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Does this support the Higgs view of the Great Depression, and the modern view of stagnation? Or is it just an anomaly? Remember, beware any single study. But of course, a single study is something.

Do ‘Cheeseburger Bills’ Work? Effects of Tort Reform for Fast Food

After highly publicized lawsuits against McDonald’s in 2002, 26 states adopted Commonsense Consumption Acts (CCAs) – aka ‘Cheeseburger Bills’ – that greatly limit fast food companies’ liability for weight-related harms. …

… we find that CCAs significantly increased stated attempts to lose weight and consumption of fruits and vegetables among heavy individuals. We also find that CCAs significantly increased employment in fast food. Finally, we find that CCAs significantly increased the number of company-owned McDonald’s restaurants and decreased the number of franchise-owned McDonald’s restaurants in a state. Overall our results provide novel evidence supporting a key prediction of tort reform – that it should induce individuals to take more care – and show that industry-specific tort reforms can have meaningful effects on market outcomes.

Let’s revisit that in case it’s not clear. If you reduce the costs employers face (in this case the risk of being sued for ridiculous things), customers take more responsibility for themselves, and that the companies hire more people. That should not be surprising. The obvious extension is to then ask, “how is this any different than regulations which impose other costs on firms, like the minimum wage or mandating benefits?” It’s, of course. no different.

Related, I was going to blog this article, but decided against it. The above piece is just a tiny, tiny slice of what the author “doesn’t understand.”

Joseph Stiglitz has four (yes, four) new papers on wealth and inequality: (1), (2), (3) and (4).

Economists are very familiar with the “rebound effect” which tends to undermine direct regulatory mandates. For example, if you mandate seatbelts in cars, you in effect lower the cost of driving aggressively, so you should expect drivers to consume more aggressive driving. Of course whether in fact drivers respond in toto by driving more or less aggressively is still an empirical question, but it at least makes you aware of what it means to be a good economist. Always be on the lookout for where the bodies are buried. Another classic example economists beat on is the implementation of CAFE standards in an effort to reduce fuel consumption. Again, the direct effect of the regulation is that since each car gets better mileage, then people will burn less gas per mile driven. The in-tuned economist would recognize of course that increasing fuel economy standards lowers the marginal cost of driving an additional mile, so you might expect some amount of the gas savings to be “eaten” up by driving more miles at the margin. Again, whether CAFE standards actually increase driving is an empirical question. I don’t think economists are claiming that the rebound effects are more than enough to offset the gains due to the standard, rather their point is that the proposed gains due to CAFE are overstated. Furthermore, the real lesson is not that there is a rebound effect, but that at the margin an input standard like CAFE is tautologically inferior to an increase in the price of the activity you want less of, such as a fuel tax. In any case, I found the behavior and strategy in this paper to be interesting. They find that in response to CAFE, drivers do not drive more. OK, that’s perfectly fine, that still. by the way, doesn’t mean that CAFE standards are anywhere near good policy. But why they don’t drive more is interesting. It’s not that drivers wouldn’t respond to the better mileage in a way we expect, it is that the cars they are forced into buying by CAFE suck. And people don’t like to drive cars that suck. How dystopian,

This paper exploits a discrete threshold in the eligibility for Cash for Clunkers to show that fuel economy restrictions lead households to purchase vehicles that have lower cost-per-mile, but are also smaller and lower-performance.

I am sure the NY Times and HuffPo will feature this result on the front page of their respective organs:

For example, how much of the rise in earnings inequality can be attributed to rising dispersion between firms in the average wages they pay, and how much is due to rising wage dispersion among workers within firms? Similarly, how did rising inequality affect the wage earnings of different types of workers
working for the same employer–men vs.  women, young vs.  old, new hires vs.  senior employees, and so on?

Covering all U.S. firms between 1978 to 2012, we show that virtually all of the rise in earnings dispersion between workers is accounted for by increasing dispersion in average wages paid by the employers of these individuals.  In contrast, pay differences within employers have remained virtually unchanged, a finding that is robust across industries, geographical regions, and firm size groups.  Furthermore, the wage gap between the most highly paid employees within these firms (CEOs and high level executives) and the average employee has increased only by a small amount.

Of course, the reason I link to the above is because it suits my biases, and I am a paid shill to promote it. Nevertheless, we know first that earnings inequality doesn’t capture the kind of inequality that “people” claim to worry about (i.e. access to goods and services). We know that measuring earnings inequality itself is fraught with difficulty, particularly if we do not have a universe of panel data, which we do not have anywhere near that. We know that earnings inequality can be reflecting very different lifestyle choices made by otherwise identically situated individuals. We know that the index number problem (e.g. adjusting for price changes over time) can have a large impact on measured inequality over time. We know that most people don’t actually care about inequality and that most people don’t actually know how it is changing without the NYT telling them to care about it. And now we see that different firms/industries are paying more dispersed wages than they were 40 years ago, not that workers within any firm are being treated differently. I suppose this means we should tax Google out of existence to make this kind of inequality go away. I’d note, of course, that even if the finding is right, we still don’t have a counterfactual. Maybe within firm earnings would have compressed were it not for some factor causing inequality in wage payments within firms, or perhaps within firm inequality would be different if the composition of workers within those firms had remained the same (I sense that the degree of vertical integration of firms may have changed over time and the activities that they do and do not do on their own may have changed). For example, my old firm fired its entire print staff at about the time I was leaving. If you look at the data for my old firm then, it would look like wage inequality fell over time.

I found this paper to be particularly depressing for two reasons. First, as longtime readers may know, I get queasy at anyone trying to estimate “optimal taxation” because I tend to disagree with the objective function. Second, and more alarming perhaps is that this paper argues for higher education subsidies on the grounds that labor and capital taxation post-education distorts those markets, so we need to distort the education market in order to correct for it. Dystopian. Maybe Tomorrowland should have included something about that idea instead of beating us over the head for global warming and our indifference to it.

And the excellent Gabe W. sends me a link to this episode of Dog Bites Man: “When Family Friendly Policies Backfire.” Yet again, I wonder what the author of this piece would say?  We know what the kids at Vox would say already. Let me retitle their article for you in case it is not clear, “The Way You Love Moms is to Impose Rules, by Force, That Require Other People to Pay for Moms … and Oh, It Doesn’t Matter if Those Policies Actually are Good for Moms, It Just Matters that Our Piece of the Map is Colored with the Right Color. Because? Moms.” I especially “liked” this part of the article:

As Americans debate whether and how to make the system here more generous, there are lessons from overseas. The child-care law in Chile, the most recent version of which went into effect in 2009, was intended to increase the percentage of women who work, which is below 50 percent, among the lowest rates in Latin America. It requires that companies with 20 or more female workers provide and pay for child care for women with children under 2, in a location nearby where the women can go to feed them.

It eases the transition back to work and helps children’s development, said María F. Prada, an economist at the Inter-American Development Bank and lead author of a new study on the effects of the law. But it has also led to a decline in women’s starting salaries of between 9 percent and 20 percent. Researchers compared pay at the same companies before and after they were big enough to be forced to comply with the law. (Another approach by companies, especially smaller ones, has been simply not to comply with the law.)

But of course, like we saw above, we wouldn’t expect increasing firm costs in America by, say, raising wages they have to pay workers, to have any adverse impact at all.


Sunday Blue(s) Laws

Among the many disasters that Prohibition wrought (and continues to bring in the form of the current Drug War) it seems it is largely responsible for wiretapping. This again from Last Call:

When he was Attorney General (wintercow: Lord Jeff alum) Harlan Fiske Stone had declared that Justice Department personnel (including members of J. Edgar Hoover’s brand-new Bureau of Investigation) were forbidden to use wiretaps, which he considered unethical.

and Chief Justice Taft led a 5-4 majority that found private telephone communication between two individuals no different from casual conversation overheard in a public place. “Can it be said that the Constitution affords no protection against such invasions of individual security? asked Brandeis. For the first time, the Court said it did not.


An acquaintance who knows a bit about organic farming and conventional farming and GMO techniques tells me that scientists have been able to take a gene from the barley and stick it in the wheat … and by doing so to irrigate wheat would require 1/8 as much water as conventional wheat requires. Perhaps instead of the Bureau of Reclamation and the Army Corp trying to make the desert “bloom like a rose” they should be supporting research that helps figure out how to grow crops when natural rainfall is lower than 10 inches per year.

From Last Call:

By 1910 the federal government was drawing more than $200 million per year from the bottle and the keg — 71 percent of all internal revenue and more than 30 percent of federal revenue overall. Only external revenue — the tariff – provided a larger share of the federal budget

The federal government today spends about $4 trillion per year. If we funded 30% of it with a liquor tax, we’d need to raise $1.2 trillion from liquor taxes alone! That is well over triple the amount we raise from corporate income taxes.and about 75% of the amount we raise from the individual income tax and 30% more than we raise from payroll taxes! Your mileage may vary on what these data points demonstrate.

It seems that the burden of proof in popular argumentation is shifted to whatever favorable point we’d like to make. And believe me, people of all sides are prone to doing it. But think about some issue that causes controversy for whatever reason – climate change, eating GMO foods, vaccines and autism, and so on. I think the very best that science is going to be able to do is rely on the default position that Marauding Ghoulies do NOT cause cancer. If we insist on a burden of proof that requires me to prove that Marauding Ghoulies do NOT cause cancer, which is just about impossible to demonstrate, we are requiring unicorns to make appearances. It is simply not possible to demonstrate proof against an unfalsifiable claim. In this case, we are truly going to have to come up with standards that first categorize claims into those that are and those that are not falsifiable and second, when we stumble upon the latter type of claim, agree that the best we are going to be able to do is examine the existence or lack of existence of relative risks and rely upon the large body of research on such particular claims to be able to establish whether in fact Marauding Ghoulies are good candidates for cancer causing creatures.

We will demonstrate with specifics should I find my way to a keyboard someday soon.

The Hiatus

No, not this one. I’ll be galavanting and posting only sparsely. I hope you keep me in your feed reader however, I’ll be back at some point.


The reason we are talking about inequality is because we are talking about inequality. I suppose the SJW can take credit for “raising awareness:”

Misperceiving Inequality
by Vladimir Gimpelson, Daniel Treisman  –  #21174 (POL)

Since Aristotle, a vast literature has suggested that economic inequality has important political consequences.  Higher inequality is thought to increase demand for government income redistribution in democracies and to discourage democratization and promote class conflict and revolution in dictatorships.  Most such arguments crucially assume that ordinary people know how high inequality is,
how it has been changing, and where they fit in the income distribution.  Using a variety of large, cross-national surveys, we show that, in recent years, ordinary people have had little idea about such things.  What they think they know is often wrong. Widespread ignorance and misperceptions of inequality emerge robustly, regardless of the data source, operationalization, and method of measurement.  Moreover, we show that the perceived level of inequality–and not the actual level–correlates strongly with demand for redistribution and reported conflict between rich and poor.  We suggest that most theories about political effects of inequality need to be either abandoned or reframed as theories about the effects of perceived inequality.

My amazing colleague, Stan Engerman, famous for his work Time on the Cross, just shared with me a short retrospective now that 40 years has passed since the publication of that book. Here are some tidbits from that work. Stan actually does get invited to dinner parties despite this, demonstrating that I have much to learn about the world still.

  • According to Frederick Douglass, what is the worst part of being a slave? It wasn’t necessarily the deprivation and physical treatment but rather, “it was the loss of freedom of action that was the primary evil of enslavement.” Gee, I’d like to see that sentiment more widely appreciated when it comes to all institutions.
  • Slavery has obviously existed in many societies, in many times, from ancient societies into the 20th century, in the Americas, Europe, Asia and Africa. … The U.S. South was not the first British or European New World settlements to have slavery, nor was it the last area to end it (that was Brazil in 1888).
  • “The interest in the slave trade has also shown us more about the nature of slavery and the slave trade in Africa — and the role of wars, kidnapping, and other means of acquiring slaves within Africa, with the sending of slaves to the coast by Africans for sale to Europeans, or else northward to North Africa or the Middle East, eastward to the Indian Ocean areas, and also the large number traded with elsewhere in Africa. African traders gained from the rising slave prices due to the increase demands from these sources. Slavery played a significant role in Africa before, during, and after the transatlantic trade. Slavery was generally ended by European colonizers, since there was a limited indigenous African anti-slavery movement.
  • In regard to economics and demography, views have shifted from seeing slavery as the cause of a backward and a declining economy to now describe slavery as a system that was often booming economically and quite productive.
  • Brazil was the largest recipient of African slaves, over 40% of the total … the U.S. received only about 5% of the transatlantic slave trade. Yet the US had more than 1/3 of all New World Blacks in 1830. This growth reflected a very high rate of natural increase, based on unusually high level of fertility and relatively lower mortality than for slaves elsewhere … it was the high southern slave fertility — as high as that of northern and southern whites at the time…
  • This might mean that the slave trade and slavery had then become relatively inexpensive to give up. Or, as Adam Smith suggested concerning the Pennsylvania Quakers, the fact that they ended slavery indicated that it was unprofitable to them — that the demand for morality is downward sloping. It is easier for individuals and societies to behave morally when the costs of morality are considered low.
  • Prices, both male and female, in the U.S. rose through the 1850s, reflecting expectations that slavery would continue. The same upward price pattern in the 1850s existed for slaves elsewhere. Even late in the slave era it was clear that slavery was still profitable and planters did not expect decline to be immediate.
  • Easterlin’s findings indicated that from 1840 to 1860 the South grew about as rapidly as did the North, and although its income was below that of the Northeast it was above that of the agricultural Midwest.
  • And although it is not clear exactly what this proves, cotton became more important to the south in 1880 than it was in 1860.
  • In no major case in modern times did slavery simply grind to a halt due to unprofitability.
  • There had seemed little objection by scholars when these indicated that the North was more productive than was the South. It was only when the result seemed possibly to go in a different direction that attention was drawn to the difficulties of measurement.
  • Since planters wanted to (and dud) make money from their operations, it is possible that they were not as frequently cruel and harsh as often argued.
  • Thus, the higher fertility of U.S. slaves reflects considerations such as health, available foodstuffs in the U.S., a higher stability of cohabiting, and an adaptation away from African patterns of nursing.
  • There were also dramatic changes in southern laws, politics, and education after 1870, but then there was a sharp reversal of many conditions after 1890. Was this 1890s change in U.S. ex-slave conditions related to economic or to other factors?
  • If the current U.S. conditions are a legacy of slavery, why was it so long deferred, and on what did it depend on to take place? Also to be noted is the differential success of West Indian ex-slaves in contrast with those from the southern states when both began to move to the northern U.S. in the 20th century.
  • At times it was argued that the slaves, not the owners, should be compensated for the theft of their labor, but this argument was infrequently made, and never carried out. … In the U.S. and elsewhere there was no major calling for what came to be called reparations until the 1960s.

Goodbye Seniors

Congratulations and godspeed. I’m extremely honored to have been part of your lives and I wish for all of you the deepest human flourishing.

You will be missed but not forgotten.

Public Service Announcement: If you ever need a good belly laugh, check out the Darwin Awards.

Were there awards handed out to dingbats who do not manage to kill themselves, then these thieves from my hometown area would be in a race for the title:

If I were one of the burglars who ransacked her Build-A-Burger restaurant in Mount Morris on Sunday and was already in for her surveillance cameras and cash register, I would have made off with the big steel bowl of macaroni salad in the fridge, too.

Because if you’ve ever tasted Hill’s macaroni salad, you know you don’t wait to eat it, even if you’re lugging a 35-pound cash register and cameras through the weeds of theGenesee Valley Greenway hiking trail in the middle of the night on the lam.

the three men arrested in connection with the burglary left “a steady trail of macaroni salad” on the Greenway that helped lead investigators to them.

“It was later discovered that the suspects stole a large bowl of macaroni salad, which they took turns eating, along their escape route

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