Friday, January 30, 2004

Outsourcing is Good 

Virginia Postrel has a good piece on outsourcing in the NY Times focusing on the work of economist Catherine L. Mann.

Compared with the end of 1999, which was still a good time for programmers, December 2003 data show a 14 percent increase in business and financial occupations, a 6 percent increase in computer and mathematical jobs, and a 2 percent drop in architecture and engineering jobs. New programming jobs may be springing up in India, but they aren't canceling out job growth in the United States....

What's happening now to software and services has already happened to hardware, with great economic results....

Far from an economic disaster, the result was a productivity boom. As global manufacturing helped to reduce the price of information technology sharply, all sorts of businesses, from banks to retailers, found new, more productive ways to use the technology....

As a result, she estimates, gross domestic product grew about 0.3 percentage point a year faster than it would have otherwise, adding up to $230 billion over the seven years from 1995 to 2002.

"There is no question that the downside anecdote - the well-trained person losing their job - is a story that people identify with," Dr. Mann says. "They simply don't identify with the story of the person who changed their job and does three times better."

"Most of the stories are about downside loss, not about upside gain," she adds, "and there is a lot of upside gain."

See Tyler Cowen's post for further discussion.

Super Bowl XXXVIII Prediction 

I've been messing around with a model to predict football. I won't tell you what it is, because "messing around" is too formal to explain what I did. So here it is:

Patriots 28 Panthers 27

This sort of pains me, but I am just happy that my prediction gives my Panthers more of an edge than most people. And it looks like a fun game to watch, with much more scoring that most people predict. The latest line I saw has the Patriots by 6.5 and the over/under is 38. So, my model is really off compared to the gambling market.

How has my model done in the past? With a very unscientific test, I checked one game (Panthers vs. Rams) and my model predicted Panthers winning 30 to 25, while the actual score was 29-23 (but in OT).

Warning: Using my advice for anything other than amusement could be hazardous to your bank account.

Go Panthers!

The King of Plagiarism Detection 

My father points me to a very good Q&A with UVA plagiarism detector extraordinaire Louis Bloomfield.

Louis A. Bloomfield, a physics professor at the University of Virginia, made headlines in May 2001 when he referred 158 students to the school's Honor Committee to be investigated for plagiarism. He found the suspected plagiarism in five semesters worth of term papers from his course, "How Things Work," by writing a computer program that compared 2,000 papers to one another. When the so-called "Bloomfield plagiarism" honor trials were completed in November 2002, 59 students had been formally accused of an honor offense. A student jury found 20 of them guilty, and 28 left school, admitting guilt.

Dr. Bloomfield not only performed an unselfish service to UVA but to the academy. The software he invented is free to download here. One of the points he makes that I very much agree with is that most student plagiarizers can morally rationalize their behavior away. Sadly, I think this a capacity that all humans have, which we underestimate.


Thursday, January 29, 2004

More on PCR 

Tyler Cowen and Virginia Postrel both chime in on the fall of Roberts. Both highlight why this goes beyond the advocation of bad policy, and the fall is news in itself.

Wednesday, January 28, 2004

More Dumping on Paul Craig Roberts 

After his recent article in the NY Times PCR took a pretty heavy and much deserved beating in the blogosphere, including here. Well, if that wasn't enough Eugene Volokh has just ruined him. Ouch!

What did PCR do to deserve this? He compares taxpayers to slaves, and states that slaves were actually better off. Yes, he actually says this here. What a frickin idiot! When are people going to learn, you can't play around with these analogies. Comparing Bush to Hitler or taxpayers to slaves is just beyond the realm of polite exaggeration....It is plain disrespectful to the point of immorality.

More on Choice "Tyranny" 

Tyler has an excellent post with comments on the latest "Tyranny of Choice" research.

Calling All Sewanee Bloggers 

After receiving two notes from former students, I learned about some Sewanee weblogs of which I was unaware. Please, let me know if you have an interesting website or weblog and I will link to it in the sidebar. I'd like to support the work of our local bloggers.

More on Competitive Balance and Attendance 

I have done some more thinking on my previous post.

I think the answer may lie in the information costs of keeping up with the NBA. All 30 NBA teams play 82 games a year, which means a total of 1230 regular season games are played over a course of a season. Compare this with the NFL’s 32-team/16-game schedule – 256 games a year. To me, watching a sporting contest where I have some idea about the quality of the contest is more enjoyable than watching one without this information. When I watch the New England and Detroit play in the NFL I know I am seeing a good team and a bad team play. A blowout by New England does not surprise me, but a close game does. When I watch hockey – of which I have no knowledge – I cannot distinguish one game from another.

Now how does this relate to the NBA? There are so many team-games in the NBA it is hard to keep up from week-to-week and year-to-year. When I sit down to watch a game on the weekend, it is harder to update the quality of the teams than it is in the NFL. Between 14 and 16 games occurred in the NFL the previous week. I can easily catch up with those teams. In the NBA, where teams may play 3 games a week, which means I have to catch up on 45 games to know anything about the quality of the teams. It is just less enjoyable. Now let’s consider a situation where we have an equally competitive league and a league with a few dominant teams. When I sat down to a Bulls-Knicks game in the 1990s, well I knew that was a great game and Bulls-Timberwolves is a sleeper. BUT, my enjoyment of the game is greater with the dominant teams, because I know a good bit about the quality of the game. In an equally balanced league, the good and bad teams may fluctuate throughout the season, and I will not be able to figure out who is good and who is bad. The outcome of any given game does not provide much enjoyment.

So I have a testable hypothesis. Many team-game leagues (NBA, MLB) should be more negatively correlated with fan interest than few team-game leagues like football. How does this hold up? Unfortunately, I do not have the answer. I do know that CB in MLB is not correlated with attendance, thanks to an excellent paper by one of my students from my Research Seminar. She could find no relationship between CB on individual team attendance from 1998-2001 in a simple correlation and in regressions controlling for many different factors. I would be interested to see the results for football, where CB might generate more fan interest since fans can keep up with the entire league at a lower cost than the NBA and MLB.


Tuesday, January 27, 2004

Thoughts on New Hampshire 

I saw a few speeches after the primary tonight. Here are my observations.

John Kerry: Wants to raise taxes, end free trade, and "fix" healthcare (which only reminds all Americans of Hillary Care). Kerry will be lucky to take his home state if this is what he is running on.

John Edwards: For some reason, John thinks the US is suffering from poverty the likes of which the world has never seen. How sad? Most countries hope for an average income equal to our official "poverty" threshold of $9,000. He would do better against Bush than Kerry, but I don't think that is saying much.

Wesley Clark: He says he remembers what it was like to make "the ends" meet. THE ends? Not even Bush could misread that off a teleprompter. James Stockdale could out-debate Clark. I give him 10 days before he is gone.

Joe Lieberman: For some reason he thought he came in third. I don't know why, but I can't help but like Joe a little. He seems so genuine, which is why his statements were so sad. He knows he's done, and it strains him not to say so.

Howard Dean: I prefer the screaming Dean. He tried so hard not to repeat his Iowa performance that he made Joe Lieberman seem mildly enthusiastic.


NBA, Attendance, and Competitive Balance 

Tyler Cowen points to a new sports blog Transition Game and asks the following question.

why does overall NBA attendance and interest seem to go up when we see one or two dominant teams (e.g., the former Celtics, Lakers, and Bulls) rather than a so-called "competitive balance"? Do fans really look to a sports season to see a long coronation march, perhaps punctuated by one final dramatic showdown?

Well, my first thought on this is that I am not sure Tyler's assumption of the negative correlation between attendance and competitive balance is correct. So I decided to check out the relationship between average NBA/ABA attendance and the competitive balance (measured as the standard deviation of winning %) from 1960-2001. Here is a graph with a regression line.

While the relationship is positive as Tyler predicts --as SD goes up CB goes down -- the regression results are not statistically significant. When I run some regressions controlling for autocorrelation and heteroskedasticity, there is still no statistical significance. I also included a dummy for years the ABA was in existence. The regression estimates that every 0.1 increase in the SD of Win% (mean = .15; SD = .02) is associated with an additional 32,000 fans per team per year. It seems that there is not much relationship between CB and attendance in the NBA. The main limitation of this data is that it is capturing the most inelastic fans, those who attend games. I imagine an estimate that looked at TV ratings might yield some more robust results.

I need to think more on this...

Monday, January 26, 2004

MLB's Third World Exploitation 

Tim Weiner writes a simply awful column in Sunday's NY Times on a Rawlings baseball "sweatshop" in Costa Rica. The only problem is, he got caught up in the point he was making -- the US is full of big meannies -- and forgot to see what his facts actually said. Let's look at all of the mistakes Wiener makes.

Highlighting extremes instead of the typical: By world standards Costa Rica is wealthy with a per capita GDP of over 8K and unemployment rate of 6%.

Unrelated comparisons: Comparing the wages of Costa Rican workers to baseball players. This is odd. Why not compare to the average American who consumes baseball, baseball owners, or even baseball players in Costa Rica? There is no doubt that Costa Rica is poorer than the US, most countries are. But, by world standards Costa Rica is better than average and growing. By world standards, working 5 days a week indoors is good.

Sugar plantations are gone thanks to "globalization":
1) Umm, I think most people would prefer not to work in the sugar industry.
2) If by "globalization" he means free trade, I think it is more likely that the lack of free trade/globalization in the sugar industry (thanks to US restrictions on imported sugar) is the real culprit.
3) Eliminating the free trade zone would likely make these workers much worse off, since Rawlings would likely move its factory to a poorer country where citizens will work for less.

Workers are exploited: If these jobs are so bad, why does one man state that without this factory the town would be as poor as Nicaragua? And why did he move from Haiti to take this job and stay in it for 16 years? Also, another person interviewed in the article states that without this factory, there would be NO jobs.

30 cents a ball versus $15 sale price = injustice: So I guess labor is the only input in making baseballs. From the article "It imports duty-free the makings of millions of baseballs; cores from the Muscle Shoals Rubber Company in Batesville, Miss.; yarn from D&T Spinning in Ludlow, Vt.; cowhide from Tennessee Tanning in Tullahoma, Tenn." Plus, there are transportation, administrative, product safety and quality testing, etc. costs to consider.

Finally, I have to assume that the author did not correct the CR wage for the amount CRs can purchase with that $2,750. Using the purchasing power parity (PPP)correction for CR (.44) the wage in what can be purchased in CR is about $6,250, which is more than the average per capita GDP of 124 countries.

Is this what they teach in journalism school these days? How pathetic. I suggest that Mr. Weiner have a talk with his colleague Nicholas Kristoff about how to judge working conditions in other countries properly.

Addendum: I also find it interesting that this article appears in the "news" section of the paper, while Kristoff's articles appear on the Op-ed page. Political bias at the NY Times? Never!

Update: It seems that the information provided in the NY Times article may not be entirely accurate. Check out this article from the Chicago Tribune.

All the work now is done by approximately 575 workers in the factory. Three hundred stitch baseballs for $1.21 an hour in wages and another 67 cents an hour in health and retirement benefits. Based on a five-day, 48-hour week, the pay and benefits are $90 per week or $4,681 per year. The country's per-capita annual income is $3,950, according to the Canadian International Development Agency.

Stitchers also work by number of baseballs sewn. A worker who reaches 175 can leave after three days and be paid for a full week. At 162, the worker can leave 5 1/2 hours early Friday. Bermudez said fewer than 10 of the 300 stitchers are able to leave after three days and most experienced workers sew 34 or 35 balls a day.

This is not the USA but benefits and retirement (hmmm...Tim Weiner forgot to mention this), a 5-day workweek with options to leave early? I think you would be hard-pressed to call this a "sweatshop."


Stossel's Myths 

I enjoyed John Stossel's 20/20 special Lies, Myths, and Downright Stupidity on Friday. You can read about his special here. Here is his list of lies, myths, and stupidity.

10. Getting Cold Can Give You a Cold
9. We Have Less Free Time Than We Used To
8. American Families Need Two Incomes
7. Money Can Buy Happiness
6. Republicans Shrink the Government
5. The Rich Don't Pay Their Fair Share of Taxes
4. Chemicals Are Killing Us
3. Guns are Bad
2. We're Drowning in Garbage
1. Life is Getting Better (Only available if you saw the show)

I think the saddest part about this list is that these are all myths. To me none of these were myths before I saw the program. Thankfully, there are some journalists like John Stossel to set the record straight. Good work John!

Saturday, January 24, 2004

Free Lunch Author 

Gregg Easterbrook presents the following piece of economics trivia about Robert Heinlein's 1966 sci-fi novel The Moon Is a Harsh Mistress:

The phrase "there's no such thing as a free lunch" originates in the novel. The most popular café at the moon capital's has a huge sign that says FREE LUNCH, but the drinks cost twice as much as in other cafés, and drinks are mandatory.

I always wondered who came up with the expression, and apparently it was not Milton Friedman. Perhaps Friedman enjoyed reading some science fiction before bed. His book, There Is No Such Thing as A Free Lunch did not come out until 1975.

Thursday, January 22, 2004

Interesting Sabermetric Links 

I'm doing a little casual research on the history of sabermetrics, and these are some cool links I have found.

The Bill James Primer -- A lot of people wonder how Bill James has been such a prolific writer over the years. My theory is that he got these commandments from a burning bush.

Rob Neyer's History of Sabermetrics -- If you want a good introduction to sabermetrics, read Neyer's column on ESPN.com. A lot of hard-core guys dislike him. I think they have saber-envy. This is a really nice history. Like most good things in baseball (racial integration, radio broadcasts of games, etc.), apparently Branch Rickey was responsible for first using sabermetric analysis.

Rickey's 1954 Life Magazine Article -- Looks like OPS is a little older than I thought.

Futility Infielder -- I got most of this information from one great blog post here.

Why The Royals Stink -- Next time someone complains about big-market teams crushing small-market teams, tell them to read this article summing up how the Royals ignored some very obvious advice from Bill James, who left KC and is now with Red Sox.

Baseball Primer -- Unless this is your first time here, you know I like the Primates.

Baseball Prospectus -- The Bizarro-World Primer. Word has it that Primates and Prospectors formed out of a schism in the sabermetric community. There is a lot of good data here, but much of the site requires a subscription.

Baseball-Reference -- Data and more data on baseball.


NBER Makes News? 

Today's Washington Post reports that:

The last recession may have started in the last months of the Clinton administration rather than at the beginning of the Bush administration.

The seven-member panel had earlier decided that the recession began in March 2001 and ended in November that year. President Bush took office in January 2001.

This is already being reported as a big political story, but I can't imagine it making any difference. To consider it important, you would have to believe one of two things. It could be that voters vote based on the economy 3 years ago, not on what is currently happening. Or you could also believe, as the Democrats have been suggesting, that because the recession was originally thought to have begun in March 2001, over one month into the Bush administration, that Bush caused the recession, and somehow the decline in the stock market from the preceding year that induced it. Both of these hypotheses are ridicules.

Choice Tyranny? 

Psychologist Barry Schwartz has been making rounds in the media pushing his latest book The Paradox of Choice: Why More is Less. The general idea behind his book is that while choices give us more options, these options sometimes overwhelm us and make us less happy then we would be with fewer choices. Today, he has a piece in the NY Times where he says the following.

While a life without any freedom of choice would not be worth living, it appears not to be true that more choice inevitably leads to more freedom and greater happiness. Indeed, there may be a point when choice tyrannizes people more than it liberates them. The implication of this news, both for individuals and for government officials, is that sound social policy simply cannot consist of throwing an ever-greater menu of options at the American people.

When I first heard of Schwartz's ideas, I was interested. But I have grown tired of this argument. It is certainly true that many people feel overwhelmed when they have to make choices without much information. For example, buying a car can be quite a hassle with all of the options; however, as an individual I am glad that I have such choices. Though I bear some cost of having to choose, I also get much benefit from finding a car that more accurately meets my desires. And to minimize the pain third parties often provide services to make the car buying process easier. The market creates the incentive for such filters to minimize this pain. The point is, I buy the argument that choices bring costs as well as benefits, but there is no way you can convince me that having fewer choices dictated to me will make me "happier." I think Schwartz's argument rests too much on questionable survey data. Happiness is a very hard thing to measure. And I think it is a bad and dangerous idea to make social policy based on the paternalistic notion that "too many" choices are a bad thing. Just think about it. Though I hate having to flip through 150 channels on my satellite as opposed to the 50 I used to get with cable, I would not chose to ever go back. Taking away this option from me, and I suspect most humans, would make me very unhappy.

I also very much dislike his use of the word "tyranny" to describe some minor disutility that may arise from more choices. This is offensive to people who live under real tyranny, like the one currently being discussed by Nicholas Kristoff. And "offensive" is the correct word to use here. I ask you to read a Kristoff column and then read Schwartz again. Doing so made me sick.

When it comes down to it I believe the market "Force" better serves the world than the psychologist "Schwartz."
(Explanation to very bad joke: The Force is to Star Wars as The Schwartz is to the Star Wars spoof Space Balls.)

Guns and Crime in the NFL 

Yesterday, two NFL players were accosted by criminals with guns. Ravens cornerback Corey Fuller was attacked outside his home by two men intending to rob him. Keyshawn Johnson, the inactive wide receiver for Tampa, was mugged on the street. What I find interesting about these events is the fact that Keyshwan is so pro gun-control that he is on the NRA's blacklist and a thief takes his property. Fuller owns a gun and his attacker fled into the night after Fuller fired at the intruder. I wonder what John Lott thinks of this.

Wednesday, January 21, 2004

Bad Newlywed Judment? 

I have to admit that I really enjoy the "Newlyweds" show on MTV. Though the season premier Wednesday night did not live up to the show's high standards, it did reveal one amazing piece of information. For their Wedding, Nick and Jessica chose to have country music mediocrity Neal McCoy, who usually performs for middle aged women in church basements, show up in person and sing the Van Morrison song "Crazy Love". I only mention this because, regardless of the things that have happened on the show, this one act shows a lack of taste and judgment unparallel so far in this century. Also, I think I remember John Charles telling me that he and his lovely wife danced to Neal McCoy's "Wink" at their wedding, but from a cassette tape rather than live.

Small Problem 

I have noticed that there is now a lag between my posting and the appearance of the posts on the main site. The posts are always available in the archives. I will work on the problem.

More on Competitive Balance in the NFL 

An insightful commenter on my previous post notes that while parity in the league may not be changing with each year, certain teams may still win more games then others from year to year. While teams may be packed together every year it is still possible for the winning percentages of the teams to remain constant over time. The salary cap ought to prevent teams from holding onto good players, which prevents teams from forming dynasties. In this sense, the salary cap may bring more competitive balance over time.

This is an excellent point, and one that very few people make. Therefore, I decided to analyze the correlation between winning percentages over time before and after the salary cap. I use the time period 1986-2002. Using panel data I estimate the following two equations:

1) Win% = Constant + Win% in Previous Season + (Win% in Previous Season * When the Salary Cap is in effect) +e

2) Win% = Constant + Avg. Win% in Previous 3 Seasons + (Avg. Win% in Previous 3 Season * When the Salary Cap is in effect) +e

The interaction term between past Win% and the Salary Cap isolates the effect of the effect of past performance on present performance that might change with the introduction of the cap in 1994.

The result: The effect of Win% of the previous season on the current Win % with the salary cap is almost indistinguishable from the no-cap situation. For example, an 8-8 team will win 1/10th of a game less in the following season with the salary cap than without due to their previous season's record. And a 12-4 team will win 1/5th fewer wins per season with the cap than without. I should also note that the results on the salary cap variable in both regressions are not statistically significant. In sum, dynasties are no less likely after the salary cap than before.

Addendum: If you would like to see the regression results, just e-mail me.

Update: I updated the numbers after correcting an autocorrelation problem. The change barely affects the results, but I would rather be honest about it.

Tuesday, January 20, 2004

Competitive Balance and the Salary Cap in the NFL 

I started thinking about the quality of competitive balance in the NFL compared to MLB when I came across something. In general most people believe the "hard" salary cap in the NFL is responsible for the strong competitive balance in the football. From 1980-2002, the NFL's standard deviation of winning percentage relative to the ideal standard deviation is 1.5. This measure being equal to 1 means all teams are .500; therefore, the actual standard deviation of winning percentages is 1.5 times the optimum of absolute equality (This is a common measure used by sports economists). Over that same period baseball's ratio is 1.73. This is pretty close, but that is not the fact that struck me as most interesting.

The NFL's salary cap has been in place since 1994. From 1994 to 2002 its measure of competitive balance is 1.46. For the 9 years prior to the cap from 1985-1993 the measure is 1.53. Also, when compared to MLB, over this same time periods, MLB's competitive improved from 1.82 to 1.70. Essentially, the salary cap in the NFL has had no effect on competitive balance in the sport! This really shocked me given the conventional wisdom on the subject.


Monday, January 19, 2004

Changing the Rules of the Game 

Alan Schwartz at ESPN proposes 10 simple rules to improve the game of baseball. While I am not a big fan of any of his suggestions -- especially changing the walk rule -- I have a few suggestions of my own.

1. Eliminate all arguing by managers. This is simply rent-seeking. One manager tries to persuade the umps on future calls, which forces the other manager to do the same. The end result is that ten minutes have passed and no one is better off. Allow a little jawing, but if you step onto the field or disrupt the ump's concentration, you're gone!

2. Ban all meetings on the mound. I have never understood why this is allowed. Get your secret signals straight and throw the damn ball.

3. No time-outs for batters in the box. And if a pitcher shakes off 27 signs to the catcher, the umpire can call a ball.

But for the record, I like the game the way it is, and Schwartz's suggestionns are better than most I've seen. See other rule suggestions on Primer.

Economics and Football 

It seems that the secret to the success of Bill Belichick of the New England Patriot's is his economics major...well, at least partly. Economics is a powerful tool in analyzing sports. Bill James, who invented of sabermetrics for analyzing baseball, was also an economics major.

I got this from Tyler.

Also, congratulations to my hometown Carolina Panthers on reaching the Super Bowl. The Cardiac Cats pull off another one.

Friday, January 16, 2004

Worst Journalist Ever 

I hope the students in this journalism class failed.

Pete Rose, speaking to a Calabasas (Calif.) High School journalism class, inadvertently admitted more than a year before his latest autobiography was released that he had bet on baseball. Editors of the school newspaper, the Calabasas Courier, chose not to publish Rose's remarks, made to the class in an appearance on Dec. 9, 2002.

After Rose's confession last week that he had bet on baseball while managing the Cincinnati Reds, the paper's former co-editor in chief, Nick Reder, played a videotape of the session for the Los Angeles Times.

Asked by a student why he had sacrificed a berth in the Baseball Hall of Fame, Rose said: "You mean, why did I bet on baseball? Well, it was because I made mistakes. I made mistakes. You know, when you do something, you think you're not going to get caught. It's not like I'm the only guy in the world to gamble."

This stinks, I mean this really stinks. They have Rose admitting he bet on baseball on tape, and they held it back? I suspect it won't be too long before we hear of suspicious payments to the owner of the tape. Read more on Primer.

Thursday, January 15, 2004

Worst Secretary of the Treasury Ever 

Much of the media the spent the past week enjoying Paul O'Neil's statement that Bush behaved at cabinet meeting like "like a blind man in a roomful of deaf people". Michael Kinsely of Slate.com, for the second time in less than a week, has a great column where he opines:

I'm sorry, but how is being uninterested in policy like being a blind man in a roomful of deaf people? Are blind people uninterested in policy? Or, more accurately, do blind people become less interested in policy when they find themselves in a room with deaf people? Does a blind man surrounded by deaf people talking policy issues think: "Oh, hell. These folks are going to go on and on and on about the problems of deaf people. Who needs that? I've got problems of my own." Is that O'Neill's point? And even if there is something about a room full of deaf people that makes a blind man disengage from policy issues, what does this have to do with President Bush and his Cabinet?

As described by Paul O'Neill, life inside the Bush administration is like life itself (according to Macbeth): "a tale told by an idiot, full of sound and fury, signifying nothing." The only solid punch he lands on President Bush is unintentional: What kind of idiot would hire this idiot as secretary of the treasury?


Why Does Christian Rock Suck? 

I don't mean to offend any of my readers who are fond of this genre of music, but I don't think it is too much of a stretch to say there are very few good religious-themed rock bands and songs. Off the top of my head, U2 is about it. But the reason I ask this is that Christian country music is some of the best of the country genre. The consumption of religion does not seem to interfere with the quality of the music in country the way it does in rock-and-roll. At first I thought that rock music just might involve a bit more sinning, but any true country music fan knows there is a lot more lying, cheating, and drinking in country songs. There is clearly a large market out there for Christian rock, why can't Christian rockers put out higher quality music? I would appreciate any suggestions. I'm stumped.

Wednesday, January 14, 2004

Am I an Austrian Economist?...The World Will Never Know 

Actually, the real answer is no, but I thought I might take this quiz just to be sure. One glance and I burst out in laughter. If this is not long and boring enough, you can take the long version.

I think the true metric of this test is whether or not you take the time to answer any of the questions. If you can stand to take the test you might actually be able to survive reading some Austrian stuff.

In summary, I like Hayek, I have nothing against Mises, but I don't feel the need to join any "schools" over it.

How "Fair Trade" Hurts the Poorest of the Poor 

Nicholas D. Kristoff of the NY Times uses a touching example in Cambodia that helps explain why international labor standards ultimately harm very poor people in very poor places.

Nhep Chanda is a 17-year-old girl who is one of hundreds of Cambodians who toil all day, every day, picking through the dump for plastic bags, metal cans and bits of food. The stench clogs the nostrils, and parts of the dump are burning, producing acrid smoke that blinds the eyes.

Nhep Chanda averages 75 cents a day for her efforts. For her, the idea of being exploited in a garment factory — working only six days a week, inside instead of in the broiling sun, for up to $2 a day — is a dream.

"I'd like to work in a factory, but I don't have any ID card, and you need one to show that you're old enough," she said wistfully.

All the complaints about third world sweatshops are true and then some: factories sometimes dump effluent into rivers or otherwise ravage the environment. But they have raised the standard of living in Singapore, South Korea and southern China, and they offer a leg up for people in countries like Cambodia.

Here in Cambodia factory jobs are in such demand that workers usually have to bribe a factory insider with a month's salary just to get hired.

Along the Bassac River, construction workers told me they wanted factory jobs because the work would be so much safer than clambering up scaffolding without safety harnesses. Some also said sweatshop jobs would be preferable because they would mean a lot less sweat. (Westerners call them "sweatshops," but they offer one of the few third world jobs that doesn't involve constant sweat.)

Cambodia has a fair trade system and promotes itself as an enlightened garment producer. That's great. But if the U.S. tries to ban products from countries that don't meet international standards, jobs will be shifted from the most wretched areas to better-off nations like Malaysia or Mexico. Already there are very few factories in Africa or the poor countries of Asia, and if we raise the bar higher, there will be even fewer.

And where do political candidates stand on the issue?

While Mr. Gephardt calls for an international minimum wage, Mr. Dean was quoted in USA Today in October as saying, "I believe that trade also requires human rights and labor standards and environmental standards that are concurrent around the world."

Perhaps the candidates are simply pandering to unions, or bashing President Bush. But my guess is that they sincerely believe that such trade policies would help poor people abroad — and that's why they should all traipse through a Cambodian garbage dump to see how economically naïve these schemes would be.

The Democratic Party has been pro-trade since Franklin Roosevelt, and President Bill Clinton in particular tugged the party to embrace the realities of trade. Now the party may be retreating toward protectionism under the guise of labor standards.

That would hurt American consumers. But it would be particularly devastating for laborers in the poorest parts of the world. For the fundamental problem in the poor countries of Africa and Asia is not that sweatshops exploit too many workers; it's that they don't exploit enough.

"Economically naïve," indeed!

Addendum: Tyler Cowen points to this little nugget, explaining the new anti- free trade trend in the Democratic party. This is very disturbing.


Tuesday, January 13, 2004

More On Comments 

I have switched commenting services; therefore, all of the past comments are gone. And I am not sure I would have been able to get them back anyway (see here). I think Holoscan is a little more stable. If you said something that you wanted a response to, please feel free to repost.

On Blogging in the Classroom 

From Tyler on an article featuring co-MR-blogger Alex Tabarrok.

As the article points out, blogs are just starting to be used in teaching. Someday I will teach a course where each student is responsible for writing a daily blog. I will evaluate the students by grading the blogs, no other test, paper, or quiz. Usually when I make that sort of claim it means someday soon!

I think this is a great idea. I see blogs as the educational tool that everyone thought TV, the Internet, and E-mail would be. The superquick interactive nature of blogs makes weblogs very useful. This should be a huge boon to large universities that take advantage of non-rivalrous educational dissemination in the classroom, but they cannot replicate all of the outside-of-class discussion that goes on in the liberal arts atmosphere. Blogs will help narrow this gap.

I really like the fact that I can post little ideas that are relevant to students wanting to learn about economics, but I just cannot fit into the normal lecture. I can also link directly to the source and other points of view.

Comments Down 

Blogspeak is having some problems, which is why the comments have disappeared. I am looking into other options.

Update: Comments back thanks to Holoscan.

Monday, January 12, 2004

Enlightened European Social/Economic Policy 

Tyler Cowen again reminds us of why it is good to live in America instead of Europe.

Saturday, January 10, 2004

Terence Moore is an Idiot...Again 

I find it quite amusing that the day after I write posts referring to bad sports writing by Terence Moore and the overrated performance of Donovan McNabb, Moore decides to contribute to both issues.

In today's column he states,

Essentially, Limbaugh told a national television audience in late September that McNabb is an overrated black quarterback, that sportswriters wave pompoms for overrated black quarterbacks, and that all of this ranked along the lines of a left-wing conspiracy involving the Clintons.

...Since then, McNabb has gone from struggling BL (Before Limbaugh) to soaring AL (After Limbaugh). His passer rating of 98.5 during the last 10 games of the regular season was higher than those of Peyton Manning (97.7) and Steve McNair (93.6), the NFL's co-most valuable players.

What Moore has done here borders on unethical. Note that nothing he says here is untrue, but he makes it sound as if McNabb is a truly great QB who has directly responded to Limbaugh's indictment. This is possible, but Limbaugh made his comments on Week 3 of the NFL season (Sept. 28). The Eagles played 13 games "AL (After Limbaugh)," so why does Moore tell us about McNabb's last 10 games? Because Moore is being blatantly dishonest to prove a point. The three games Moore excludes were very bad games for Donovan, especially Week 7 (11 weeks before the end of the season), when McNabb threw for only 64 yards. How convenient that Moore draws his cut-off at 10 weeks ago!

There is no doubt that McNabb has had a better second half of the season (see his splits by month), but why does Moore get to pick a biased sample of games that make his player look good. Of course if you arbitrarily throw out McNabb's bad games he is going to look better than he is. But, what really irks me is that Moore divides the season into the BL and AL portions, and then gives us divided stats from a different portion of the season.

I would also like to add that I think McNabb is overrated not because of his race, but because he is a likeable guy. I really enjoy seeing him in interviews and Chunky Soup commercials. My wife, who is not a football fan, also likes him. I actually root for the guy, and I used to hate the Eagles. How can you not like a guy who plays an entire game on a broken leg!? But this is why we should judge players by the data, to prevent our inherent biases from influencing our perceptions. McNabb is an average QB in the NFL. He will have above average games and below average games. And it is wrong to judge any empirical phenomenon by only looking at one side of the statistical distribution.


Friday, January 09, 2004

Ricardo on Ricardo 

From On the Principles of Political Economy and Taxation, chapter 7:

In one and the same country, profits are, generally speaking, always on the same level; or differ only as the employment of capital may be more or less secure and agreeable. It is not so between different countries. If the profits of capital employed in Yorkshire, should exceed those of capital employed in London, capital would speedily move from London to Yorkshire, and an equality of profits would be effected; but if in consequence of the diminished rate of production in the lands of England, from the increase of capital and population, wages should rise, and profits fall, it would not follow that capital and population would necessarily move from England to Holland, or Spain, or Russia, where profits might be higher. 7.12

To produce the wine in Portugal, might require only the labour of 80 men for one year, and to produce the cloth in the same country, might require the labour of 90 men for the same time. It would therefore be advantageous for her to export wine in exchange for cloth. This exchange might even take place, notwithstanding that the commodity imported by Portugal could be produced there with less labour than in England. Though she could make the cloth with the labour of 90 men, she would import it from a country where it required the labour of 100 men to produce it, because it would be advantageous to her rather to employ her capital in the production of wine, for which she would obtain more cloth from England, than she could produce by diverting a portion of her capital from the cultivation of vines to the manufacture of cloth. 7.16

It would undoubtedly be advantageous to the capitalists of England, and to the consumers in both countries, that under such circumstances, the wine and the cloth should both be made in Portugal, and therefore that the capital and labour of England employed in making cloth, should be removed to Portugal for that purpose. In that case, the relative value of these commodities would be regulated by the same principle, as if one were the produce of Yorkshire, and the other of London: and in every other case, if capital freely flowed towards those countries where it could be most profitably employed, there could be no difference in the rate of profit, and no other difference in the real or labour price of commodities, than the additional quantity of labour required to convey them to the various markets where they were to be sold. 7.18

Experience, however, shews, that the fancied or real insecurity of capital, when not under the immediate control of its owner, together with the natural disinclination which every man has to quit the country of his birth and connexions, and intrust himself with all his habits fixed, to a strange government and new laws, check the emigration of capital. These feelings, which I should be sorry to see weakened, induce most men of property to be satisfied with a low rate of profits in their own country, rather than seek a more advantageous employment for their wealth in foreign nations. 7.19

Ricardo in these passages not only sets forth the law of comparative advantage, but also suggest that factor mobility, if it existed, would result in the equlization of wages and product prices between countries, making international trade uneccesary. He does however, suggest that factor mobility in his time was not a realistic possibility, nor something that he was in favor of.

McNabb Overrated?  

I am afraid that the answer is yes. I think Rush Limbaugh is an idiot for saying what he said, and I think he said what he said for the wrong reasons. But, the data do not lie. Donovan had a poor season this year, and he definitely should not be going to the Pro-Bowl.

Here is how McNabb ranks compared with all 32 starting QBs in the NFL.

Yards per Attempt: 19th
Total Yards: 14th
Completion %: 19th
TD passes: 17th
Interceptions: 9th
Interception %: 8th
QB Rating: 16th

In terms of passing this is pretty weak. Only in picks is McNabb in the top-10 in the league. For every other stat he is right in the middle of the pack. But, what about his running ability? I could not find comparable rushing data for QBs but in terms of sacks allowed he is 31st and 30th in sacks and sack yards lost. Ouch! His offensive line may be part of that, but his main running back Brian Westbrook had no trouble racking up the 8th highest yards per carry behind this same offensive line.

But was this year an anomaly? Nope, he looks to be dead-on his career average this year. In fact, this is his best season ever in terms of yards per attempt.

So has Rush been vindicated? Maybe, but a stopped clock is right twice a day.

Addendum: McNabb is second in rushing yards (377) by QBs in the NFL behind Dante Culpepper (440).

Fly Me to the Moon 

So the Bush Administration had decided to put a man on the moon. Why you may ask? Space and NFL expert Gregg Easterbrook outlines the potential scientific benefits:

What would astronauts at a Moon base do? I haven't the foggiest notion. Note that NASA has not so much as sent a robot probe to the Moon in 30 years, because as far as space-exploration advocates can tell, there is nothing, absolutely nothing, of value to do on the Moon.

The Bush administration however, sees lots of potential benefits:

The administration was said to see the initiative as an important national security measure and experts said it could lead to new technologies and potential new sources of energy.

National Security? Really? I have to admit this logic totally stumps me. I can’t even think of anything sarcastic to say. As far as new technology, that makes some sense, because orange flavored “tang”, which was the chief by product of the earlier trip to the moon, is getting pretty old, and maybe this new mission to the moon can come up with a mediocre, grape-flavored, powdered beverage. In addition to the President, some other politicians are getting excited about this:

"If we don't do it, somebody else will," said Tennessee Rep. Bart Gordon a ranking Democrat on the House Science Committee. "The Chinese, the Europeans and the Japanese all have the goal of going to the moon. Certainly we don't want to wake up and see that they have a base there before we do."

Why do we care if China, the Europeans and the Japanese build a useless moon base? If China, the Europeans and the Japanese all jumped off a bridge, would Rep. Bart Gordon have us jump as well?

What is the ultimate logic behind this new space proposal? Easterbrook suggests:

And why might George W. Bush endorse a Moon base or Mars mission? Either he's a science illiterate surrounded by advisors who are science illiterates, or it's a blank check for aerospace contractors.

Why Don't We have a Better Sports Press Corps? 

This just makes me so mad. There are numerous people out there dying to be sports journalists. What I don't understand is why the best do not seem to rise to the top, especially in Atlanta. Here is an excellent example from Terence Moore commenting on the Falcons's hiring of Jim Mora, Jr.

Jim Mora Jr.? I mean, if you're going to hire somebody from that particular family to coach your football team, you go after the father, Jim Mora Sr., who more accurately fits the trend these days in the NFL.

Bill Parcells is 62.
Joe Gibbs is 63.
Dick Vermeil is 67.

The older Mora is 69. Just like the others, he was a successful head coach in the league before he decided to retire. And, just like the others, you could get the older Mora to return with a little nudge and a lot of cash.

1) Jim Mora did not retire. He was fired. And he was fired after a very nasty public fight defending his defensive coordinator Vic Fagio. It was very memorable.

2) How is Jim Mora in any way comparable to Parcells, Gibbs, and Vermeil?

Mora: Reg Season: 125-106 (.541); Post Season: 0-6
Parcells: 148-106 (.582); 11-6 (.647), 2-1 in Superbowl
Gibbs: :124-60 (.674); 16-5 (.762); 3-0 in Superbowl
Vermeil: 103-94 (.522); 6-4 (.600); 1-1 in Superbowl

Mora is a joke even when compared to Vermeil, who has no business being compared to the Parcells or Gibbs. So how does this sports writer compare the coaches? Age. Unbelievable.

I don't cover sports for a living, Terence Moore does. I read sports pages to learn things about sports that I don't have time to gather myself. But how can I with men and women like Terence Moore covering sports?

More Thoughts on The Progress Paradox 

I have been thinking some more on the general thesis behind this idea that people are not necessarily getting happier along with their wealth. I have not yet seen anyone propose a very simple solution, which might be correct. I normally spend a day or two in my class explaining how rich the US is today relative to the past and relative to the world. This just blows students away, the same way it blew me away when I learned it. My guess is that if I did a survey of happiness before and after this lecture, there would be a distinct difference in answers (maybe I will try this). The general public simply has no knowledge of our wealth, and therefore doesn't think much about how happy they should be. I mean Ross Perot ran two non-insignificant Presidential campaigns on the idea that we materially worse off than in the past. In this case ignorance is not bliss. I think if people were able to view their wealth on a grand scale, they would be a little happier.

And Yet More on Free Trade 

It seems that the shit has finally hit the fan with the PCR/Schumer article. Tyler Cowen, Alex Tabarrok, Daniel Drezner, Arnold King, and Brad DeLong all have comments on it today.

My Research in the WSJ 

What a surprise! Although my name is not in the article, a research paper that I co-authored is cited in today's science section of The Wall Street Journal. My colleague in the Math Department, Doug Drinen, is presenting our paper Moral Hazard on the Mound: The Economics of Plunking at the annual meeting American Mathematical Society and the Mathematical Association of America in Phoenix. We made the press release and I guess the reporter found it interesting enough to pick up.

From the article:
With players reporting for spring training next month, can the perennial debate over why the American League has a higher rate of hit batsmen than the National League be far off? Barroom wisdom holds that, thanks to the designated hitter rule that spares pitchers a turn at the plate, AL hurlers don't risk retaliation for either chin music or hit batsmen. They therefore pitch more inside.

But a vociferous minority begs to differ. The higher incidence of hit batsmen in the AL, they say, reflects a change in the composition of the batting order induced by the DH: AL lineups have at least one additional strong, aggressive hitter who makes a tempting target.

Mathematician Doug Drinen of the University of the South in Sewanee, Tenn., analyzed what he calls "the economics of plunking." The zero possibility of retaliation, he will tell the math meeting, explains 60% to 80% of the interleague difference in hit batsmen (as Mets fans still irate at Roger Clemens already know).

And not just to toot my own horn here, I will say this is probably the least important work in sports statistics that Doug has ever done. Check out his great site of football statistics, www.pro-football-refernce.com. And make sure you check out his articles section.

Thursday, January 08, 2004

Laura Ingram is "Artificially Depressed" 

I like conservative commentator and radio host Laura Ingram. She is usually funny and has great taste in music (she usually plays Johnny Cash and Lucinda Williams during breaks on her show). Unfortunately she feels compelled to talk and write about economic issues, and when she does she comes across as a very good-looking version of Pat Buchanan. She characterizes the Wall Street Journal and other free traders as "economic elitist" who don't understand the plight of the common man. This week she wrote in her weekly email about the Bush administrations new immigrant worker program:

The only reasonable prediction is that wages for a wide range of jobs will be kept artificially depressed by outside workers—now with “legal status” will work for peanuts. “I have worked construction for 30 years as a truck driver (18-wheeler),” wrote one of my listeners, “And every year my pay has gone down because Mexicans are flooding the trucking industry…."

Apparently there is such a thing a fair wage, and competition from foreigners "artificially" depresses it. Qualified Mexican truckers need not apply for American jobs, as they rightly belong to Americans, who are free to charge whatever they want.

I worry that her radio show might catch on, and in doing so compete with other talk shows, artificially suppressing the wages of established talk show hosts. Oh, wait, its OK if she competes in the economy to increase her income, after all, she is an American, not a Mexican. If you ever want a real headache, try reading the chapter on "Economic Elitists" in her book Shut Up and Sing, where she lays out her entire economic philosophy.


Even More on Free Trade 

Michael Kinsley coins a new phrase for PCR and Senator Schmuck: Free Trade Butters. I like it.

Example: I'm all for free trade, BUT...I'm really a protectionist A-hole.

The pointer is from Volokh.

Why Are Mini-Bars So Expensive? 

Here is an armchair question. Why do the products provided in the hotel mini-bar cost so much? I mean how much do you have to value not going down to the hotel bar or nearby liquor store to get a drink. Even the damn peanuts are $5. I have never once purchased an item from the mini-bar largely due to the fact that the items are often double or triple the price of nearby substitutes.

More on Free Trade 

In case you missed it in the comments, John Graves points to another critique of the PCR/Schumer article discussed here.

Wednesday, January 07, 2004

Market Size and Competitive Balance in Baseball 

Update: I've been doing some more work on this, and I no longer have confidence in th estimates reported here.

I have been reading a lot lately on the economics of baseball. One fact that almost everyone agrees with is that bigger cities value wins more than smaller cities. The idea is that you have more paying viewers per win. This causes problems for competitive balance if dollars buy wins. Big cities will buy up the talent to always beat up on small cities. In a vacuum this works, but I am not sure it works in the real world. The main reason behind this is that big cities also have more entertainment alternatives than small cities. The opportunity cost of going to a Yankee’s game in NYC is much greater than that of seeing a Brewers game in Milwaukee. Anyway, I am not writing to prove why, I am just curious in the empirical evidence. This idea caused me to gather a little data and run a quick regression. I used data on average wins of MLB teams from 1995-2002 (the post-strike era) and the 2000 MSA populations of all the teams. I found the following:

Wins = 5.26e-07 + 2.69e-07 * MSA Population; R-Squared = .12

The positive estimate for population is not quite significant at the 5% level.

So what does this mean? Every 3.7 million people in an MSA leads to one additional win for the baseball team. This means that the difference in wins due solely to population size between the largest (New York) and smallest (Milwaukee) MLB teams is a paltry 5.25 wins a season. New York is 12 times the size of Milwaukee! It is no wonder that competitive balance does not seem to be a problem in MLB.

Warning: This is not a well thought-out econometric study, just idle tinkering on my part.


It's Good That Fish Can't Read 

Alex Tabarrok points to a list of Wacky Warning Labels.

A five-inch fishing lure which sports three steel hooks and cautions users that it is, "Harmful if swallowed," has been identified as one of the nation's wackiest warning labels in an annual contest sponsored by a consumer watchdog group.

Maybe PETA ought to spend more time addressing the issue of fish literacy than throwing rocks at fishermen.


Anti-Lomborg Bias 

Now I have something positive to say about Gregg Easterbrook.

Easterbrook notes that while The Washington Post was quick to post findings of impropriety by Bjorn Lomborg, it has yet to report the retraction of these findings. Instapundit gives the pointer.

It is also nice to see that the anti-lomborg site still has not posted the retraction. Very classy.


Tuesday, January 06, 2004

The Progress Paradox Paradox 

It seems that Virginia Postrel is not all that fond of Gregg Easterbrook's latest, The Progress Paradox. In her review, she basically says the book is sloppy and boring...well, she is a little nicer than that. I have to agree.

In general I found myself either tearing through a chapter with interest or counting the pages until it ended. The further I got into the book, the more pages I began to count. In fact, I have stopped reading with about 30 pages left, because I am bored. There is nothing new here, and what seems new is not well documented or argued. I agree with Postrel that "The question posed by "The Progress Paradox" would make a good book, one that might also consider whether discontent is in fact essential to progress. But this isn't that book."

This book has two main problems. First, the beginning 120 pages need to be edited down to 30. How many times do I need to be told how rich we are? I get it. Second, Easterbrook is completely undisciplined with some of the things that he says. Here is an example:

Today market democracy passes the utilitarian test of producing the greatest good for the greatest number. But that's today. Some superior future system may await, especially if technology makes possible unlimited production, and in a future light, contemporary economics may seem little more than a transitional system. (p. 153)

What? Is he serious? Unlimited production? Economics is a social science based on understanding human choice in the condition of scarcity. And the function of a market system is not an invention, but a spontaneous order (to borrow from Hayek) that best allocates scarce resources. I stopped reading after he advocates raising the minimum wage to help poor people, because they deserve to be richer. Yet, he does not seem to even contemplate why economists across the political spectrum universally agree that this is a bad idea. To counter he just states in a footnote that the higher minimum wage in California resulted in only .2 percentage points more unemployment than the national average. Dear Gregg, that is a big difference -- about 35,000 people!

It is statements such as these that cause me to lose confidence in what he is telling me. And as I sit posted at the finish line of this book I feel no closer to understanding the cause of "the progress paradox." There a few attempts using biology and psychology, but they seem pretty weak and unconvincing. It is like a Law and Order episode with five minutes left. There is not enough time to resolve the show, so you know the lame witness stand confession is coming to ruin the grand conclusion you were expecting. At times, I admit this book is fun to read, with lots of interesting facts. But that is why the book is so disappointing. If it continually stunk, I would have quit a long time ago.


Here Comes Pete Rose 

Does anyone really believe this guy is sorry? Is it just coincidence that he is apologizing one-year prior to the end of his eligibility to be elected to the Hall of Fame by the writers? If this is really part of a deal with Bud Selig...what a shame. Here is some more "nice" stuff about Charlie Hustler from his former gambling gopher.

"Yes, absolutely he bet from the clubhouse,'' said Tommy Gioiosa, a New Bedford native who met the disgraced All Star in 1978 and became Rose's confidant, housemate and runner for bets for the next 10 years.

"He'd call (Tigers' manager) Sparky (Anderson), (Dodgers' manager) Tommy Lasorda, asking about how their pitchers were, who was playing and stuff and then he'd hang up, laughing like a kid, saying like, `I got good information.'''

"I know Pete Rose did not bet on baseball to cheat,'' said Gioiosa, who claims he helped doctor Rose's bats. "Pete Rose corked his bat and he never thought of that as cheating . . . I think that any time you have an addiction, and as out of control as it was back then, no one was thinking clearly. I think Pete loved to win - in everything.''

Note to all current baseball players in baseball: you can bet on baseball as long as you apologize. The rules governing punishment are just guidelines.

You can also view a discussion of this article on Primer.


The Humanitarian War 

Instapundit points to The Blog o'RAM NoBody Count! which calculates the lives saved since the fall of Saddam Hussein in Iraq. Based on the number of people Saddam killed throughout his rule, 138 people have been saved everyday since Saddam has been deposed. That is about 40,000 people. This number does not include the indirect costs that I discuss here. If you add my number it is about 6 extra lives saved a day.

Of course this is a very rough number and should not be taken as an precise estimate of lives saved. However, this number gets the point across that the War in Iraq has saved lives on net.


I Have Lost All Respect for Paul Craig Roberts 

My father points me to an article in today's NYT where supply sider Paul Craig Roberts joins forces with senatorial slimeball Chuck Schumer to oppose free trade. Their argument is as follows.

The case for free trade is based on the British economist David Ricardo's principle of "comparative advantage" -- the idea that each nation should specialize in what it does best and trade with others for other needs. If each country focused on its comparative advantage, productivity would be highest and every nation would share part of a bigger global economic pie.

However, when Ricardo said that free trade would produce shared gains for all nations, he assumed that the resources used to produce goods -- what he called the "factors of production" -- would not be easily moved over international borders. Comparative advantage is undermined if the factors of production can relocate to wherever they are most productive: in today's case, to a relatively few countries with abundant cheap labor. In this situation, there are no longer shared gains ? some countries win and others lose.

When Ricardo proposed his theory in the early 1800's, major factors of production -- soil, climate, geography and even most workers -- could not be moved to other countries. But today's vital factors of production -- capital, technology and ideas -- can be moved around the world at the push of a button. They are as easy to export as cars.

This is a very different world than Ricardo envisioned. When American companies replace domestic employees with lower-cost foreign workers in order to sell more cheaply in home markets, it seems hard to argue that this is the way free trade is supposed to work. To call this a "jobless recovery" is inaccurate: lots of new jobs are being created, just not here in the United States.

I would expect such garbage from Schumer, but former Reagan administration economist Roberts? Shame on you! I am still trying to figure out if this is some sort of a joke. Anyway, I am not familiar with every assumption made by Ricardo, but even if he did say this he is wrong. The free trade doctrine based on comparative advantage still holds with mobile factors of production. If it is cheaper to let another country produce it, free trade will necessarily make both countries better off.

Addendum: Note to PCR, if Chuck Schumer thinks it is a good idea, it is probably a bad idea. This is a corollary to: if they do it in Europe, it is probably a bad idea to do it in the US.

Thursday, January 01, 2004

Why Are We So Rich? 

I'm back...sort of. I have a lot of work to do over the next week so my blogging may be a bit light.

Here is a great article by Virginia Postrel discussing the determinants of wealth in human history (with some help from economic historian Joel Mokyr). The article is very good so I'll just give you a taste. You might as well read the whole thing.

Consider cotton, an expensive and relatively unimportant textile until the mid-18th century, when spinning became mechanized. Before that innovation, an Indian hand spinner took 50,000 hours - the equivalent of five years and nine months - to spin 100 pounds of cotton. After the invention of the hand-operated cotton mule spinning machine in the 1760's, that time dropped to 300 hours. With the mule, human fingers no longer had to spin the threads, thread could be spun on many bobbins at the same time, and the strength of the thread improved significantly. After 1825, when the self-acting mule spinner automated the process, spinning 100 pounds of cotton took 135 hours. Cotton became a cheap and common cloth, and cotton production a major industry.

Despite all the differences across time and space, Professor Mokyr says: "There are certain unifying themes that you see everywhere. People have to make a living. People would rather have more than to have less. On the whole, they don't behave stupidly. They do as well as they can under the circumstances. The variation is in the circumstances, in the richness and diversity of human economic institutions that have emerged over time."

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