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Before reading the following passage, note that I probably should retitle this post and change “government” to just about “anyone.” My children go to Catholic schools and there are piles of things they learn there that are either misinformed, plain wrong, questionable, etc. I like that they are exposed to things that I think are wrong, after all I may in fact be wrong myself, but also, how the heck can you expect people to learn if they are not seriously and regularly exposed to a cacophony of ideas? One sized fits all education is worrisome. In any case, I very much enjoyed Daniel Okrent’s Last Call, here is an early passage:

In 1886 Hunt took her caravan to Congress, which promptly passed a law requiring Scientific Temperance Instruction in the public schools … By 1901, when the population of the entire nation was still less than 80 million, compulsory temperance education was on the books of every state in the nation, and thereby in the thrice weekly lessons of twenty-two million American children and teenagers.

Before I go on, note that though a brewer myself and lover of beer and bourbon, I think we all drink too much. OK, off that high horse and onto the next:

What many of these millions received in the name of “Scientific Temperance Instruction” was somewhat different from what they three words implied. The second one was arguably accurate but what Hunt called “scientific” was purely propaganda, and what she considered “instruction” was in fact intimidation. Students were force-fed a stew of mythology (“the majority of beer drinkers die of dropsy”), remonstration (“persons should not take a stimulant before bathing”), and terror (“when alcohol passes down the throat it burns off the skin, leaving it bare and burning”). These specific insights … were not spontaneously generated; they entered the curricula of an estimated 50 percent of all American public schools in textbooks bearing the one imprimatur most valuable to any publisher: the approval of Mary Hunt.

I do not see education today as being any different. Oh, and then there’s this:

But in 1906, a few months after her death – (the WCTU) learned something distressing about Mary Hunt. For years she had maintained a bank account in the name of something she called the Scientific Temperance Association. Into this account she had deposited royalties on endorsed books published by A.S. Barnes & Company and Ginn & Company — money intended “in whole or in part for the maintenance of the work at 23 Trull Street.

As a once-sensible economist I supported a “revenue neutral carbon tax” as one major prong of global warming strategy. The simple idea is that such a program would qualify as “No Regrets.” If CO2 turns out to be really bad, then the tax assures that we’ve properly considered those damages in our day to day decisions. If it turns out that CO2 is no big deal, well, you still need to raise revenues somehow, and perhaps distorting the energy and land use markets is no worse than distorting labor or capital markets. The premise behind revenue neutrality is that for every dollar we raise in carbon taxation we would eliminate $1 of taxes on something else that we don’t want to be taxing, like labor effort.

But I no longer take hallucinogenic drugs. There is no chance that once a carbon tax is enacted, that major reductions or eliminations of other taxes would take place. And once a carbon tax is in place, there is no chance that other distortionary measures taken to prevent or deal with global warming would be unwound. What we are almost sure to end up with is carbon taxation on top of those other existing programs.

Do I have evidence that leads me to think this way? Well, public choice theory suggests I have every reason to think this way. But ignoring that, two major historical episodes suggest that I am not being cautious enough. First, examining the history of financial sector reform, you never see in the aftermath of a crisis the scrapping of the old rules and regulations that presumably failed or had a hand in the crisis in favor of a cleaner and better set of new rules. In every case in American history what we have seen is a layering of a new set of rules and oversight onto the old set – presumably to not upset the old coalitions that have been built up over time to rely on those. For example, after the very disasterous set of National Bank Era regulations promulgated a series of increasingly severe crisis in the latter half of the 19th century, the new Federal Reserve System was layered right on top of the old National Bank regulations. When the Fed regulations failed during the Depression, we layered a new set of rules on top of those. And so on.

But the era of Prohibition demonstrates quite clearly what would happen if we ever got around to passing a carbon tax. Here is more from Last Call:

Much of the liquor revenue was treated as additive, and helped to pay for the new government initiatives that began to proliferate in the second half of Franklin Roosevelt’s first term. To the economic conservatives who had sponsored Repeal, the combination of high taxes and new programs defined a perfect hell. They had defeated the Drys, but in their own view they had ended up similarly vanquished.

Update: Just saw this piece on WWRD.

You thought I was going to talk about statistics?

Not really.

A good friend of mine happens to suffer from Type 1 diabetes, and one of my brothers played football with someone who suffers from it. I found the following information on the insulin that they must use to regulate their blood sugar and metabolism:

The initial sources of insulin for clinical use in humans were cow, horse, pig or fish pancreases. Insulin from these sources is effective in humans as it is nearly identical to human insulin (three amino acid difference in bovine insulin, one amino acid difference in porcine). Differences in suitability of beef-, pork-, or fish-derived insulin for individual patients have historically been due to lower preparation purity resulting in allergic reactions to the presence of non-insulin substances. Though purity has improved steadily since the 1920s ultimately reaching purity of 99% by the mid-1970s thanks to high-pressure liquid chromatography (HPLC) methods, minor allergic reactions still occur occasionally, although the same types of allergic reactions have also been known to occur in response to synthetic “human” insulin varieties. Insulin production from animal pancreases was widespread for decades, but very few patients today rely on insulin from animal sources, largely because few pharmaceutical companies sell it anymore.

Biosynthetic human insulin (insulin human rDNA, INN) for clinical use is manufactured by recombinant DNA technology.[45] Biosynthetic human insulin has increased purity when compared with extractive animal insulin, enhanced purity reducing antibody formation. Researchers have succeeded in introducing the gene for human insulin into plants as another method of producing insulin (“biopharming”) in safflower.[46][47] This technique is anticipated to reduce production costs.

Those came from Wikipedia entries on Insulin and Diabetes. Note, that my trust in Wikipedia and other similar social information pages is a bit shook for it seems as though there are Gatekeepers who make sure that the information on the pages contains what they want it to contain – they are not truly “free for alls” of information. That’s the topic for another day.

Today’s point is simple, again. Genes (DNA) are taken from humans, transferred into a bacteria (yucky e Coli to boot!), those e Coli are allowed to grow and then in the process they produce an insulin very similar to what humans naturally produce. This is very clearly a case of Genetic Modification. In other words, Insulin medication is a GMO. I bet many other medicines are too.

We should ban it.

Some more fuel to be added to the mythical fires:

Unlike Harding, some of whose highest officials actively abetted the bootlegging industry, and unlike Coolidge, whose lack if interest in enforcement was commensurate with his lack of interest in government activity of any kind, Hoover tried to do something about it. Because he was an engineer, he believed that all problems had solutions; because he was a progressive, he considered an efficient, systematized approach to government reform an article of faith. The earnestness of these convictions, which had won him the derisive nickname “Wonder Boy,” inspired Hoover to appoint the investigative commission whose creation pushed Pauline Sabin into the wet camp.

Still, Hoover’s belief in rational government did lead to some positive initiatives … But in one moment of despair, when he concluded that the unchecked lawlessness in Detroit indicated a “complete breakdown in Government,” Hoover briefly considered sending in the army or the marine corps.

Sure does sound like an ideologue to me, just not the kind people think he was.

I’d simply like to see some consistency on when corporations are deemed to be greedy and when they are not. In today’s WaPo:

Evidence that banks still deny black borrowers just as they did 50 years ago

Well, I have no doubt that banks deny black borrowers. But the article title is to put it mildly, misleading. The evidence that banks redlined in the past surely is in the literature somewhere, but it’s not really “evidence” to show a single map of Chicago from 1939 as systematic evidence of the practice. It would be at least moderately useful to explain what the empirical literature shows about lending to minorities, controlling for all of the factors that impact lending, in 1939. Be that as it may, the article, you would think, would go on to show you systematic evidence of redlining today. Right? Well, not exactly. The article is about a single Wisconsin’s Bank activities in three states. And the evidence that redlining by bankS (note the S)is common, just like 50 years ago, is:

HUD’s analysis of Home Mortgage Disclosure Act data concluded that the bank disproportionately denied qualified loan applicants in predominantly minority neighborhoods in Chicago, Milwaukee, and Minneapolis, compared to other lenders operating in these same communities.

Whoa, what? So, Redlining is prevalent because it seems that one bank does it as compared to other banks who are presumably not doing it or are doing it less? That is sciency goodness. The author goes on to say:

The case is not about doling out mortgages to minority households that wouldn’t otherwise qualify for them — it’s about offering equal access to families that look just as eligible on paper as white homeowners nearby.

You would hope that the author would provide the reader some context. Are there any reasons that a bank would be willing to walk away from sure profits like this? I have no doubt that they may in fact be discriminating, so how about some context about just how much they were willing to sacrifice in order to indulge their “taste” for discriminating? Maybe that was a simple oversight, but the following bit of economics is a bit off:

If your family was denied a mortgage in the 1930s, or the 1950s, or the 1970s, then you may not have the family wealth or down payment help to become a homeowner today. In that way, the consequences of past redlining transcend time, even as new forms of it continue

What does being denied a mortgage have anything to do with how much wealth your family has today? Maybe showing the massive pile of research that demonstrates that people who own homes accumulate more wealth than people who rent them would be useful here. Or perhaps even supporting the statement with some intuition would have one check the validity of it. Let’s rewrite it: “looking at two identical properties in a city, you save a lot more money by owning it than by renting it.” Does that pass the smell test?

In any case, this bank seems not to be greedy. But if you are not greedy then you are a racist. Are those the only options? By the way, I regularly redline everyone everywhere. I’ve never opened a retail store in any neighborhood and I certainly have never made a mortgage loan to any borrower, qualified or otherwise. What does that make me?

An incident that took place just forty miles west of Chicago provoked the Tribune’s editors to indulge in an orgy of coverage that in its frequency, its prominence, and its amplitude suggested that Armageddon was at hand. In the town of Aurora, local officers handed the Tribune (and the dozens of papers nationwide that glommed on the episode) a story it rode for months. In the “peaceful green valley of the Fox River,” the Tribune sighed, Mrs. Lillian DeKing “lay bleeding to death in the kitchen of her home.”

If her husband was indeed a small-time (dealer), his were hardly the sort of crimes that should bring to the family doorstep “six officers of the law, armed with sawed off shotguns, pistols, machine guns, bulletproof vests, and tear bombs.

Oh, that was 1928 in the first major “War on Drugs” which is to say, War on People. Of course we are much more civilized today. Nothing to see here. moving on.

More from Last Call:

Al Smith’s candidacy gave bigots and xenophobes a perfect demon. In 1928 the crude impulses that had earlier ignited the rapid growth of the Ku Klux Klan now exploded among those “Pure Americans” who saw themselves as losing their nation to the Irish and the Italians and all the other foreigners crowding the big cities. Rev. Bob Jones made frequent use of a starling call to arms that year: “I would rather see a saloon on every corner than a Catholic in the White House.” If this didn’t make his feelings sufficiently clear, Jones’s alternative option certainly did: he declared that he would prefer “a nigger president” to the Catholic Smith.

Classy. Of historical interest perhaps, there have been exactly the same number of Catholic Presidents in the United States as there have been Black Presidents of the United States.

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.

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