Monday, January 31, 2011

What is wrong with Greece?

Greece is plagued with regulations that were designed to protect special interests, according to this article in the New York Times. The result is an economy that discourages entrepreneurship.
The Greek economy is riddled with distortions — the number of trucking licenses has remained unchanged in Greece since 1971, for example, and the country is among the world’s leaders in lawyers per capita. It has one lawyer for every 250 people, compared with about one for 272 in the United States.

Is the ratio of lawyers to population a rough measure of the amount of rent-seeking a society has?

Sunday, January 30, 2011

Ah, the academic life

It is videos like this that make me wonder if I should have stayed.

Friday, January 28, 2011

Why the slow recovery?

From John Taylor in the Wall Street Journal:
Yet the unemployment rate is still over 9%—double what it was before the recession—and it's been stuck above 9% for 20 consecutive months. Why the extraordinarily high and prolonged unemployment? My research shows that discretionary government interventions—deviations from sound economic principles and policies—have been largely responsible. 
The Paul Krugmans of economics will not like hearing that.

Wednesday, January 26, 2011

Screening or human capital?

An article in the Lafayette Journal and Courier says that some employers do not want to hire people who have been unemployed for more than a year.

There is a stigma that long-term jobless people have been sitting around and don't really want to work. There is the perception that they won't take a lower-paying job -- and if they do, they will bolt as soon as they find a higher-paying one.
On top of that, some companies have explicitly barred the unemployed from certain job openings, outright telling them in job ads that they need not apply.
But the company is far from alone in wanting workers who already are gainfully employed, said Patrice Waidner, board chairwoman of the Indianapolis chapter of Business & Professional Exchange, a networking organization that helps unemployed professionals."Companies are saying, 'I will take the person who was just working or is currently working,' " she said. "It is extremely difficult to get back into the job market."
Does a person lose job skills as a result of being unemployed for a long time? Or does long-term unemployment tend to be a marker for people who are less reliable and dependable than average? The article does not tell us much, but then the reporter probably does recognize that these are interesting questions.

Wednesday, January 19, 2011


James Taranto takes a stab at trying to explain the irrational hatred that Sarah Palin brings out in some people. He says that the deepest wells of this hatred are with women.

A couple excerpts:
To a woman who has internalized this point of view, Sarah Palin's opposition to abortion rights is a personal affront, and a deep one. It doesn't help that Palin lives by her beliefs. To the contrary, it intensifies the offense.

Liberal men put down Palin as a cheap way to score points with the women in their lives, or they use her as an outlet for more-general misogynistic impulses that would otherwise be socially unacceptable to express.

Update: Another attempt, at neo-neocon, with a long and mostly serious string of comments. My summary of the thread--some people perceive Palin as uppity and they do not care for uppity women.

The level of Palin hate is a most interesting phenomenon, one that cries out for an explanation. It tells us something about human nature, but I am not sure what.

Wednesday, January 12, 2011

People respond to incentives

Steven Landsburg begins his book Armchair Economist with the statement, "Most of economics can be summarized in four words: 'People respond to incentives.' The rest is commentary."

That seems a rather different beginning than that given in most introductory textbooks, which stresses that economics is about scarcity and choice. However, on closer examination, Landsburg's statement may tell us more and at the same time incorporate the insights of the scarcity-choice definition.

When economists talk about incentives, they are thinking that people respond to costs and benefits. When the cost of something rises, people use or do less of it, while when the benefit of something rises, people use or do more of it. Rational people should not act if the benefit of acting is less than the cost, and they should act if the benefit of acting is greater than the cost.

A benefit is something that makes a person better off. How do we decide if something makes a person better off? Economists take an Aristotelian approach on this question. They assume that people have goals, though unlike Aristotle, they do not spend much time trying to evaluate whether those goals are desirable or not. Actions that move a person closer to achieving their goals are benefits.

Notice that it is the individual who decides what his or her goals are, not some authority. Economics assumes that people know what is best for themselves, that is, that people should be allowed to choose for themselves what their goals are. This is not an assumption that everyone makes. In addition, by assuming that people are goal-seeking, we are also implicitly making the assumption that people are self-interested. You might think that someone could decide that their goal was to do whatever was best for humanity, and they might. But the limits to our knowledge and ability to process information make this a goal beyond the capability of anyone to actually put into practice.

What about costs? The cost of anything is what you have to give up to get it. Often this is measured in money. When we say that something costs $5.00, that means that when you spend $5.00 to get the item, you cannot use that $5.00 to purchase some other item. Often cost includes time. If to get an item one must pay $5.00 plus wait fifteen minutes, the cost of the item includes both money and time.

Why is there any cost at all? In a world without cost, we would not need to give up anything, and there would be no need to make choices. In a world without choice, there would be no incentives. This world without incentives is the world of abundance, a world without scarcity. And this insight brings us back to the traditional definition of economics, which is that it is the study of how people make choices in a world of scarcity.

On the need for civil discourse

We have grappled with many social problems in the past--we had a War on Drugs and a War on Poverty, we fight crime and pollution, we battle illiteracy and teen pregnancy, and we target a whole variety of social problems. Now we have too much incendiary political language and we need to combat this problem in the same way we have attacked other social evils. We must annihilate incendiary languages, obliterate violent metaphors, and crush and extirpate inflammatory speech. It may be a tough contest--there is no magic bullet solution--but victory is possible only if we take on the challenge.

Sunday, January 9, 2011

Chinese mothers

Shannon Love responds to the article in the Wall Street Journal about the superiority of Chinese mothers by pointing out the importance of teamwork.

Those who criticize team sports for instilling a competitive spirit usually miss the cooperation that they also teach.