The Unbroken Window

Tags: decline of the academy

1. It is clear that on average, you cannot outperform the market - whatever market you are in. Why? Well, “everyone” IS the market.
2. If you beat the market one time, you got lucky.
3. If you beat the market a second time, you got lucky.
4. If you beat the market a third time, you understand government. 

Tags: investing

We would add that FedEx and UPS use handheld computers to track more than 22 million packages, all over the world, each and every day. Their computers work because their business depends on it. So you can know, up to the minute, when your Amazon shipment left Memphis, when it touched down in Parsippany and when it got loaded on the truck for delivery to your house. And yet the Census Bureau, with a decade to plan for it and hundreds of millions of dollars to spend, could not come up with a handheld computer to record the ages, races and addresses of those who don’t respond to the mailed census survey.

And yet we want this institution to have more responsibility for our health care system? For our retirement “security”? For our defense?

Tags: census, incompetence

A self-professed ”classically liberal” friend of mine continues to make the claim that. ”It is difficult to deny the relief to the mortgage borrowers once the pirates have helped themselves to the Treasury.” In other words, since the Fed and Treasury are taking actions to bail-out the major financial institutions (a terrible idea, I agree), then it is only right that the government bail out individuals and families that are in danger of losing their homes. One way to bail out homeowners is to rewrite mortgage contracts (reducing interest rates, or writing off some of the loans as losses)

To that I say hogwash.

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Tags: foreclosure, subprime

This paper examines why developed countries are monogamous while rich men throughout history have tended to practice polygyny (multiple wives). Wealth inequality naturally produces multiple wives for rich men in a standard model of the marriage market. This paper argues that the sources of inequality, not just the level of inequality, determine the equilibrium degree of monogamy or polygyny. In particular, when inequality is determined more by disparities in human capital versus non-labor income (such as land, capital, corruption), the outcome is more monogamous. This explains why developed countries, where human capital is the main source of income and inequality, are monogamous while less-developed economies tend to be polygynous. The results are driven by the larger inequality in the value of women in the marriage market in modern economies. When the value of human capital increases, rich men increasingly value quality women who can help them raise quality children more efficiently. As a result, high quality women are valued much more than low quality women, which makes polygyny less affordable for rich men. In this manner, we show that male inequality generates polygyny, but female inequality reduces it. Using data from Cote d’Ivoire, we provide evidence for all the main implications of the model. In particular, we control for a man’s total income and show that polygyny increases with non-labor income but decreases with labor income and education. These patterns are strong even within social groups where norms regarding polygyny are likely to be constant.  

The paper is here. The Texas story is here.

Tags: human capital, polygyny, sorting

It is criminal and immoral to celebrate, on this day, the social and economic achievements of the Labor Movement. How can one be proud of the fact that those societies that pursued equality were forced to create a new class of individuals to “enforce it” leading to mass murder on a scale that has never been replicated in human history? In honor of the hundreds of millions who suffered under the crippling, despotic, oppressive regimes known as Communism, National Socialism, or Fascism, and to protect the liberties of all people who walk the earth today, the horror of the socialist regimes must not be forgotten.

Over 169 million human beings were killed at the hands of repressive governments in the 20th century.

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Tags: communism, death, equality, workers

The first of my two-part interview with Cornell professor John Cawley can be read here. The second should be coming soon. The most interesting thing about the interviews are the two questions that we did not answer, for various reasons. I reproduce them below.

1. How can you square the strong agreement to the question about insurance markets suffering from adverse selection (i.e. healthy people select not to purchase insurance, leaving insurance pools with large numbers of unhealthy, high-cost, patients) with the oft-levelled claim that insurance companies cherry-pick the healthiest customers to insure?

   In other words, how can it be that both only the healthiest individuals and the least healthy individuals are the insured?

2. It seems to me an inconsistent position for economists to solidly agree that employer-provided health benefits are “paid-for” by employees through lower wages, but to also be divided on whether the U.S. should continue its favored tax-treatment for employer-sponsored health insurance. To what might you attribute this difference?

   In other words, how can economists agree that when employees are provided with health insurance from their employers, their employers reduce the wages of employees to “pay for it”, and at the same time be worried about eliminating the tax preference for employer provided health insurance - eliminating the tax preference, and therefore having individuals purchase their own or through a group at their employer, will result in higher wages for employees.

The answers to these are messy, and perhaps politically unpalatable.

Tags: health policy, normative economics, positive economics

No matter what data we seem to show about U.S. trends (manufacturing share of employment fell below 10% last month from a high of 40% during WWII; manufacturing output is at an all-time high; U.S. living standards, per capita, have increased four-fold since WWII), this ridiculous fear still remains.

While you might have questions about the reliability of the following chart, it is interesting to ponder nonetheless. Note that official Chinese sources are not publishing employment data for the manufacturing sector at this point, so I had to stop in 2002. I can only imagine why.

Tags: china, growth, manufacturing, trade-deficit

Jim Bohannon asked me, as a final question, what I would do if I were the world’s economics czar, and to ignore political consequences for a moment. I had something like 15 seconds to answer.

My original answer was: “I’d eliminate my position.” But, as this was talk radio, both he and the listeners wanted to hear what I would say anyway. So I acquiesced and answered:

1. Enforce sound money policies on all of the world’s central banks (e.g. returning to some sort of commodity standard)
2. Eliminate all special privilege.

 There really wasn’t time to elaborate, or to think harder about what else to add. Without sounding like an anarcho-nutcase, which I suppose at times some might think of me as, I would have added the following to the short list if the time were there:

• Force all corporate charters to run out (or at least be renewed);
• Disallow corporate managers (owners?) to have zero liability. I really would consider some sort of partnership structure the standard we should aspire to;
• Elimate all barriers to trade, including tariffs, subsidies, quotas and import restrictions;

Of course, there could be dozens more. But for the sake of a soundbite, I think I would stick with these to start.

UPDATE: Notice that as czar I would not propose the creation of anything, at least not as one of my top priorities.

Tags: media, planning

Begin with the current inventory of carbon dioxide emissions - CO2 being the principal greenhouse gas generated almost entirely by energy use. According to the Department of Energy’s most recent data on greenhouse gas emissions, in 2006 the U.S. emitted 5.8 billion metric tons of carbon dioxide, or just under 20 tons per capita. An 80% reduction in these emissions from 1990 levels means that the U.S. cannot emit more than about one billion metric tons of CO2 in 2050.

Were man-made carbon dioxide emissions in this country ever that low? The answer is probably yes - from historical energy data it is possible to estimate that the U.S. last emitted one billion metric tons around 1910. But in 1910, the U.S. had 92 million people, and per capita income, in current dollars, was about $6,000.

By the year 2050, the Census Bureau projects that our population will be around 420 million. This means per capita emissions will have to fall to about 2.5 tons in order to meet the goal of 80% reduction.

It is likely that U.S. per capita emissions were never that low - even back in colonial days when the only fuel we burned was wood. The only nations in the world today that emit at this low level are all poor developing nations, such as Belize, Mauritius, Jordan, Haiti and Somalia.

Read the whole thing in Monday’s Wall Street Journal.

Tags: energy prices, global warming