Monday, March 26, 2007

On Wal-Mart

Jeffrey Goldberg writes about Wal-Mart:"Twenty years ago, Wal-Mart was widely viewed as a scrappy regional retailer, and its founder, Sam Walton, an Ozarks eccentric with a vision of super-discounting, was praised for intuiting the needs of his customers, and for maintaining high morale among his workers. When Walton retired, in 1988 (he died in 1992), the company had revenues of sixteen billion dollars. Today, Wal-Mart is the second-largest company in the world in terms of revenue—only ExxonMobil is bigger".

Sunday, March 25, 2007

Incentives to Stop Abortions

"Texas legislator has proposed that pregnant women considering abortion be offered $500 not to end their pregnancies.
Republican State Sen. Dan Patrick, who also is a conservative radio talk show host, said on Friday the money might convince the women to go ahead and have babies, then give them up for adoption.
He said during a legislative conference in New Braunfels, 45 miles south of Austin, there were 75,000 abortions in Texas last year.
"If this incentive would give pause and change the mind of 5 percent of those woman, that's 3,000 lives. That's almost as many people as we've lost in Iraq," Patrick said".

Friday, March 23, 2007

An Economist's Courtroom Bonanza

In the WSJ: "For high-profile economists like the 58-year-old Prof. Teece, expert testimony has become a way to earn $2 million or more a year. Their rise has its roots in the Reagan era of the 1980s, when a free-market view of the law inspired by University of Chicago scholars gained ground. Courts now rely far more on economic analysis, with its apparent precision, to reach decisions. As a result, big companies in legal disputes race to enlist top economists on their side, paying top dollar in an arms race for talent".

Tuesday, March 20, 2007

Quotations from Milton Friedman

Reason publishes some quotations from Milton Friedman. An interesting one is: "Why has there been so great a shift in the attitudes of the public [toward accepting free market ideas]? I’m sorry to confess that I do not believe it occurred because of the persuasive power of such books as Friedrich Hayek’s Road to Serfdom or Ayn Rand’s Fountainhead or Atlas Shrugged or our own Capitalism and Freedom. Such books certainly played a role, but I believe the major reason for the change is the extraordinary force of factual evidence.…The great hopes that had been placed in Russia and China by the collectivists and socialists turned into ashes.…Similarly, the hopes that were placed in Fabian socialism and the welfare state in Britain or the New Deal in the United States were disappointed. One major government program after another started with the very best aims and with noble objectives and turned out not to deliver the goods.…Ideas played their part. But they played their part not by producing a reaction against the spread of government but by determining the form that that reaction took. The role we play as intellectuals is not to persuade anybody but to keep options open and to provide alternative policies that can be adopted when people decide they have to make a change."

A Conversation with Tyler Cowen

There is an interesting conversation with Tyler Cowen in the Econtalk blog.

Monday, March 19, 2007

On Liberty

The classic book of John Stuart Mill is available in the Librivox site together with its audio book.

Sunday, March 18, 2007

Global Imbalances

Global investors are worried about many things. Why is America's current-account deficit not one of them? asks The Economist.

Saturday, March 17, 2007

Rational Terrorists and Optimal Network Structure

An article by Walter Enders and Xuejuan Su recently published in the Journal of Conflict Resolution: "After the events of 9/11, U.S. counterterrorism became more proactive in that the Patriot Act allowed the authorities far more freedom to directly attack terrorist network structures. We argue that rational terrorists will attempt to thwart such policies and restructure themselves to be less penetrable. We model the trade-off between security and intragroup communication faced by terrorists. The model is used to derive the anticipated changes in network structure and the consequent changes in the type, complexity, and success rate of potential terrorist attacks". An article by

Friday, March 9, 2007

The Memoirs of János Kornai

The Hungarian economist János Kornai that started his career believing that "Central planning must be more efficient than market anarchy", then "he came to reject first the brutal methods used by the regime and later the justificatory ends and theories as well. He went through a process of "emotional and intellectual restructuring that lasted several years." He also ceased to be a Marxist, unlike many Western intellectuals who, while rejecting communist systems, insisted that Marxist theory was wholly innocent of the wrongdoings committed on its behalf. Mr. Kornai was not one of those fighting "desperate rearguard actions" to salvage comforting beliefs. He quoted with approval a contemporary Hungarian philosopher who said that he came to reject Marxism "not because [the Party] did the whole beastly business in the name of Marxism, but because Marxism does not explain what is going on around me.""

Thursday, March 8, 2007

Tenure Once Again: The Role of Academic Habits

I wrote an article with Goncalo Monteiro, forthcoming in the Japanese Economic Review, in which we investigate why some scholars [university professors] continue to be productive after receiving tenure. The paper shows that departments can set tenure rules and standards as incentives for scholars to accumulate academic habits. As a result, academic habits have a lasting positive impact in scholar’s productivity, leading to higher scholar’s productivity rate of growth and higher productivity level.

The paper appeared first as a University of York discussion paper, here is a link to the working paper.

Wednesday, March 7, 2007

Mankiw Comments on Levitt's Tenure Proposal

Greg Mankiw commenting on Levitt points out that "One question that Steve does not address is how department hiring would work in a world without tenure. Now, senior hiring is done by existing senior faculty. If those faculty could start firing one another, the political dynamics of hiring would become complicated and probably untenable. (Here is a related paper.) A university without tenure would likely have to move toward a more hierarchical system with a "boss" in charge of hiring and other major decisions. That is, one cannot abolish tenure and expect university governance to remain the same. Deans would likely have more power over hiring. In my experience, anything that gives deans more authority is a step in the wrong direction, for deans have less information about what is going on in the field or in the classroom than the faculty do."

Levitt Proposes the End of Tenure

According to Steven Levitt tenure "distorts people’s effort so that they face strong incentives early in their career (and presumably work very hard early on as a consequence) and very weak incentives forever after (and presumably work much less hard on average as a consequence)."

The Smith-Hayek Economist: From Character to Identity

An article by Daniel B. Klein on the Smith-Hayek Economist.

Here are some characteristics of the Smith-Hayek economist:

"a tendency to make the distinction between voluntary and coercive action clear in formulating many basic economic categories, principles, and arguments;
an appreciation that knowledge is not merely information, but also interpretation and judgment, and as such is highly particular to the individual and the moment; it is essential for humans to err, in the sense that they kick themselves for having interpreted or judged badly;
a sense that economics must be relevant and serve social purposes, and that such service necessarily entails heavy engagement with non-economists, notably laypeople and policy-makers;
a sensibility that economic reality is incredibly complex, inspiring the eschewal of efforts to paint a picture of the economy or how it "really" works;
a sober, non-romantic view of government—since economic reality is scarcely knowable, we should be wary of those who pretend to manipulate it beneficially;
a presumption in favor of liberty, not the status quo.

The Smith-Hayek characteristics are by no means typical of economists today. As one who shares those characteristics, I wonder if Smith-Hayek economists could do better. Maybe they would do better if they created an effective "we.""

Tuesday, March 6, 2007

Why We Need Risk

Why can't things always be smooth and nice and predictable? Myron Scholes, Nobel Laureate, says you wouldn't like it if they were

Monday, March 5, 2007

Illegal Immigration

Soft government's approach to illegal immigration leads to an increasing industry that help fuelling illegal immigration.