations for the past eight years – including a failure to protect endangered species.

Noam Chomsky has made a reputation for calling America a police state and branding the Pentagon "the most hideous institution on earth," yet his entire academic career, writes Schweizer, has been subsidized by the U.S. military.

Barbra Streisand is another proponent of environmentalism, yet she drives an SUV, lives in a mansion and has a $22,000 annual water bill. In the past, she has driven to appointments in Beverly Hills in a motor home because of her aversion to using public bathrooms.

Ralph Nader plays the role of the citizen avenger – the populist uninterested in wealth and materialism, pretending to live in a modest apartment. In fact, he lives in fancy homes registered in the names of his siblings.

... "Those who believe that the rich need to pay more in taxes proved especially adept at avoiding taxes themselves. Critics of capitalism and corporate enterprise frequently invested in the very companies they denounced. Those who espouse strict environmental regulations worked vigorously to sidestep them when it came to their own businesses and properties. Those who advocate steep inheritance taxes to promote fairer income distribution hid their investments in trusts or exotic overseas locales to reduce their own tax liability. Those who are strong proponents of affirmative action rarely practiced it themselves, and some had abysmal records when it came to hiring minorities. Those who proclaim themselves champions of civil liberties when it comes to criminal or terrorist cases went to extraordinary lengths to curtail the civil liberties of others when they felt threatened or just inconvenienced. Advocates of gun control had no problem making sure that an arsenal of weapons was available to protect them from dangerous criminals."

Much of this reminds me of the website, Skeleton Closet.
. . . . . . .

Thursday, November 03, 2005

Rising Gasoline Prices???

I received a telephone message today from a journalist who said she was writing about rising gasoline prices around the world.

I didn't speak with her, but I wonder whether she was writing about the trend line over the past year or what. Surely she should be reading Econbrowser and The Knowledge Problem, two of the best sources available for economic analysis of energy.

In the short run, gasoline prices at my favourite station have plummeted from $1.30/litre to 82 cents per litre during the past two months. Now that is serious price "de-gouging".

The Swami

Last weekend, as I wrote last Friday, I was part of a group of actors who put on a mystery weekend at the Forest Golf and Country Club. For the show, I played "Swami", who was a not-very-good fortune teller

On Saturday evening, we had a costume party. The Swami went as Gerald Ford.

The next public show I will appear in there will be a Mystery Dinner Theatre (just one evening, not the entire weekend) on Saturday, November 12th. I play Constantine Leopold, a ballet dancer, in "Murder is a Wake."

Everyone Has a Theory

Have you ever met people who don't like theory? People who say things like, "That's okay in theory, but..." in a sneering tone of voice?

In most cases, people think they have an idea about how things work, whether they admit it or not. There are some theoretical models underlying their belief, even though the models might be fatally flawed.

In his item about Nobelist Tom Schelling, Dan Drezner wrote:

Too often, theorists come up with great models of the world by assuming away petty inconveniences like bureaucratic politics, implementation with incomplete information, or the effects of rhetorical blowback. But before he throws out the baby with the bathwater, Kaplan [who wrote a not entirely complimentary review for] might want to ask himself the following question: if policymakers choose not to rely on social science theories to wend their way through a complex world, what navigational aid would Kaplan suggest in its stead? Policymakers across the political spectrum always like to poke fun at explicit theorizing about international relations. The problem is that they usually rely on historical analogies instead -- which are, in every way, worse than the use of explicit theories.
As Paul Heyne wrote in The Economic Way of Thinking, "No theory means poor theory."

Wednesday, November 02, 2005

The Price Elasticity of Demand for Theatre Tickets

Richard Monette is a world-renowned actor and dirctor; he is now the Artistic Director for the Stratford Festival. During his tenure as artistic director, the Festival has gone from being in serious financial difficulties to being a financial success.

I had the opportunity to speak with him last Friday at The University of Western Ontario, where he received an honorary doctorate. I asked him what he had done to turn around the financial fortunes of the Stratford Festival.
He replied, "I really don't know..."
He went on to say that the Festival performs roughly the same types of plays and musicals now that it always did, and he did not think he had changed the mix enough to have made a big difference (though not everyone would agree with his assessment). He did say that he always tries to make sure there is at least one well-known Canadian actor or actress in the company each season.*

I said,

"But the Festival did raise its prices some years ago, and quite dramatically."

He said,

"Yes, and I didn't want them to raise the prices. I was afraid it would drive people away from the theatre."
It turns out that, on average and in general, Monette was incorrect and the business folks at the Festival knew what they were doing.

The higher ticket prices did, indeed, reduce the quantity demanded. After all, demand curves are downward-sloping. But the reduction in the quantity demanded was not very large relative to the price increase.

In other words, raising the prices increased the overall revenues of the Festival. Prior to the increase in ticket prices, the Festival had been pricing tickets in the inelastic portion of the demand curve, where marginal revenue was negative. The business folk had a better read on the price elasticity of demand for tickets than did the artistic director. That should not be surprising.

*To tell the truth, I had never heard of some of the so-called big names he mentioned. But what else would you expect from the chair of the Philistine Liberation Organization?

More on Richard Posner;
a journalist's perspective

It is no secret that I am a big fan of Richard Posner. Deep in my heart, I know he is unlikely ever to become a Supreme or to win the Nobel Prize in Economics, but I think both events should occur.

But not everyone agrees. Here are some excerpts from a recent article about Posner from the Columbia Journalism Review (thanks to John Chilton for the link).

Judges are not wallflowers, but Posner’s pugnacity and impatience, his willingness to confront bureaucracy with practicality, and his tendency to catch people off-guard are attributes for which he has become known. There are others: Posner is the most prolific federal judge in American history. In addition to more than 2,200 published opinions, he’s written thirty-eight books on a dizzying array of topics, from Monicagate to aging to intelligence reform, and more than 300 articles, op-ed pieces, reviews, and essays — including a recent blockbuster about the press. Along with Gary Becker, a Nobel economist in the monetarist Milton Friedman mold, he maintains a blog ( on which they tag-team on the finer points of everything from plagiarism to whether it’s cost-beneficial to fully rebuild New Orleans. He’s a professor at the University of Chicago Law School. He edits the American Law and Economics Review and is the founder of the Journal of Legal Studies.

In legal circles, he’s best known as an architect of, and primary cheerleader for, a market-deterministic school of legal thought known as “law and economics,” an extension of the Friedman philosophy that seeks to explain behavior and mediate disputes according to economic rules. Posner brought economic ideas into law in a new way, and he has had an enormous impact. “Posner is one of the most influential judges in the country,” says Floyd Abrams, the First Amendment lawyer, echoing the opinion of almost everyone I spoke to who has an opinion about the judge. “What he says is often not only read but taken serious account of by judges who sit far from the Seventh Circuit.”

That’s not particularly good news for journalists since Posner, in recent years, has brought his influence — and his pugnacity — to bear on the press. Posner seems to have little use for the notion that news is a product that deserves a higher legal status than, say, jet engines or soybeans. One influential opinion attached a heavy chain around the neck of the hope that the Supreme Court will grant journalists the right to remain silent about sources when prosecutors come calling. Another opinion threatens to strip First Amendment protections from student journalists. Yet when you study the record, a Judge Richard Posner emerges who has also, at times, been a staunch defender of newsgathering, including investigative reporting. So, journalistically speaking, he’s complicated.

Tuesday, November 01, 2005

Women of Curling Calendar:
a New Draw

What effect do you think this will have on the popularity of curling?

Women's curling is sure to receive a lot more exposure this year, thanks to a new international calendar that features nude and scantily clad female curlers.

One of the stars of the calendar is

Lynsay Ryan of Kelowna, B.C., the daughter of two-time world champion skip and 2006 Olympic hopeful Pat Ryan.

Ryan, a 21-year-old student at Hamilton's McMaster University, found herself in July posing in a see-through sarong in the forests of Fussen, Germany.

“I sent him (her father) an e-mail,” Ryan said with a laugh. “I thought it might be better if he read about it and had time to think about it before he replied.”
And, of course, the calendar fits nicely with Colleen Jones' earlier suggestion that

I think the women are going to have to curl naked in order to get people out there.
I'm not kidding. You're going to have to hope for an Anna Kournikova to come along to really jazz it up.
[thanks to John Chilton for the pointer]
Cross-posted at Curling.

A LIttle Bit of Stagflation?
Maybe Just a Little?

Stagflation is a period of rising rates of inflation and rising unemployment rates (or, more generally, economic stagnation or slowdown).

The slowly rising oil prices over the past year, combined with the oil price spike of September and the huge fiscal deficits in the U.S., along with rapid monetary growth in Canada have led many people to become concerned about the possiblility of growing inflation rates in both countries. Even though oil prices have abated from their September peaks, they are still considerably higher than they were a year ago, and there is good reason to be concerned that these higher energy prices will show up as higher costs and higher prices for other products thus raising the core rate of inflation in the near future.

At the same time, in Canada the unemployment rate is at an long-time low. And in the U.S., the unemployment rate, distorted by so much upheaval after Katrina, Rita, and Wilma, is probably a bit on the low side, too. What I mean by "on the low side" is that the unemployment rates are quite likely below the natural unemployment rates [or NAIRU, depending on which macro model you prefer] in both countries. If I am correct in this assessment, then, ceteris paribus, we should expect unemployment rates to rise, slightly, in both countries.

These two forces, contrary to the naive, short-run Phillips Curve, indicate that over the next year or so we should experience rising inflation rates and rising unemployment rates -- just a little bit of stagflation. It happens frequently when an economy experiences a supply shock, which has been occurring for the past year as oil prices have been bid up on the world market.

Stephen Poloz agrees:

Central banks are raising interest rates now to reduce the risk of an acceleration in behavioural inflation. Higher interest rates will moderate demand in the economy overall. Non-energy sectors will feel this the most, of course, because the energy sector is booming. The effect on non-energy sectors will be twofold: higher energy costs will drain purchasing power from other sectors, and higher interest rates will drain purchasing power from all sectors.

The result will be a little bit of stagflation, although not the ugly kind we saw back in the 1970s. A combination of slowing growth and rising inflation is a natural consequence of an energy price shock that collides with a cautiously restrictive monetary policy. The situation is nothing like as severe as it was in the 1970s, because inflation is so low today and the economy much healthier.
At the same time, David Altig points out that the current situation and the assessments of it are much more mixed in the U.S.

My concern is that elected policy makers will not accept as "natural" the future increases in the unemployment rate that I expect are on the horizon. If they do not, monetary authorities will have to remain strong-willed to hold off additional inflationary pressures.

The Health Benefits from Eating Salmon
(and other fish)

Eating Salmon is good for people.
Salmon is low in calories and saturated fat, yet high in protein, and a unique type of health-promoting fat, the omega-3 essential fatty acids. As their name implies, essential fatty acids are essential for human health but because they cannot be made by the body, they must be obtained from foods. Fish contain a type of essential fatty acid called the omega-3 fatty acids. Wild-caught cold water fish, like salmon, are higher in omega-3 fatty acids than warm water fish. In addition to being an excellent source of omega-3s, salmon are an excellent source of selenium, a very good source of protein, niacin and vitamin B12, and a good source of phosphorous, magnesium and vitamin B6.
This article elaborates in great detail. [h/t to BenS]

But does it have to be salmon? What about Arctic Char? For some conditions, this article pretty much says any fish will do.
One tuna sandwich a week can slow brain decline by the equivalent of three to four years, new research shows.

Scientists at Chicago Rush University Medical Center found that elderly people who ate fish at least once a week had a 10% to 13% per-year slower rate of cognitive decline than those who did not eat fish regularly.

Monday, October 31, 2005

Some Muslim Reactions to Ahmadinejad Call to Wipe Out Israel

The reaction of the Muslim press has been mixed:

The Iranian president's call for Israel to be "wiped off the map" has received a sympathetic ear in some Arabic papers, which say it was a justified device to focus attention on the Palestinians' plight.

Others however believe the remarks were ill-advised and counter-productive.

Some of the editorials are frightening in their misrepresentations and dogmatism in blatant support of Ahmadinejad. Others are more balanced. [thanks to Jack for the pointer]

Ungodly Oil Profits?

There have been two recent items about oil profits which have provoked my interest enough to write about them.

The first, by the Emirates Economist, says

Short-run demand for petroleum is inelastic, meaning that a fall in supply translates into percentage increase in price that is greater than the decrease in quantity consumed. As a result, negative supply shocks drive up revenues and can drive profit as well. What does this prove? That despite its size Exxon and its fellow producers were not exploiting market power - otherwise they would have done on their own what a string of hurricances did instead.
He very wisely points out that

It is only because government has been able to maintain a reputation not to grab profits that oil producers invest in exploration and production.
This long-run view is crucial for economic development.
The second item, by Kip Esquire, says,
[ExxonMobil] announced profits of $9.9 billion on sales of $101 billion. For those who cannot divide, that is a profit margin of 9.9% of sales. Since when is a profit margin at a cyclical peak of 9.9% considered "staggering"?

Microsoft makes 30%, in good times and bad, with a fraction of the investment or risk [ExxonMobil] takes. ... Procter [&] Gamble makes a margin of nearly 13% of sales selling toothpaste and detergent but we are going to begrudge oil companies 7.6% on average and 10% in their best quarters?
While I agree with the tone of his posting, I think a better comparison would be the rates of return on equity, not the rate of return on sales. Rate of return on equity better captures the opportunity costs of the shareholders' financial investments; and rates of return on sales can vary dramatically across industries for reasons that have nothing to do with market power. Furthermore, there seems to be some evidence that oil profits have fallen, now that oil prices have declined.

Back in the late 1970s, I used to tell people who were affronted by the large profits of the oil companies that they had a chance to get in on the profits themselves by buying the stocks of those companies. That they chose not to do so should not be taken as grounds for punishing or taxing those who did.

Sunday, October 30, 2005

Still More Sudoku

We are slowly weaning ourselves off our addiction to Sudoku (see here, here, and here). But not completely.

Meanwhile, Brian Ferguson recently sent me this comprehensive set of links to Sudoku from The Times.

Signs of Rank and Status

With some frequency, we receive e-mails of the following nature at The University of Western Ontario:

The flag will be at half staff on [insert date] from 8:00 am to [insert time] in memory of [insert name], [insert position and rank] with [insert number] years of service.
It appears that the longer one worked here, and the higher the rank, the longer the flag is left at half-mast. The process of assigning different castes to different deceased employees is grotesquely insulting to the memories and survivors of those who have died.

My friend, BenS, says he knows his former colleagues will celebrate when he dies, and so he would like the university to lower the flag in his memory now, while he is still alive, so that he can participate in the celebrations.

BF has wondered whether a new hire who dies suddenly would have the flag dipped in his/her honour for ten seconds or so. Maybe I should hire a work-study student to collect data and estimate the decision rule that is used.
When I retire, I want my employer to dedicate a urinal in the Socionomology Department to my memory (but, like Ben, I'd rather hold a dedication ceremony now, while I am alive, so I can enjoy it, too). It turns out that the concept of "The John Palmer Memorial Urinal" is neither unique nor original.
This is all in sharp contrast to how Phil's Dad was memorialized.
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