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Short, Sweet & Efficient

Seven years ago, Thomas Sargent (Nobel, 2011) gave perhaps one of the shortest (and therefore best) commencement addresses ever:

I remember how happy I felt when I graduated from Berkeley many years ago. But I thought the graduation speeches were long. I will economize on words.

Economics is organized common sense. Here is a short list of valuable lessons that our beautiful subject teaches.

1. Many things that are desirable are not feasible.

2. Individuals and communities face trade-offs.

3. Other people have more information about their abilities, their efforts, and their preferences than you do.

4. Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended.

5. There are tradeoffs between equality and efficiency.

6. In an equilibrium of a game or an economy, people are satisfied with their choices. That is why it is difficult for well-meaning outsiders to change things for better or worse.

7. In the future, you too will respond to incentives. That is why there are some promises that you’d like to make but can’t. No one will believe those promises because they know that later it will not be in your interest to deliver. The lesson here is this: before you make a promise, think about whether you will want to keep it if and when your circumstances change. This is how you earn a reputation.

8. Governments and voters respond to incentives too. That is why governments sometimes default on loans and other promises that they have made.

9. It is feasible for one generation to shift costs to subsequent ones. That is what national government debts and the U.S. social security system do (but not the social security system of Singapore).

10. When a government spends, its citizens eventually pay, either today or tomorrow, either through explicit taxes or implicit ones like inflation.

11. Most people want other people to pay for public goods and government transfers (especially transfers to themselves).

12. Because market prices aggregate traders’ information, it is difficult to forecast stock prices and interest rates and exchange rates.

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Violence in Louisville Revisited

Recent violence in Louisville has thankfully started many public conversations about poverty, education and culture that otherwise be relegated to quiet, resigned laments at the dinner table. That Louisvillians are talking about this publicly is broadly to the good. Unfortunately, one well-worn claim about How We Got Here doesn’t stand up to basic scrutiny.

In a piece that has more to recommend it than indicated here, Tim Druck writes:

We used to pay for real educators and leaders spending the time to teach youth who are currently neglected and forgotten. We used to have career and vocational programs for kids who aren’t necessarily college material – I know plenty of successful adults today who learned a trade in high school, anything from auto mechanics to printing to agriculture. Today, if you’re not college-bound, an athlete, or an entertainer, you are entirely on your own to find a trade or a career – no wonder ‘pro athlete’ and ‘gangsta rapper’ are the only goals of so many children. Kids don’t learn that there is success in working for a living – in our culture, in our education systems, in the media, either you are fabulously wealthy or you are nothing.

I include the latter part about vocational education because I agree with it almost entirely. The median salary for plumbers in America is about $49,000.

On the broader issue of what “we used to pay for”, I responded:

Tim responded:

And I responded with this:

Here’s the relevant chart:

This chart doesn't include the costs of school buildings, btw.

This doesn’t include the costs associated with school buildings, btw.

It’s a powerful testament to the power of public school salesmanship and media handwringing that the most carefully considered, thoughtful answer to basically any problem with public schools must always be, say it with me, More Funding.

It’s past time Kentuckians admitted that More Funding has been tried for decades. The persistent problems of low proficiency in reading and math in Jefferson county (despite decades of More Funding) should be laid squarely at the feet of the public school establishment and its defenders.

Kentucky is among a shrinking number of states with no charter schools and no private school choice. This, too, is a testament to the power of the public school establishment that has fought to keep students in failing schools.

But let’s be clear: School choice is not the silver bullet cure to my hometown’s violence. It is, however, a powerful way to engage parents in making one of the most important decisions on behalf of their children that they’ll ever make. If a robust transfer of power away from public schools and into the hands of low-income parents isn’t on the table, then I think it’s safe to call that intentional oversight yet another testament to the power of the public school establishment.

(Related: KidsCount.org has a darn good website.)

Update: Alas, it appears Mr. Druck would rather punish the wealthy than help the poor

If the betterment of school district performance were the only relevant metric for school choice … Tim would still be mistaken.

Also, does anyone honestly care about school districts? Better to worry about how kids currently trapped in those districts get educated.

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Violence in Louisville

My friend Terry Meiners has some very pointed thoughts on the recently high-profile violence in Louisville. I can’t say if I agree with what he says entirely – I haven’t lived there for ten years – but the closed-off nature of much of the media and political establishment in Louisville makes me suspect that we’ve been getting a far-too-rosy picture of the downtown area for some time.

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Bitcoin: Roger Ver Stole My Idea

Last year Roger Ver gave the Foundation for Economic Education the largest-ever bitcoin donation to any nonprofit. At the time of the donation, it was worth more than a million dollars.

The problem is Mr. Ver stole the basic idea from me. I mean, pretty much.

When I emceed FEE’s first-ever Leonard E. Read Alumni Award dinner last night in Naples, Florida, I showed this video and proved my case conclusively.*

[click to continue…]

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Supply, Demand, Uber and Violence

Here’s how car service Uber deals with demand for their services:

When a lot of people are looking for an Uber car — like during a recent New York snowstorm, or Washington on New Year’s Eve — it sets the rate higher, in the hope of increasing supply, by enticing more of its drivers to come out or stay out. (Regardless of intent, the prices jump quickly, and from a user’s point of view, work more as a form of demand-limiting price discrimination than supply-inducing incentive.)

During a recent New York snowstorm, some rides cost 8.25 times the standard price.

Emphasis mine.

Here’s how French cabbies deal with demand for the same kind of service:

“Smashed windows, tires, vandalized vehicle, and bleeding hands,” passenger Kat Borlongan said on her Twitter feed, describing what happened after an Uber car picked her up at Charles de Gaulle Airport (aka Roissy Airport). “Attackers tried to get in the car, but our brave Uber driver maneuvered us to safety, changed the tire on the freeway, and got us home,” she said.

Two other cars, booked through the local Chauffeur Privé service, were targeted in similar attacks near Orly Airport and the Montparnasse train station. “Eggs and stones were thrown, and there were violent blows that broke the cars’ windows and rear-view mirrors,” Chauffeur Privé said in a statement.

Tensions between cabbies and Uber have been brewing for months. At the request of taxi drivers, the government recently imposed a new rule on private services requiring a minimum 15-minute wait between the time a car is booked and the passenger is picked up.

Which one of these is more peaceful? Which embraces openness, honesty and respect for our fellows?

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Ollie’s Trolley

I’ve long considered producing a short doc on the rise and disintegration of Ollie’s Trolley, a restaurant franchise operation that has a few lasting remnants, notably in Louisville and the D.C. area. If anyone has any information that might be useful to get such a project moving, I’d love to hear from you.

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A year ago this week, I was puzzling over why one of my favorite Louisville tourist traps, Lynn’s Paradise Cafe, had suddenly closed. I suggested it may have had something to do with the impending regulations that would be foisted upon businesses in 2014 by the Affordable Care Act (ObamaCare). I haven’t lived in Louisville for nearly nine years, so I’ll admit that I don’t understand all the dynamics that went into Lynn’s decision to shut down. I earned only one response I believe was ill-considered. Louisvillian Briana Morgan said that my suggestion was irresponsible. Here are her thoughts. [click to continue…]

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Words with Republicans

I’m not a Republican. There, glad that’s overwith. Still, Kevin Williamson posted this set of answers to a “questionnaire” that’s really not much of a questionnaire. It was on Facebook, but he’s allowed me to post it here:

1) If Republicans are so fiscally responsible, why was President Eisenhower (in the 1950?s) the last Republican president to balance the budget?

Answer: False premise; the last Republican to balance the budget was Newt Gingrich. Presidents don’t write budgets, cannot authorize spending, and cannot authorize taxes. Congress does that.

2) If President Reagan was such a fiscally conservative hero, why did he quadruple our national debt during his eight years in the White House?

Answer: False premise; Tip O’Neill quadrupled the national debt. Presidents don’t write budgets, cannot authorize spending, and cannot authorize taxes. Congress does that.

3) If tax breaks are the main driving force behind job creation, how would we create jobs once tax rates were reduced to practically zero?

Answer: Tax breaks are not the main force behind job creation; demand for labor is the main force behind job creation.

4) If socialized health care is so awful, why does every country that leads the world in life expectancy have socialized health care?

Answer: What on earth do you mean by “socialized medicine”? If you mean single-payer, then your premises are, as seems to be the developing trend here, wrong. The longest-lived countries are Japan and Switzerland, neither of which is single-payer. Counterquestion: If socialized medicine is great, how come people on Medicaid have some terrible health outcomes?

5) If you support the freedom of religion (as per our Constitution), and my church recognizes gay marriage, isn’t your support for the banning of same-sex marriage an attack on my religion’s First Amendment rights?

Answer: No, your church can believe what it wants. The question is the legal status of same-sex relationships. Counterquestion: The Church of Kevin says nobody should ever have to pay more than 10 percent in taxes — is the IRS violating my First Amendment rights?

6) What’s more realistic? 1) That an entire region of the United States that supported slavery in the late-1800?s and support segregation in the 1950?s and 60?s suddenly stopped being racist, or 2) The racist southern Democrats in the south became Republicans during the 50?s and 60?s when the Republican party shifted toward an idea called the “Southern Strategy,” where the GOP appealed to the racism in southern whites who didn’t like African Americans voting for Democrats.

Answer: False premise. Southern voters in the main did not become Republicans until the 1990s, as shown by Southern congressional delegations, state governments, etc. In presidential elections, Southern states voted overwhelmingly for Republicans such as Nixon and Reagan, but then so did Vermont.

7) If taxes are at some of their lowest levels in history, and the wealthiest in this country are richer than ever, why hasn’t the growth in the wealth of the middle class matched that of the top 2%?

Answer: Because in a world of globally integrated markets returns to skill and entrepreneurial success at the high end of the market are very large, while pressure on moderate-to-low-skill wages is very strong. Wealthy Americans are getting wealthier for the same reason that wealthy Swedes are getting wealthier, despite having a very different tax code.

8) If our Founding Fathers wanted this nation to be based on Christianity, why don’t the words “Christian” or “Christianity” appear even once in our Constitution?

Answer: They expected the republic to continue as part of Christian civilization, not to have a U.S. version of the Church of England. India has a secular constitution, but nobody seems to much doubt that it is a Hindu country, in spite of the presence of non-Hindu minorities.

9) If a Republican president reduced massive job losses in the midst of the worst recession in nearly a century by more than 50% in his first 4 months in office; presided over 44 consecutive months of private-sector job growth creating nearly 8 million jobs; killed Osama bin Ladin; saw stock markets reach all-time highs; saved the American auto industry; increased domestic oil production to highs not seen since the late-90?s and championed the largest year-to-year deficit reductions since World War II, would your party not be calling him a hero and a legend?

Answer: Since when did you guys start loving the stock market, which contributes so much to the inequality you’re so worried about in No. 7? Counterquestion: If a Republican president’s term coincided with the lowest workforce-participation rate in recent history, an illegal war in Libya, and the illegal assassination of U.S. citizens based on their Facebook histories, would you not call him … something less than heroic?

10. If Jesus spent his life helping the poor and the needy, how does it make sense that a party which claims to be for “Christian values” continues to cut funding for programs that help the poor and the needy?

Answer: Let me help you out here: Jesus commanded his followers to feed the hungry and clothe the naked. He did not command them to petition Caesar to seize their neighbors’ assets and to use them to feed the hungry and clothe the naked. Also, you’re begging the question: If you compare money spent to changes in the poverty rate, there is little or no evidence that these programs actually “help the poor and the needy.” They do create a lot of full-time jobs and vote banks for Democrats. By their fruit shall ye know them.

CONCLUSION: Whoever wrote this questionnaire, which is in fact no so much a questionnaire as a litany of banalities, is not very bright and should be kept far from the levers of political power.

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Cuba Cracking Down on Entrepreneurs

I continue to believe that the best way to take down this regime is ending the embargo and flooding Cuba with the most basic goods of civilization:

President Raul Castro issued a stern warning to entrepreneurs pushing the boundaries of Cuba’s economic reform, telling parliament on Saturday that “those pressuring us to move faster are moving us toward failure.”

Castro has legalized small-scale private business in nearly 200 fields since 2010 but has issued tighter regulations on businesses seeing as going too far or competing excessively with state enterprises. In recent months the government has banned the resale of imported hardware and clothes and cracked down on unlicensed private video game and movie salons.

I once had high hopes that this Castro would be better than the last. Remains to be seen, I suppose.

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Upskirting Privacy

Here’s Mike Rogers – the chair of the House Intelligence Committee – explaining to a respected law professor about how privacy works.

Here’s a rough transcription of the relevant portion:

Rogers: I would argue the fact that we haven’t had any complaints come forward with any specificity arguing that their privacy has been violated, clearly indicates, in ten years, clearly indicates that something must be doing right. Somebody must be doing something exactly right.

Vladeck: But who would be complaining?

Rogers: Somebody who’s privacy was violated. You can’t have your privacy violated if you don’t know your privacy is violated.

Vladeck: I disagree with that. If a tree falls in the forest, it makes a noise whether you’re there to see it or not.

Rogers: Well that’s a new interesting standard in the law. We’re going to have this conversation… but we’re going to have wine, because that’s going to get a lot more interesting…

Now for something substantially related:

A federal air marshal was arrested Thursday morning at Nashville International Airport after being caught taking multiple upskirt pictures of female passengers boarding a plane, police said.

A witness spotted 28-year-old Adam Bartsch, who was on duty, taking pictures with his cell phone underneath women’s dresses, police said. The witness grabbed Bartsch’s phone and notified a Southwest Airlines flight attendant, a police report said.

Airport police removed Bartsch from the flight and took him into custody.

According to the police report, Bartsch said he snapped 10 to 12 inappropriate pictures, something he said he had done before. He was charged with disorderly conduct and held on $10,000 bail.

The Transportation Security Administration said it is assisting authorities with the investigation.

“TSA does not tolerate criminal behavior. The agency immediately removed this individual from his current duties and is in the process of suspending or terminating his employment.”

Why shouldn’t this guy be able to use the same defense? The women who were photographed weren’t complaining. How can we say that their privacy had been violated? Your honor, this air marshal’s only crime was that he was caught.

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