Markets and governments

From here:

The free market is a harsh mistress, but a fair one. Big Government, on the other hand, is always for sale to the powerful.

Young entrepreneurs

The Wall Street Journal reports an increase in college graduates becoming entrepreneurs because of the bad job market:

Of course, young entrepreneurs also are likely to face their own hurdles. "Having the skill set to become an entrepreneur is different than any thing you learn in school," says Susan Amat, the executive director of the Launch Pad at the University of Miami, an entrepreneurship-support program based out of the campus career center.
To that end, it's important for young entrepreneurs to seek the necessary help to get started. For current students or recent graduates, it might be easiest to reach out for assistance on campus. Many schools have campus incubators or offer start-up competitions, like Babson College's annual Entrepreneurship Forum, which offers cash, consulting, legal and Web services to winning business plans. Other schools have business incubators that help students—and sometimes outsiders—hone business ideas and, in some cases, support them financially or with other resources.

Wikipedia on climate change

Lawrence Solomon has an interesting article on the climate change administrator for Wikipedia, who made sure that the Wikipedia articles on the topic had the proper viewpoint.

All told, Connolley created or rewrote 5,428 unique Wikipedia articles. His control over Wikipedia was greater still, however, through the role he obtained at Wikipedia as a website administrator, which allowed him to act with virtual impunity. When Connolley didn’t like the subject of a certain article, he removed it — more than 500 articles of various descriptions disappeared at his hand. When he disapproved of the arguments that others were making, he often had them barred — over 2,000 Wikipedia contributors who ran afoul of him found themselves blocked from making further contributions. Acolytes whose writing conformed to Connolley’s global warming views, in contrast, were rewarded with Wikipedia’s blessings. In these ways, Connolley turned Wikipedia into the missionary wing of the global warming movement.

The comments are interesting, and there is also a long discussion in the comments climateaudit. Here is the bottom line:

Whilst Wikipedia is pretty good on non politically contaminated issues such as mathematics it is a largely useless s minefield when it comes to highly contentious issues.

economic simulator

The Fed has another economic simulation for students:

http://econsimulator.com/

I have not tried it yet.

What works in fiscal policy.

In the New York Times Greg Mankiw reviews empirical evidence that suggests tax cuts work as fiscal policy, while increases in government spending do not.

The results are striking. Successful stimulus relies almost entirely on cuts in business and income taxes. Failed stimulus relies mostly on increases in government spending.
All these findings suggest that conventional models leave something out. A clue as to what that might be can be found in a 2002 study by Olivier Blanchard and Roberto Perotti. (Mr. Perotti is a professor at Boccini University in Milano, Italy; Mr. Blanchard is now chief economist at the International Monetary Fund.) They report that “both increases in taxes and increases in government spending have a strong negative effect on private investment spending. This effect is difficult to reconcile with Keynesian theory.”

You might almost think that the supply side people were on to something. 

The downside of being a pirate

There may be no downside to being a pirate:

A group of suspected Somali pirates detained on a Dutch warship has been released because no country has agreed to prosecute them.

Some of the European countries are eager to try Bush officials for crimes against humanity, but no one wants to try the pirates. What a funny world we live in.

econ blogs for students

The best blogs for economics students:
http://www.onlineuniversities-weblog.com/50226711/100-best-blogs-for-econ-students.php

Only one, please

Reacting to an opinion article in a Canadian publication suggesting that the world needs a one-child policy, a post at the Volokh conspiracy notes:

A welfare state is in one sense a big Ponzi scheme. Without increasing numbers of people entering the scheme, there is no money to pay the people receiving the money.

Do people who fret about overpopulation have any idea of what fertility rates are in the developed world and what they tell us about the future?
China, meanwhile, is worried about its one-child policy and is finding that people do not want a second child:

Even one child makes huge demands on parents' time, he said. "A mother has to give up at least two years of her social life." Then there are the space issues -- "You have to remodel your apartment" -- and the strategizing -- "You have to have a résumé ready by the time the child is 9 months old for the best preschools."
Most of his friends are willing to deal with this once, Chen said, but not twice.
"Ours is the first generation with higher living standards," he said. "We do not want to make too many sacrifices."

For a previous post on this, see here.

Feedback and climate change

My guess is that few people realize how important the concept of feedback is to climate change. A recent article in the Wall Street Journal explains its importance:

It is generally accepted that a doubling of CO2 will only produce a change of about two degrees Fahrenheit if all else is held constant. This is unlikely to be much to worry about.
Yet current climate models predict much higher sensitivities. They do so because in these models, the main greenhouse substances (water vapor and clouds) act to amplify anything that CO2 does. This is referred to as positive feedback. But as the IPCC notes, clouds continue to be a source of major uncertainty in current models. Since clouds and water vapor are intimately related, the IPCC claim that they are more confident about water vapor is quite implausible.
There is some evidence of a positive feedback effect for water vapor in cloud-free regions, but a major part of any water-vapor feedback would have to acknowledge that cloud-free areas are always changing, and this remains an unknown. At this point, few scientists would argue that the science is settled. In particular, the question remains as to whether water vapor and clouds have positive or negative feedbacks.
The notion that the earth's climate is dominated by positive feedbacks is intuitively implausible, and the history of the earth's climate offers some guidance on this matter. About 2.5 billion years ago, the sun was 20%-30% less bright than now (compare this with the 2% perturbation that a doubling of CO2 would produce), and yet the evidence is that the oceans were unfrozen at the time, and that temperatures might not have been very different from today's. Carl Sagan in the 1970s referred to this as the "Early Faint Sun Paradox."
For more than 30 years there have been attempts to resolve the paradox with greenhouse gases. Some have suggested CO2—but the amount needed was thousands of times greater than present levels and incompatible with geological evidence. Methane also proved unlikely. It turns out that increased thin cirrus cloud coverage in the tropics readily resolves the paradox—but only if the clouds constitute a negative feedback. In present terms this means that they would diminish rather than enhance the impact of CO2.

If the EPA can regulate carbon dioxide because of the greenhouse effect, could it also regulate water vapor?

In praise of dirt

Too much cleanliness when you are young may make you unhealthy when you are old, according to one study:

To find out, Tom McDade of Northwestern University in Evanston, Illinois, and colleagues turned to health surveys, which began at birth, of 1534 children in Cebu City in the Philippines, where western levels of sanitation are generally not found. When these people reached 20, McDade's team were able to test their blood for C-reactive protein (CRP), a marker of chronic inflammation.

They found that the more pathogens the people had encountered before age 2, the less CRP they had at age 20. Every episode of diarrhoea back then cut the chance of higher CRP later by 11 per cent; every two months spent in a place with animal faeces cut it by 13 per cent. Being born in the dusty, dirty dry season cut the chance by a third (Proceedings of the Royal Society B, DOI: 10.1098/rspb.2009.1795).

The minumum wage

A blog post at the Washington Post suggests that the recent increase in the minimum wage was a bad idea.

Back in 2007, Congress enacted a three-stage increase in the minimum wage from $5.15 to $7.25, the last installment of which took effect just last July. This was done with the best of intentions, of course. But what it meant in practical terms was that, at the height of a savage recession, the government essentially imposed a substantial tax increase on hiring. No wonder the unemployment rate among black teenage males is at an all-time high of 57 percent.
....
If Obama and Congress were really as serious as they say they are about reducing unemployment, they would at least be willing to discuss rolling back last July’s minimum wage increase. It would create some jobs for those who need them most, and it would not cost taxpayers a dime. Yes, those who get hired at a reduced minimum wage would have to work for less. But at least they'd be working.

The reaction of the commenters is interesting. The majority berate the idea with invective with comments like these:

Mr. Lane, I would suggest that you experience of joy and comfort of living on a minimum wage salary for a few months, and then write an article about it. People like you are what got our country where it is now economically. President Obama, with the grace of God, will heal your years of abuse.
....

I agree with the other posters. How can this guy even write this crap? Lower the minimum wage when it took so long to get it raised? Of all the suggestions on increasing jobs in this country, this has got to be the most stupid one yet.
The minimum wage was low and employers still weren't hiring and the employees had to get government help just to eat.
Easy for an idiot like this to make this claim when he doesn't have to feed a family on the minimum wage.

I wonder if they have any idea of how stupid they appear to those who actually know some economics.

Meanwhile, Tigerhawk is worried about the increase in costly regulations and its effect on hiring:

Already our economy is struggling against health care "reform," massive new regulation and/or taxation on any business that emits carbon, the proposed "Employee Free Choice Act," new regulation in financial services, new corporate "governance" requirements, fiscal catastrophes in all the large states controlled by the Democrats, and huge new tax increases for the people who actually decide to hire people (whether they are corporate tools or individual entrepreneurs). Do we really need "an array of 90 rules and regulations" from the Labor Department on top of all that?

Just when you think "they can't keep making it harder," they do.

I thought this comment especially interesting:

I just bailed out of a deal to buy a company which has gone from a money-making position to a money-losing position in the past two years and is in need of a turn-around. The services provided by this company are extremely carbon-intensive. There is just no way I can justify risking capital on a business like this in this regulatory environment.

There are no other buyers on deck. I suspect this business will be liquidated within 6 months. Another 150 jobs gone. Way to go, Obama.

This is what you get when nobody in the Administration has any private sector experience.

An IRS horror story

From the Seattle Times:

"I asked the IRS lady straight upfront — 'I don't have anything, why are you auditing me?' " Porcaro recalled. "I said, 'Why me, when I don't own a home, a business, a car?' "
The answer stunned both Porcaro and the private tax specialist her dad had gotten to help her.
"They showed us a spreadsheet of incomes in the Seattle area," says Dante Driver, an accountant at Seattle's G.A. Michael and Co. "The auditor said, 'You made eighteen thousand, and our data show a family of three needs at least thirty-six thousand to get by in Seattle."
"They thought she must have unreported income. That she was hiding something. Basically they were auditing her for not making enough money."
Seriously? An estimated 60,000 people in Seattle live below the poverty line — meaning they make $11,000 or less for an individual or $22,000 for a family of four. Does the IRS red-flag them for scrutiny, simply because they're poor?
....
Driver quickly determined the IRS was wrong in how it was interpreting the tax laws. He sent in the necessary code citations and hoped that would be the end of it.
Instead, the IRS responded by launching an audit of Rachel's parents.
"I was floored," says Rob Porcaro, 59. "I get audited now and then in my business, so I've been through it before. But to have them go after me because of my daughter, well, I've never heard of anything like it."

The Protestant work ethic

From the Telegraph:

Has a young Harvard graduate student in economics dealt a deadly blow to Max Weber’s theory that Protestantism favours economic development? Davide Cantoni has just produced a brilliantly argued paper which takes economic data from Catholic and Protestant cities in Germany from 1300 to 1900, subjects them to meticulous multivariate analysis, and finds no evidence that Protestantism per se made people richer.

the whole paper is available in pdf format here.

It was inevitable given the trends

If you cannot see how it ends, click it.

The prices at intrade does not reflect the polling results. The probability that Obama will be re-elected in 2012 is at 61.5% and shows little trend. That is just a bit below the probablily that the Democrats will maintain control of the House of Representatives in 2010, at 62.6%, though that has been trending downward.

Wind rights

I learned of a new kind of property right recently, wind rights. They are involved in a tiny wind farm that the city of New Ulm wants to build. Here is an explanation from wind-watch.org

Acquiring wind rights for a wind energy project is necessary to ensure that winds have unimpeded flow to turbines.
“Wind rights place limitations relating to the height of obstructing structures,” Nierengarten said.
A landowner who sells wind rights agrees to refrain from building wind-obstructing structures within defined setback requirements.
As a practical matter in rural areas, this would mean that landowners selling wind rights couldn’t erect their own towering wind turbines within a certain distance of a city-operated turbine on an adjacent property.

The issue has caught the attention of TheVolokh Conspriacy, which is interested in the eminent-domain aspect of the project.

A big loser

The Wall Street Journal has an article about a man who lost over $100 million in Las Vegas.

During a year-long gambling binge at the Caesars Palace and Rio casinos in 2007, Terrance Watanabe managed to lose nearly $127 million.

Should we feel sorry for him?  Las Vegas exists to separate fools from their money. "The money you bring to Las Vegas stays in Las Vegas."