I’m really with Volokh conspirator Orin Kerr on this one: it’s hard to throw a pity party for a professor who has to “endure” Kerry / Edwards bumper stickers and a left-leaning faculty. His biggest gripe—horror of horrors—is that some faculty members will skip the RNC. Hardly evidence of oppression. Here’s “William Pilger’s” take:

My new tenure-track digs include a large office in a historic building with leaded-pane windows, sills deep enough to stack files on, and shelves on three walls filled with my own books, departmental gems, and junk from years past.

All the signs point to it: I’m finally a bona-fide member of academe.

Yet I’m gradually coming to realize that my membership card should read “in but not of”—something the 2004 presidential election set in stark relief. Maybe I should have seen it coming all along.

I was just finishing up the requisite two-year temporary appointment last spring—at my alma mater, of all places—when a relatively small group of conservative students asserted itself more publicly than the administration wished. Their claim: A leftist bias emanating from the college administration and faculty stifled discussion and real thinking in the classroom.

I had reached the same conclusion when I was a student there. During an “Introduction to Political Science” class, for example, I was required to write paper on how to solve global warming. My paper suggested that perhaps there was no reason to, since the scientific evidence was inconclusive. I got a D.

Quiggin is a social democrat so, naturally, he sees the recent gains in capitalism (neoliberalism in his lingo) as just making the sectors where capitalism succeeds smaller and making the increase of government interference an inevitability due to capitalism’s own successes. For instance, he lists agriculture and manufacturing as areas that are appropriate to capitalism, but healthcare and education, not so much.

Europe will get increasingly economically weak for the next several decades and almost all of it can be accounted for in their demographics, not their philosophy. If their philosophy stays exactly the same, they will see much more government. That's not a philosophy that's ascendant; rather, one that is stuck in its own demographic constraints.

Like Quiggin, I’m influenced by my own views and disagree with his. He sees increased government interference, and he’s probably right about most of the rest of the world, but the U.S. is still an open question as I see it. Europe will be experiencing dramatically increasing median age, which will propel its welfare states even higher than they are now as a percentage of GDP (typically around 50%, as opposed to 32% for the U.S.). The only real hope they have for immigration is from the Middle East, from a culture largely untouched by the Enlightenment. In my opinion, it’s far more likely that we’ll be seeing a Europe in the future that’s far more illiberal (in the classical sense) if they accept new immigrants, and economically so even if they don’t.

The Economist has an excellent population survey from a couple of years ago that sheds a bit of light on the situation:

For 50 years, America and the nations of Western Europe have been lumped together as rich countries, sharing the same basic demographic features: stable populations, low and declining fertility, increasing numbers of old people. For much of that period, this was true. But in the 1980s, the two sides began to diverge. The effect was muted at first, because demographic change is slow. But it is also remorseless, and is now beginning to show up.

America’s census in 2000 contained a shock. The population turned out to be rising faster than anyone had expected when the 1990 census was taken. There are disputes about exactly why this was (more on that shortly). What is not in doubt is that a gap is beginning to open with Europe. America’s fertility rate is rising. Europe’s is falling. America’s immigration outstrips Europe’s and its immigrant population is reproducing faster than native-born Americans. America’s population will soon be getting younger. Europe’s is ageing.

Unless things change substantially, these trends will accelerate over coming decades, driving the two sides of the Atlantic farther apart. By 2040, and possibly earlier, America will overtake Europe in population and will come to look remarkably (and, in many ways, worryingly) different from the Old World.

In 1950, Western Europe was exactly twice as populous as the United States: 304m against 152m. (This article uses the US Census Bureau’s definition of “Europe”, which includes all countries that were not communist during the cold war. The 15 countries that make up the European Union are a slightly smaller sample: they had a population of 296m in 1950.) Both sides of the Atlantic saw their populations surge during the baby boom, then grow more slowly until the mid-1980s. Even now, Europe’s population remains more than 100m larger than America’s.

In the 1980s, however, something curious began to happen. American fertility rates—the average number of children a woman can expect to bear in her lifetime—suddenly began to reverse their decline. Between 1960 and 1985, the American fertility rate had fallen faster than Europe’s, to 1.8, slightly below European levels and far below the “replacement level” of 2.1 (the rate required to keep the population steady). By the 1990s American fertility had rebounded, rising back to just below the 2.1 mark.

According to Bill Frey, a demographer at the University of Michigan, the median age in America in 2050 will be 36.2. In Europe it will be 52.7. That is a stunning difference, accounted for almost entirely by the dramatic ageing of the European population. At the moment, the median age is 35.5 in America and 37.7 in Europe. In other words, the difference in the median age is likely to rise from two to 17 years by 2050.

The U.S. is not settled by a long shot. First, we had a chance to follow Europe towards social democracy in the 1970s. Instead, we elected Reagan and enacted tax cuts—very steep ones which were partially repealed in the coming years. We’ve done something similar with President Bush who has been characteristically headstrong in his refusal to raise taxes as the boomers start to retire. He’s pushing for reform of social security and has already implemented MSAs on a limited basis. He’s right to do it, as well. I would far rather experience some short-term pain—even excruciating pain—rather than suffer slow decline, which will surely happen with the expansion of government that Quiggin envisions.

He’s an Australian and I’ll wish him well in his country’s little adventure. I just don’t want us to follow them.

China seems to be all the rage these days. I’ve seen the issue of China’s ascendancy in at least one textbook and one test in recent months. The question is generally asked as a comparative advantage question, such as “If China has an absolute advantage in producing all products (meaning it can produce each of them with fewer inputs per unit of output) against the U.S., will China still choose to trade with us?”. The answer is a modern spin on Ricardo’s “wine and wool” scenario between Britain and Portugal.

I would be interested to hear a contrary answer, provided it doesn’t contain overheated rhetoric about “predation” and so forth.

The answer, of course, is “yes”, China would continue to trade with us because it’s too expensive for them not to. Even if they have an absolute advantage in everything, they will still be internally better at producing some good and there’s an opportunity cost associated with their production choices. So it behooves us to not respond to their ascendancy with quotas or tariffs, but rather to continue trading with them. Monetary theory adds some additional difficulty but the answer should be the same (I would be interested to hear a contrary answer, provided it doesn’t contain overheated rhetoric about “predation” and so forth). Business Week has a good article on the economic history of the U.S. and Europe that provides a present-day lesson:

The close links between the U.S. and Europe fostered growth in both regions then, but how is trade affecting the U.S. today? Just as Europe prospered in the 1800s despite the rise of America, the U.S. is faring relatively well now, in a world where manufacturing jobs are moving in droves to China and white-collar jobs are outsourced to India. GDP per person in the U.S., adjusted for inflation, is up 6% since 2000 despite a recession, the terrorist attacks of September 11, 2001, and a massive trade deficit that is subtracted from GDP.

Surprisingly, real wages are up as well, as inexpensive goods from China hold down inflation and help paychecks go further. According to the latest figures from the Bureau of Labor Statistics, real wages of private-sector workers are up 3.3% since 2000. At the high end, real wages rose 5.1% for managers and 3.1% for professionals despite the recession and pressure from information-technology jobs transferring out of the country. At the less-skilled end, over the past four years there has been a 4.1% real wage increase for clerical and administrative support workers, a 3.2% gain for less-skilled blue-collar workers, and a 6.7% jump for traditionally low-paid health-care workers. These are solid improvements, even compared with the boom years of 1996 to 2000, when private-sector wages showed a 5.4% increase.

As for innovation, the U.S. still has a comparative advantage in key areas such as biotechnology and finance. Biotech, which many believe could fuel the next global boom, is still concentrated in the U.S. And the American financial system, far deeper and more robust than its fragile Chinese counterpart, is much better suited to be the global financial hub.

But as history shows, in periods of political, economic, or military turmoil, the free flow of goods, capital, and ideas can get choked off. And some countries feel the pain more than others. Europe found that out during World War I and the Great Depression. While America was developing mass production and a domestic automobile industry, “Europe was distracted by wars and interwar economic chaos,” writes economist Robert J. Gordon of Northwestern University. The result: The U.S. grew while Europe stagnated. From 1913 to 1950, U.S. GDP per person rose 1.6% per year—as fast as in the previous 100 years—while Europe struggled with a meager 0.8% annual gain.

When you have learned of the bitter oppressions that so many people have suffered under, in despotic countries around the world, have you ever wondered why Americans have been spared?

Have scenes of government-sponsored carnage and lethal mob violence in countries like Rwanda or in the Balkans ever made you wonder why such horrifying scenes are not found on the streets of America?

Nothing is easier than to take for granted what we are used to, and to imagine that it is more or less natural, so that it requires no explanation. Instead, many Americans demand explanations of why things are not even better and express indignation that they are not.

Some people think the issue is whether the glass is half empty or half full. More fundamentally, the question is whether the glass started out empty or started out full.

Those who are constantly looking for the “root causes” of poverty, of crime, and of other national and international problems act as if prosperity and law-abiding behavior were so natural that it is their absence that has to be explained. But a casual glance around the world today, or back through history, would dispel any notion that good things just happen naturally, much less inevitably.

There will be challenges due to China’s growth—and those that see economics as an extension of their penises will probably feel threatened by it—and we’ll have to address them through education, job retraining and income assistance. Even so, we’ll end up better off and, assuming they pose no military threat to us, we shouldn’t feel threatened by another country throwing off poverty and developing a middle class.

Via the still-valuable-even-though-the-election’s-over Real Clear Politics.

With exams over less than twelve hours, I wasn’t planning on doing much thinking—who knows, after reading this you might conclude that I haven’t been doing much thinking—but this is an issue I care about. So I blog.

I read a proposal in the WSJ earlier this year, which has apparently come up again, about ending the tax deductibility of health benefits and was struck by how simple it is. I wish I still had the archive from my old site so I could find the original article.

Anyway, making benefits exempt from taxable income causes people to over-consume and employers will opt for more elaborate plans for more expensive workers. They’re the ones with the bargaining power. Will eliminating this distortion, by treating different forms of income equally, cause employers to abandon health insurance as a benefit? I suspect not for two reasons.

First is institutional inertia. Employees have come to expect employers to offer some sort of health benefit and it’s one of the first things employees think about when evaluating jobs. Employers will likely continue to offer health benefits simply because employees expect the benefits.

Another reason employers will continue to offer health benefits, even without the tax benefit, is because it’s something that they can offer relatively cheaply, as opposed to having employees get their own insurance. This won’t be true in every case, to be sure, but in general employers will be able to buy insurance at a lower rate than employees can alone, therefore adding more value to a compensation package from the employee’s perpective at a relatively low cost to the employer.

Will the benefit of eliminating the propensity to over-consume that’s built into the tax code outweigh the costs of disintermediation and other considerations? I don’t know, but on its face it doesn’t make a lot of sense to me to treat one form of income as preferable to another.

More on this issue can be found here and here.

Update: click through the "here" links if you want to see actual numbers.

This is what Stalinism does for you. Maybe North Korea will collapse so their people can eat:

Sixty years of North Korean communism have had a grim and unexpected impact on its citizens: it has paralysed their growth.

While their cousins in the south have thrived physiologically, thanks to the comforts of capitalism, North Koreans remain as stunted in stature as they were after the Second World War. Adolescents look like children, adults like young teenagers. Nor is the height difference a slight one. After studying more than 2,300 refugees who have fled the north over the past four years, anthropologist Sunyoung Pak has found that the average young northern male is 5.9cm (2.32in) shorter than his southern contemporary. The difference for women is 4.1cm (roughly 1.62in).

‘North Koreans are clearly suffering from chronic growth retardation,’ said Pak, of Seoul National University in South Korea. Her studies, to be published in the international journal, Economics and Human Biology, this month, suggest that North Koreans must have suffered severe malnutrition problems virtually since Korea split into two states in 1948.

Her research shows that the only ages at which the average North Korean in her sample and the average South Korean share about the same height is from 50 to 69 years. Since height is determined during the early teenage years, this suggests that North Korea began to suffer food shortages at least by the 1960s.

A recent amendment to the Fair Credit Reporting Act requires that all three major credit bureaus (Equifax, Experian, and TransUnion) provide you with a free copy of your credit report, upon your request, once per year.

To prevent them from being overwhelmed with requests, the free reports are being phased in over a nine month period, from Dec. 1, 2004 to Sept. 1, 2005, depending on your state of residence.

For more information, visit the FTC‘s page, or go to http://www.annualcreditreport.com/. (No link provided, since that web server rejects requests with a HTTP_REFERER header from any site other than www.ftc.gov, www.equifax.com, www.experian.com, or www.transunion.com, presumably to thwart phishing attacks.)

Chris just commented on this extensively, but this topic seems to be all over the place (and I mentioned it earlier this week, however briefly). The Economist has an article as well by their “Lexington” on this issue of ideological bias in the universities. A quote:

This is profoundly unhealthy per se. Debating chambers are becoming echo chambers. Students hear only one side of the story on everything from abortion (good) to the rise of the West (bad). It is notable that the surveys show far more conservatives in the more rigorous disciplines such as economics than in the vaguer 1960s “ologies”. Yet, as George Will pointed out in the Washington Post this week, this monotheism is also limiting universities’ ability to influence the wider intellectual culture. In John Kennedy’s day, there were so many profs in Washington that it was said the waters of the Charles flowed into the Potomac. These days, academia is marginalised in the capital—unless, of course, you count all the Straussian conservative intellectuals in think-tanks who left academia because they thought it was rigged against them.

Bias in universities is hard to correct because it is usually not overt: it has to do with prejudice about which topics are worth studying and what values are worth holding. Stephen Balch, the president of the conservative National Association of Scholars, argues that university faculties suffer from the same political problems as the “small republics” described in Federalist 10: a motivated majority within the faculty finds it easy to monopolise decision-making and squeeze out minorities.

The more indeterminate the discipline, the more it tilts left.

There are some on the right that rather loudly oppose affirmative action in all its forms, except in academia, where they want some form of preferences for the right. This seems like a bad idea to me, and Chris said it better than I can below: “Replacing liberal ideologues who can’t keep their lectures and their leftism separate with right-wingers with similar faults is no solution.”

It’s not as much of a threat in my discipline, economics, as it is in other fields. As my Thought professor has pointed out at great length, the economic discipline has created a “little box” which it defines as theory. The box is supposedly used as a means of keeping ideas that aren’t fully explainable out of the body of theory. There’s also a nearly complete positive correlation in favor of those ideas that can be expressed using math. Again leading to my theory about how indeterminate a discipline is sets its leftward tilt.

Talk about the dollar has been all the rage these days. The Economist is leading with it as an issue this week. Seeing the dollar fall this much is bothersome—and may be very bad news, for all I know—but it still seems to be about forcing China to break that peg. As for The Economist’s suggestion that we focus on the budget deficit, as long as it’s confined to spending restraint, I agree. The tax cuts, though, need to stay in place to force the issue of entitlement reform. Future tax increases—and there will be future tax increases—should be implemented once that’s been accomplished. Here’s what The Economist had to say:

In a free market, without the massive support of Asian central banks, the dollar would be far weaker. In any case, such support has its limits, and the dollar now seems likely to fall further. How harmful will the economic consequences be? Will it really undermine the dollar’s reserve-currency status?

Periods of dollar decline have often been unhappy for the world economy. The breakdown of Bretton Woods that led to a weaker dollar in the early 1970s was painful for all, contributing to rising inflation and recession. In the late 1980s, the falling dollar had few ill-effects on America’s economy, but it played a big role in inflating a bubble in Japan by forcing Japanese authorities to slash interest rates.

This time round, it is a bad sign that everybody is trying to point the finger of blame at somebody else. America says its external deficit is mainly due to sluggish growth in Europe and Japan, and to the fact that China is pegging its exchange rate too low. Europe, alarmed at the “brutal” rise in the euro, says that America’s high public borrowing and low household saving are the real culprits.

There is something to both these claims. China and other Asian economies should indeed let their currencies rise, relieving pressure on the euro. It is also true that Asia is partly to blame for America’s consumer binge: its central banks’ large purchases of Treasury bonds have depressed bond yields, encouraging households in the United States to take out bigger mortgages and spend the cash. And Europe needs to accept, as it is unwilling to, that a weaker dollar will be a good thing if it helps to shrink America’s deficit and curb the risk of a future crisis. At the same time, Europe is also right: most of the blame for America’s deficit lies at home. America needs to cut its budget deficit. It is not a question of either do this or do that: a cheaper dollar and higher American saving are both needed if a crunch is to be avoided.

Amazing how the blogosphere works. I started reading an interesting post on evolution at OTB and ended with a defense of comparative advantage by Paul Krugman that incorporates a prominent mention of natural selection. And I got there via a picture of Jane Galt (via Tyler Cowen), though it’s desperately unrevealing (it’s from behind, perverts).

The OTB post begins with a description of how “intelligent design” advocates are pushing that as an alternative to evolution. There’s no evidence for it—except for our lack of knowledge, or complete knowledge, on the universe’s origin—and it seems ridiculous to me when pushed as science. My own views are theistic, though there’s no evidence to support it other than our existence. It tells me nothing on how we got here. Evolution does.

Perhaps someone could explain why some people find evolution—and natural selection—so threatening? I don’t get it. Jesus taught us with parables; are opponents of evolution saying God couldn’t master allegory? Being a creator of the universe and all, I think He would have a handle on it, and His audience. Isn't it possible that God did know His audience and was explaining the origins of the universe in a way they could understand? It would have been more convenient if He had provided a seminar in physics and evolutionary biology, but I doubt His audience would have grasped it, lacking calculus and all. Evolution doesn’t preclude a creator, it only explains what we can observe. I’ll say it again: I don’t get it, there’s no threat here. I’ll leave it to Brock to argue with y’all over infinity.

As for Jane’s link to Krugman, it’s quite alarming, really. I’m so used to his hyperventilating over everything from Iraq to healthcare that I’m stunned when he seems reasonable. It’s a great article and worthy of a thorough read, which I’ll give it when exams are done.

Well, maybe they do: they should have secured the royalties agreement in advance. I guess it was just a matter of time.

A group of former London state school children who sang on Pink Floyd’s 1979 classic “Another Brick In The Wall” have lodged a claim for unpaid royalties.

Twenty-three teenage pupils from Islington Green School secretly recorded vocals for the track, which became an anthem for children with the chorus “We don’t need no education.”

On hearing the song, the headmistress banned the pupils from appearing on television or video—leaving them no evidence and making it harder for them to claim royalties—and the local school authority described the lyrics as “scandalous.”

Alex Tabarrok has an excellent post that explains the reason that the cost for most medical procedures skyrockets: third-party payers, including both government and private insurance.

Why the price decline in this market and not others?  Could it have something to do with the fact that laser eye surgery is not covered by insurance, not covered by Medicaid or Medicare, and not heavily regulated?  Laser eye surgery is one of the few health procedures sold in a free market with price advertising, competition and consumer driven purchases.  I’m seeing things more clearly already.

I’ve been reading about the weak dollar for more than two years and yet we have somehow managed to avoid economic armageddon. In fact, what’s concerned me more is the weird insistence on the part of China to peg their currency to ours at a very low value. Over the short term it hurts us by making China’s imports cheap and destroying jobs. Over the long term it causes China to destabilize their banking system by trying to maintain the peg against the dollar as it drops.

As I understand it (monetary theory is not my bag, man) the process involves printing additional yuan (or renmimbi) and simultaneously issuing new debt to soak up the new currency. I’ve heard these referred to as “wash transactions” or something similar. The additional debt that China must issue becomes untenable and destabilizes their banking system. Asset prices collapse, bank failures abound (because many debts are tied to asset prices) and the country enters a deflationary spiral, not unlike Japan in the 1980s. A spiral they have yet to recover from fully.

China raised interest rates for the first time since 1995 or 1996 a few weeks ago, so I was still under the impression that we were seeing 1980s Japan play itself out, only this time with China. Now, though, Robert Samuelson (and many, many others) is harping on it and I generally trust his judgment:

First, the American economy has grown faster than other advanced economies. Since 1990 U.S. economic growth has averaged 3 percent annually, compared with 2 percent for the European Union and 1.7 percent for Japan. America’s higher growth sucks in imports; Europe’s and Japan’s slower growth hurts U.S. exports.

Second, the global demand for dollars props up its exchange rate, making U.S. exports more expensive and U.S. imports cheaper. Indeed, many countries, particularly in Asia, fix their currencies to keep their exports competitive in the U.S. market. Instead of allowing surplus dollars to be sold on foreign exchange markets—lowering the dollar’s value—government central banks in Japan, China and other Asian countries have purchased more than $1 trillion of U.S. Treasury securities. Private investors have also bought lots of U.S. stocks and bonds. All told, foreigners own about 13 percent of U.S. stocks, 24 percent of corporate bonds and 43 percent of U.S. Treasury securities.

Up to a point, this arrangement benefits everyone. The world gets needed dollars; Americans get more imports, from cars to clothes. But we may now have passed that point. Hazards may outweigh benefits. The world may be receiving more dollars than it wants. A sell-off could spill over into the stock and bond markets and cause a deep global recession. Here’s how.

Will Wilkinson has a great post on negative liberty and the welfare state that I largely agree with:

However, I think that among the best argument for robust negative or liberty rights, i.e., for institutionalized constraints on coercion, is that a reliable system of negative rights over time creates more abilities, opens more paths of feasible possibility for individual lives, than most alternative systems of rights. Like Friedman and Hayek, I’m in favor of a modest and well-designed social safety net. However, political systems built around positive rights tend toward sclerosis, thereby reducing rates of economic growth, and a high rate of economic growth, along with (negative) liberty and stability, is part of the trinity of primary political goods (says me). Furthermore, a system of positive rights, conceived as a system of guarantees, is often self-defeating, because it cannot overcome systemic moral hazard problems that, independently of growth problems, turn out foreclose many of the possibilities for life that the system of guarantees was meant to open.

I’m now listeneing to AC/DC. Not exactly 80s, but still good.

Tyler Cowen wonders why health care sucks:

It remains a mystery, why private health insurance has performed badly in holding down costs. Companies compete fiercely to shed costly patients but they do less to invest in reputations for reliability and trustworthiness. Similarly, it is a puzzle why HMOs don’t do more to invest in good reputations; lately Kaiser has moved in this direction.

All of this, I suspect, can be traced directly to the disconnect between health care consumption and health care customers; employers contract with health care plans as a fringe benefit for their employees (which Cowen has noted before), but they have no real incentive to make sure the health insurance is good (although there certainly is an incentive to make its cost as low as possible), except to the extent that a good health insurance plan can attract new employees; but, once employed, few people change jobs solely because their health insurance sucks (and nobody in a cartelized labor market, like academe, does so), so there’s little incentive to improve health care coverage.

It seems to me the sensible course forward is to couple HSAs with incentives for employers to provide a health insurance purchasing account (in lieu of employer contributions), which employees could use to purchase a health insurance plan in a competitive market. This would align the customer-consumer interest much better than the present system.

Economist Alex Tabarrok of Marginal Revolution argues in favor of prison privatization in the Pasadena Star-News.

More than two decades of experience with private prisons in the United States, Great Britain, Australia and elsewhere attest to the fact that private prisons can be built and operated at lower cost than public prisons.

Cost savings of 15 to 25 percent on construction and 10 to 15 percent on management are common. These are modest but significant cost savings in a $5.7 billion state system that continues to grow more expensive every year.

Private prisons not only have lower costs than public prisons: by introducing competition they encourage public prisons to also innovate and lower costs.

Back in August I wrote

If one is of a libertarian bent (as I am) with regard to victimless crimes such as drug use and prostitution, the problem would seem to be that imprisoning people doesn’t cost the government nearly enough. After all, the marginal prisoner is a lot more like Tommy Chong than Charles Manson.

To put it another way: if California were to save 15% on the per prisoner cost of incarcerating someone through privatization, how much of that savings would be returned to California taxpayers (through lowered taxes or paying off California’s debt), and how much would be used to incarcerate even more people through “tough on crime” measures like California’s three strikes law?

Steve Landsberg asks:

How come a sandwich at the airport deli costs me twice as much as a sandwich at the deli down the block, but they’ll both sell me a newspaper for the exact same price?

My guess: the newspaper has a suggested retail price on its cover, and therefore if the airport vendor tried to take advantage of its capitive audience the consumer would object to the price inflation. Deli sandwiches don’t come with sticker prices, so consumers don’t mind the price variation as much. (I also suspect the profit margin for retailers on newspapers is somewhat higher than on sandwiches, but I’m not sure that matters as much in this case.)

From Saturday’s Washington Post:

[New stadium opponents] said that although the stadium proposal calls mainly for taxing stadium services and big business, they feared that businesses would simply pass those extra costs on to consumers. [emphasis added]

Free hint: the businesses will pass those extra costs onto consumers, either through increased prices or lower levels of customer service (i.e. reducing payroll). Or they’ll leave Washington entirely.

As others have mentioned, it appears that the Montréal Expos are headed to Washington. But, while I’m generally not in favor of Congress meddling in D.C.‘s business (and think some sort of resolution needs to be made to the district residents’ lack of congressional representation), I think I could make an exception for a law blocking the district government’s ill-conceived and completely unnecessary handout package for the team. You don’t have to believe me; believe AEI’s Scott Wallstein, or Cato’s Doug Bandow, to name just two experts, virtually all of whom have concluded that stadium subsidies don’t lead to worthwhile economic benefits—and, particularly in the case of D.C., divert resources that could be better spent on serious social ills.

Lynne Kiesling notes that the British consumer goods price markup is a pretty standard practice—the “dollar sign becomes a pound sign” policy is, and has been, quite common over the years, even as the exchange rate has varied between near-parity and 2:1.

The fact that VAT is built into British prices, while state sales taxes are not incorporated in the “sticker” price in the U.S., accounts for 17.5% of the price differential—in the case of iTunes, about half of the difference between U.S. and British pricing, depending on the day’s exchange rate. Perhaps more interestingly, the remainder of the difference between U.S. and U.K. prices is about the same as the difference between British and Euro-zone pricing (which would also incorporate the quasi-standard European VAT rate), which seems to suggest that British adoption of the Euro would reduce consumer goods prices substantially, and thus significantly improve Britian’s GDP at purchasing power parity.

There’s been some discussion of late of Ray Fair’s model, and particularly its prediction that George Bush will walk away with 57.5% of the two-party vote in November. Bill Hobbs and Don Sensing find this to be interesting—and, at some level, I suppose it is. But I have to mention a couple of caveats:

1. I seriously doubt either major-party candidate will get 57.5% of the two-party vote. A few numbers for comparison: Ronald Reagan’s landslide in 1984 against Walter Mondale netted 59.2% of the two-party vote, while Bill Clinton’s pounding of Bob Dole got 54.7% of the two-party vote. I’d frankly be surprised if Fair’s forecast is even correct within his stated margin of error (±2.4%). To be gracious to Fair on this point, he does candidly acknowledge that there could be specification issues that would inflate the forecast.
2. I think forecasting models do a poor job of explaining the causal mechanisms that take place. The national economy doesn’t vote—rather, about a hundred million Americans do, and the effects of the national economy on individuals are for the most part weak (but, admittedly, can be quite strong for voters in particular industries and regions).

Of course, a third caveat is that forecasting the national vote-share is (in my opinion) a misspecification of the institutional conditions under which the election takes place; there are 51 elections (in the 50 states and District of Columbia) that allocate representation in the electoral college, and I generally think that understanding those 51 elections is much more important than forecasting the headline figure, which only has a tenuous relationship with the substantively meaningful outcome (who wins the election).

Also (potentially) of interest: back in my slightly-more-prolific days, I posted a brief exposition of my distaste for (and disinterest in) election forecasting models.

Tyler Cowen, remarking on an NYT article on charging prison inmates for room and board, says

I'm not comfortable with this notion, since I don't think government prisons should move toward becoming profit centers.

That’s an understatement. If one is of a libertarian bent (as I am) with regard to victimless crimes such as drug use and prostitution, the problem would seem to be that imprisoning people doesn’t cost the government nearly enough. After all, the marginal prisoner is a lot more like Tommy Chong than Charles Manson.

From an economic point of view, the problem is that a huge portion of the cost of incarceration is borne by the person being incarcerated: which, of course, is the intent, for otherwise the threat of imprisonment wouldn’t have a disincentive effect on behaviors the state has prohibited. But since the full cost of imprisonment is not borne by the state, economics suggests that there will be too much of it.

Here’s my not-entirely-facetious* suggestion for getting government incentives right with regard to imprisonment. For each person the state imprisons, the state should hire, at whatever price the free market will bear, an innocent person who will be imprisoned under the same conditions for the same amount of time. (It need not be one single person for the full duration of the sentence. Presumably this job would have very high turnover.)

This way, the government will imprison someone only if the benefit to the government (which will be aligned to some degree with that of the public in a democracy) is greater than the cost, as determined by the free market, to the person being imprisoned.

Of course, there are other costs of imprisonment the state bears, such as maintaining buildings and hiring prison guards, so we would might end up with too little imprisonment under a such a one-for -one scheme. So perhaps the state should hire four innocents to be imprisoned for every five actual prisoners, or two for every three.

At any rate, the government would be a lot less cavalier about locking people up left and right under if it followed such a plan.

Over at Flack Central Station, conservative economist Arnold Kling sees a nefarious plot in the new survey-based happiness research, pioneered by Nobel Prize winners Daniel Kahneman and Vernon Smith.

Referring to the paper How Not to Buy Happiness by Cornell economist Robert Frank, Kling writes:

... [I]t is Robert Frank who wants to impose a rigid conformity on our mode of living. In his model society everyone would commute by mass transit to work. So much for people who like to work from home, or live in a rural environment, or walk to work.

I am afraid that “happiness research” amounts to nothing but a flimsy excuse for left-wing academics to claim that they should be given control over how the rest of us live.

Kling doesn't bother mentioning that Frank makes no public policy recommendations in his paper. The paper could just as well be taken as personal advice to individuals: a Lexus won’t make you any happier than a Honda; you’ll be happier if you buy a smaller house close to where you work, instead of a large house far away; no one ever wished on his death bed that he’d spent more time at the office.

The most interesting passage in Kling’s essay is the following bit:

In making his case, Frank places a heavy intellectual burden on "happiness research." As I have pointed out before, economists traditionally have not bothered to try and measure happiness. We take it for granted that people act in their best interests.

Frank, on the other hand, takes seriously the notion that happiness can be measured by surveys. He views the fact that surveys show little increase in happiness over the past few decades as evidence that higher incomes do not lead to more happiness.

Frank’s problem, according to Kling, is that he takes new evidence seriously. Kling, on the other hand, is a virtuous economist who never questions traditional assumptions.

Kling reminds me of the Catholic priests railing against the Copernican revolution in astronomy:

It upsets the whole basis of theology. If the Earth is a planet, and only one among several planets, it can not be that any such great things have been done specially for it as the Christian doctrine teaches. If there are other planets, since God makes nothing in vain, they must be inhabited; but how can their inhabitants be descended from Adam? How can they trace back their origin to Noah's ark? How can they have been redeemed by the Saviour? (From the Wikipedia article on Galileo.)

Like the Catholic priests in the 17th century, Kling's world-view is upset by new evidence, and he'll add epicycle upon epicycle to preserve his central assumption.

(Hat tip to Marginal Revolution.)

Micha Ghertner, who is far from a knee-jerk right-winger, and who is in my opinion one of the smartest bloggers out there, argues that prisoners should pay for their “room and board” while in prison:

Whatever your thoughts may be on charging wrongfully convicted prisoners for room and board, it makes even more sense to charge the guilty for their prison expenses. Why should taxpayers be forced to pay for other people’s crimes? Ideally, prisoners should be forced to work while in prison to pay off the costs of their confinement, rather than impose an additional burden upon them when they are released.

I’m of the opinion, based on my reading of David Friedman (whom I know Ghertner is familiar with), that inefficient punishments like imprisonment and execution should be expensive for the government. Otherwise, there’s too much incentive to just “lock ‘em up and throw away the key.” Ideally, the cost to the government of locking someone up should be exactly the same as the cost to the person being locked up. That way, the government will lock someone up only if the marginal benefit to society is greater than the cost to the person imprisoned.

This is especially true when a large portion of those imprisoned are being held for things that shouldn’t be crimes in the first place, such as drug crimes.

UPDATE: TChris at TalkLeft writes:

Every few months, it's worth remembering that your tax dollars are being spent to incarcerate Tommy Chong so that the Justice Department could send a message about pot pipes and bhongs.

It's a good thing imprisonment is so expensive to the taxpayers. Otherwise, there would be a lot more Tommy Chongs. (Link via Crooked Timber.)