Price Controls 2: Cuba

More evidence that price controls are a public bad.

The Price, of Price Controls

Still think price controls are good?

RIP Daniel Shaw

I never met him but my friend Ron's little brother was killed in Iraq.

Virginia Tech

This is a response I sent to the Washington Post regarding this opinion piece:

It is a tragedy what happened at VT and so as I opened the WP website and saw the title of this opinion piece, I knew that what I was about to read was horrible.

Little did I know it was not gory, but pure discrimination.

Preventable??? In what way exactly? Gun laws? Metal detectors? Giant magnets?? Anyone who had that sort of premeditation and intent would have found a way to get it done unless there was martial law.

But the truly despicable opinion of Mr. Chartrand's is the insinuation that the mentally ill need to be removed from society. A Brave New World eh, Mr. Chartrand?

First, you mention a screening program. Fine, now that they are screened and identified what do you propose? A scarlet letter so everyone knows to watch them for "warning signs?" Medical records are confidential and mental status is part of that record. Screening gives every opportunity to discriminate in enrollment practices as well as encouraging social discrimination. If anyone could exactly identify the VERY SMALL percentage of people who would be murderous, they'd be omniscient. This is NOT a realistic solution.

Second, it is not that schools have no liability in protecting their students, but they can only do so within the bounds of the law. Again, your screening idea runs into a legal roadblock. Making schools legally responsible just shifts the risk of a random attack from one individual to an institution which as we all know is a perfect straw man logical fallacy.

Third, it is much lass likely that an "alienated student reached for help" and was denied rather than that student never asked for help at all. I agree that people need to talk about it and if someone does ask for help, a good support mechanism is in place. But, the people doing crimes like at VT are not the ones asking for help generally. It is BECAUSE they cannot, that they turn to violence.

Finally, your closing sentence is outrageous. This is typical over-reactive backlash to a situation. Are you a sensationalist, Mr. Chartrand? A tabloid writer? If your intention was to spark fear and increase the probability of discrimination against those with mental illness, congratulations, mission accomplished. It is irresponsible of you to write such things. The sentiment you leave the reader with is exactly the kind of statement that will lead to discrimination, close the doors to discussion, and ultimately destroy the environment of support you claim to want to achieve. What your closing statement does, fans the flames of fear and can only leave the reader with the conclusion that you believe that anyone with a mental illness is capable of killing and that something should be done about this through screening and removal from society.

Catching up

So I am utterly exhausted...I finished mid-terms today and I give myself a B-/C+ overall. I have tested the limits of my body and brain's ability to comprehend things when pushed to the edge. I actually had to ask myself the other day what the first derivative of Total Revenue with respect to quantity was! Bogdan made me take a break at that point.

I wish I had another 2 days to study for each of the exams. I missed some I should have gotten and we shall see how it all plays out. My strategy for the rest of the semester is to stay as far ahead of the game as possible.

I decided this is the hardest thing I have ever done. Cooking for 18 hours is a joke by comparison. I would rather pull a 100 hour week rather than go through what I've been through. Maybe I am just older and weaker. I guess a PhD shouldn't be easy to get.

I must say though...through some discussion over the past week or so I have realized that I enjoy economics. Even though I was thinking about it 18 hours a day, I still found time to read a few chapters of Hayek's Individualism and Economic Order and debate the robustness of the beta matrix in ordinary least squares regression under both binary independent and dependent variables. I really love it and even though my poor, sleep deprived brain was fried, I found enjoyment this morning when I figured out a proof on my exam.

Ok so some housekeeping (random thoughts):

1. So I love my Treo 700w. I think Palm has the opportunity to make something good even better when their next generation of phones come out. My suggestions:

a. Let the media player and other aps that use sound play over Bluetooth.
b. Make an option to disable the touchscreen in a call but press a specific button to allow
access.
c. Crashing IS a problem.
d. Can we do ANYTHING to allow IE to browse non-xtml pages faster
e. How about a flash player/pdf reader? (I want to watch MLB.tv and NHL Center Ice Net)
f. Better control over system memory.

2. Vouchers

This may surprise you, but I am against vouchers. It doesn't make schooling competitive. The argument reminds me an awful lot of Lange's (1936) revision of socialist calculation. Vouchers are still paid for by taxes, so for me, the discussion ends there.

3. A good piece on minimum wage over on Jeff Miron's blog. One of my favorite, clearest libertarian economists.

4. More later.

Appalling article of the day

Shouldn't the finding of evidence of biological tendencies to homosexuality finally put the debate over "immoral" behavior to a rest?

Apparently not.

Religion keeps moving farther and farther from science and rationality. People ARE stupid:)

Iraq News

Everyday I go to Yahoo to check my email and my fantasy sports teams. Every day for the past four years the top line on the news is "** U.S. Troops killed by roadside bomb."

What bothers me is how unremarkable that heading has become.

Democracy and Development

The Econ blog on WSJ ran this discussion between Acemoglu and Glaeser. Interesting since I have been debating, both internally and with friends, whether democracy is necessarily a good thing. The end result, so far, is that I believe that although it may be good for capitalism, democracy may not be good for all people and we risk falling into the paternalism trap by wishing it upon all people. A friend of mine from the former Soviet Union recently hypothesized that democracy is bad for the Russian people because they have a cultural tradition of strong, autocratic leaders. Likewise, the Atlantic Monthly ran an article some years back stating much of the same idea.

Thanks for the pointer to Pete Boettke at The Austrian Economists.

Great satire about economics

Life Among the Econ

Thanks to Marginal Revolution

From CSM

Want world peace? Support free trade.

By Donald J. Boudreaux

FAIRFAX, VA. – Everyone knows that a key to the Democrats' big electoral win was their opposition to the Iraq war. But also, as the Wall Street Journal reported recently, "Democrats' stances against free trade helped build the party's success at the polls and could tip the balance on trade matters. The new dynamic could put a definitive end to the already troubled effort to reach a global agreement to reduce tariffs and open markets...."

Protectionists (of whatever party) believe that consumers who buy goods and services from foreigners cause domestic employment - and wages - to fall. Economists since before Adam Smith have shown that this belief is mistaken, largely because foreigners sell things to us only because they either want to buy things from us or invest in our economy.

These activities employ workers here at home and raise their wages. Mountains of empirical evidence show that protectionism is economically destructive. The facts also show that protectionism is inconsistent with a desire for peace - a desire admirably expressed by many Democrats during the recent campaigns.

Back in 1748, Baron de Montesquieu observed that "Peace is the natural effect of trade. Two nations who differ with each other become reciprocally dependent; for if one has an interest in buying, the other has an interest in selling; and thus their union is founded on their mutual necessities."

If Mr. Montesquieu is correct that trade promotes peace, then protectionism - a retreat from open trade - raises the chances of war.

Plenty of empirical evidence confirms the wisdom of Montesquieu's insight: Trade does indeed promote peace.

During the past 30 years, Solomon Polachek, an economist at the State University of New York at Binghamton, has researched the relationship between trade and peace. In his most recent paper on the topic, he and co-author Carlos Seiglie of Rutgers University review the massive amount of research on trade, war, and peace.

They find that "the overwhelming evidence indicates that trade reduces conflict." Likewise for foreign investment. The greater the amounts that foreigners invest in the United States, or the more that Americans invest abroad, the lower is the likelihood of war between America and those countries with which it has investment relationships.

Professors Polachek and Seiglie conclude that, "The policy implication of our finding is that further international cooperation in reducing barriers to both trade and capital flows can promote a more peaceful world."

Columbia University political scientist Erik Gartzke reaches a similar but more general conclusion: Peace is fostered by economic freedom. Economic freedom certainly includes, but is broader than, the freedom of ordinary people to trade internationally. It includes also low and transparent rates of taxation, the easy ability of entrepreneurs to start new businesses, the lightness of regulations on labor, product, and credit markets, ready access to sound money, and other factors that encourage the allocation of resources by markets rather than by government officials.

Professor Gartzke ranks countries on an economic-freedom index from 1 to 10, with 1 being very unfree and 10 being very free. He then examines military conflicts from 1816 through 2000. His findings are powerful: Countries that rank lowest on an economic-freedom index - with scores of 2 or less - are 14 times more likely to be involved in military conflicts than are countries whose people enjoy significant economic freedom (that is, countries with scores of 8 or higher).

Also important, the findings of Polachek and Gartzke improve our understanding of the long-recognized reluctance of democratic nations to wage war against one another. These scholars argue that the so-called democratic peace is really the capitalist peace.

Democratic institutions are heavily concentrated in countries that also have strong protections for private property rights, openness to foreign commerce, and other features broadly consistent with capitalism. That's why the observation that any two democracies are quite unlikely to go to war against each other might reflect the consequences of capitalism more than democracy.

And that's just what the data show. Polachek and Seiglie find that openness to trade is much more effective at encouraging peace than is democracy per se. Similarly, Gartzke discovered that, "When measures of both economic freedom and democracy are included in a statistical study, economic freedom is about 50 times more effective than democracy in diminishing violent conflict."

These findings make sense. By promoting prosperity, economic freedom gives ordinary people a large stake in peace.

This prosperity is threatened during wartime. War almost always gives government more control over resources and imposes the burdens of higher taxes, higher inflation, and other disruptions of the everyday commercial relationships that support prosperity.

When commerce reaches across political borders, the peace-promoting effects of economic freedom intensify. Why? It's bad for the bottom line to shoot your customers or your suppliers, so the more you trade with foreigners the less likely you are to seek, or even to tolerate, harm to these foreigners.

Senators-elect Sherrod Brown (D) of Ohio and Jim Webb (D) of Virginia probably don't realize it, but by endorsing trade protection, they actually work against the long-run prospects for peace that they so fervently desire.

• Donald J. Boudreaux is chairman of the economics department at George Mason University.

China moving forward

China took a step forward today towards what I consider to be the most important agent of free market economy. Now if South America and African states could make this change as well...

Ironic

Isn't it ironic that UPS's new commercial uses The Postal Service as their soundtrack?

http://www.youtube.com/watch?v=WpTWU7vwNtY

Who next?

From the Journal...

Protectionists Never Learn

By RUSSELL ROBERTS
March 12, 2007; Page A15

I'm thinking of a country. America's trade deficit with this country just reached an all-time high. This country holds more U.S. Treasuries than any other foreign country. It's one of the world's largest economies. And the name of that country is?

Japan.

Japan? Yes. Remember when Japan was a big threat to the American economy? You have to go back to the late 1980s. Back then, every politician in the mood for pandering to economic ignorance could scare a bunch of folks with worries about how the Japanese were stealing our jobs. How our trade deficit with Japan was going to destroy the American economy. How the Japanese economy was soon going to pass America's. How the Japanese auto industry was part of a sinister strategy to destroy our core competencies.

Job thief

You'd think Japan would still make good political fodder. The story of the baseball off-season is the Red Sox spending $100 million to bring Daisuke Matsuzaka from Japan to the United States. Dice-K, as he's known, is the ultimate import. He takes away a job from an American pitcher. And the Japanese baseball teams discriminate against American players with strict quotas. But even though America's trade deficit with Japan just hit that all-time high, no one uses Dice-K as a symbol of unfair Japanese trade policy.

Why not? Instead, it's China all the time. We're told that China cheats on its currency, stealing America's manufacturing capacity and destroying American jobs. China's holdings of U.S Treasuries threaten our sovereignty, according to Hillary Clinton, even though Japanese holdings are almost twice as big.

Why isn't Japan just as scary as China? One answer is that Matsuzaka smiles too much. He's only scary if you're 60 feet 6 inches away from him, trying to hit his famous gyroball with a wooden stick in your hand. And unlike other imports, it's easy to see how he doesn't just help his relatives in Japan with all that money he's getting from the Red Sox. He helps the Red Sox. Trade makes both parties to the trade better off.

But still. Why isn't Japan scary?

One answer is that the doom-and-gloomers already tried, but nothing happened. They told us that Japan was going to destroy our economy. They told us we needed a plan to cope with brilliant Japanese economic strategies. But then the Japanese economy hiccupped and played Rip Van Winkle for a decade, while America kept growing.

The real reason Japan isn't scary is because it wasn't and isn't a threat to our standard of living. Trade makes both parties better off, remember? But when Japan slumps and the U.S. surges, it's too hard to fool people with bad economics.

So when the sky didn't fall, a new candidate had to be found. Mexico and Nafta fit the bill. Not Canada, even though Canada was part of Nafta. Evidently, politicians and some voters find Mexicans more scary than Canadians. So it was Mexico. When that great "sucking sound" was never heard, a new sinister foreign nation had to be found. And so it's the turn of the Chinese.

Yes, China holds a lot of our bonds. But Japan holds more. Yes, we run a big trade deficit with China. But that lets us buy lots of inexpensive stuff instead of having to make it for ourselves. Yes, there are more than a billion Chinese. I guess that means they can take all of our jobs four times! But our economy keeps growing. We have more jobs than ever before. And contrary to popular belief, the American standard of living and the American middle class are thriving.

We were told that at a minimum China (and India with its own billion-strong population) would take all our high-tech jobs. But the high-tech sector bounced back from its downturn (a downturn that had nothing to do with outsourcing) and is growing again, partly because we can get some of the simplest database and programming tasks done so cheaply by Indians and Chinese.

So why can politicians still make China scary? Why didn't Americans learn from the previous sky-is-falling episodes? The simple answer is that if you don't understand economics, you might be convinced by a politician who says that trade with China is bad for America.

The next time you find yourself losing sleep over China, remember that you were worried about Japan and Mexico and everything turned out OK. Then ask yourself if America would be a richer country if China cut itself off from the rest of the world.

Mr. Roberts is professor of economics at George Mason University and a research fellow at Stanford's Hoover Institution.

Restaurants-econ

Just had a great dinner/conversation with a good friend. We went to Jaleo, Jose Andres' place in Gallery Place. It was my 4th or 5th time and is one of my favorites in DC.

One of the things we were discussing was the restaurant business. I know Tyler Cowen was talking about a paper on the restaurant business at one point, but I had a thought. The restaurant industry is as close to perfect competition as it gets. There are many small firms, price takers, none of whom can individually affect the market. There is fairly free entry and exit from the market. People obviously have preferences, but there is always a substitute. Information is fairly easy to obtain regarding prices etc. Trading costs are low. Food profits are nearly zero, especially in fine dining restaurants. We know that the supply curve is maximized because of the high failure rate.

I will write a paper on it at some point.

2007 NCAA Bracket thoughts

Midwest

*Arizona-Purdue is interest...kind of surprised AZ wasn't ranked higher, but Purdue is going to wreck the finesse of the Wildcats

*Butler a 5?? They beat Tennessee and Gonzaga early in the year but very up and down since...losing to Wright St in the conference championship...they will probably lose to Maryland.

*The UNLV-GT rankings are switched...GT should romp.

*TAMU could upset Wisconsin...you heard it here first

West

*UK got an 8???? They shouldn't even be in the tournament.

*VA Tech should surprise...should be ranked higher.

*IU and the Zag's seeds are switched

East

*UT should be ranked higher.

* Don't see many upsets in this bracket...BC is vulnerable if they don't show up...Really bored by this region

South

*I really like A&M.

*Memphis is overrated...they played nobody non-conference and CUSA sucks.

*Nevada-Creighton is a good matchup...should be a fun game

Sweet 16

FL, MD, Ore, GT, Kansas, VA Tech, Duke, UCLA, UNC, Texas, Vandy, Gtown, OSU, VA, A&M, Nevada

Elite 8

FL, Ore, Kansas, UCLA, TX, Gtown, OSU, A&M

Final Four

FL, TX, Kansas, A&M

National Chanpion

Kansas