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May 31, 2010

Feds Give EnergyStar Label to Fake Products Like Feather Duster Space Heater


"A space heater with a feather duster qualified for Energy Star . . . as an air purifier." Source of caption and photo: http://blogs.consumerreports.org/home/2010/03/gao-audit-energy-star-program-bogus-products-energy-use-consumer-reports-testing-best-appliances.html

Those who call for more government regulations to protect us, should deeply ponder the story quoted below.

(p. A16) WASHINGTON -- Does a "gasoline-powered alarm clock" qualify for the EnergyStar label, the government stamp of approval for an energy-saving product?

Like more than a dozen other bogus products submitted for approval since last June by Congressional auditors posing as companies, it easily secured the label, according to a Congressional report to be issued Friday. So did an "air purifier" that was essentially an electric space heater with a feather duster pasted on top, the Government Accountability Office said.

In a nine-month study, four fictitious companies invented by the accountability office also sought EnergyStar status for some conventional devices like dehumidifiers and heat pump models that existed only on paper. The fake companies submitted data indicating that the models consumed 20 percent less energy than even the most efficient ones on the market. Yet those applications were mostly approved without a challenge or even questions, the report said.

Auditors concluded that the EnergyStar program was highly vulnerable to fraud.

For the full story, see:

MATTHEW L. WALD. "EnergyStar Program Audit Finds Fraud Vulnerability." The New York Times (Fri., March 26, 2010): A16.

(Note: the online version of the article was dated March 25, 2010 and had the title "Audit Finds Vulnerability of EnergyStar Program.")

May 30, 2010

MidAmerican Energy Gives Ben Nelson a $1.1 Million Ride from Georgia to Omaha

(p. 3B) LINCOLN -- MidAmerican Energy is suing the state after state officials grounded a $1.1 million sales tax refund the company expected on the purchase of a corporate jet.

Under Nebraska's 1987 economic development act, LB 775, companies can get sales tax refunds for such aircraft.

But the Nebraska Department of Revenue rejected the refund because MidAmerican's multimillion-dollar Falcon 50EX jet, purchased in 2004, was used to transport U.S. Sen. Ben Nelson, D-Neb., on a trip between Albany, Ga., and Omaha on Nov. 28, 2006.

Using such planes for fundraising or transporting an elected official disqualifies a company from getting the sales tax benefit, State Tax Commissioner Doug Ewald ruled, citing prohibitions in LB 775.

MidAmerican, an Iowa-based energy firm headed by Omaha businessman David Sokol, is appealing.

The company is asking the Lancaster County District Court to overturn the department's March ruling.

MidAmerican argued that a single trip taken by Nelson should not be enough to deny the refund. It also maintained that the state, under LB 775, should have based its ruling on the intended purpose of the airplane and can test that use only when the plane is purchased.

For the full story, see:

Paul Hammel. "MidAmerican Sues State Over Tax Credit on Jet." Omaha World-Herald (Friday, May 7, 2010): 3B.

(Note: the online version of the article was dated Thursday, May 6, 2010 and had the title "MidAmerica (sic) sues Neb. for refund.")

May 29, 2010

In the Ping Pong Game of Life, Does the One with the Biggest Paddle Usually Win?

BuffettWarrenPingPongPaddle2010-05-18.jpg"Warren Buffett has a bit of an advantage in a game of table tennis Sunday with Ariel Hsing, the top U.S. table tennis under-20 player." Source of caption and photo: online version of the Omaha World-Herald article quoted and cited below.

(p. 1D) Buffett and Munger had the 100 or so journalists and others at the press conference laughing at times.

. . .

(p. 3D) The press conference followed a festive day for Buffett, including a brunch attended by Berkshire managers, a few table tennis shots with U.S. under-20 champion Ariel Hsing of Milpitas, Calif., and a few hands of bridge with his regular partner, Susan Ogborn, and Berkshire executive Ajit Jain.

About 800 people watched the table tennis, many of them sitting in bleachers erected in the Regency Court shopping center courtyard.

After losing some quick points to Hsing, Buffett pulled out a paddle that extended nearly the width of the table, but he had no better luck.

For the full story, see:

Steve Jordon. "Buffett Puts Paddle to Federal Regulators." Omaha World-Herald (Mon., May 3, 2010): 1D & 3D.

(Note: the online version of the article was dated May 2, 2010 and had the title "Fun and games with Berkshire.")

(Note: ellipsis added.)

May 28, 2010

FDR's Logrolling to Pack Supreme Court

The unsavory political practice known as "logrolling" is discussed in one of the public choice chapters of the Gwartney et al text that I use in my micro principles courses. Here is an apt example:

(p. 193) . . . , McCarran was more than ever determined to (p. 194) fight the Court-packing plan, even if he lost all of his federal patronage.

Roosevelt had some success charming more malleable politicians such as young Florida senator Claude Pepper. Roosevelt invited the wavering Pepper into the Oval Office and turned on the charm. It helped even more when he turned on the spigot. "The president," Pepper recalled, "was not above a little logrolling, promising to help me win re-election in 1938 and, in my presence, notifying the army that he wanted to see some favorable action on a Florida canal project that I had been pushing." Pepper ended up backing Roosevelt.


Folsom, Burton W., Jr. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America. New York: Threshold Editions, 2008.

(Note: ellipsis added.)

May 27, 2010

In Whom Can You Trust?

MedvedevKlausObamaToast2010-05-18.jpg"Russian President Medvedev, left, Czech Republic President Klaus, center, and U.S. President Obama, right, toast the treaty's signing on Thursday." Source of caption and photo: online version of the WSJ article cited below.

In the photo above, which of these three men would you want to sip champagne with? (Hint: the libertarian is in the middle.)

The photo accompanies this article:

JONATHAN WEISMAN. "Russia Sets Limits on Iran Sanctions." The Wall Street Journal (Friday, APRIL 9, 2010): A8.

(Note: the online version of the article had the title "U.S., Russia Focus on Iran Sanctions.")

May 26, 2010

Reid on Ben Nelson's Cornhusker Kickback: "He Got This for Him­self; He Wanted It"

(p. 5A) WASHINGTON -- Senate Ma­jority Leader Harry Reid this week defended the now-defunct Nebraska Medicaid exemption that was tucked into the Senate health care bill as Reid sought the support of Sen. Ben Nelson, D-Neb.

Nelson has said that he never asked for the exemption and that his goal all along was to provide relief for all states.

Tagged with the derisive moni­ker "Cornhusker kickback," the arrangement quickly proved po­litically toxic.

. . .

Asked why he didn't offer the same deal to every state from the start, Reid said, "Because I didn't have it for everybody at that time. I thought I could get it as we moved along in the legisla­tion, and I did."

Van Susteren said: "You're telling me that when Ben Nelson got that, when the two of you sat down together, you said, 'Ben, we'll do it this way. ... Nebraska's got it now, but after we get this passed we're going to go for ev­erybody?' " "No, no, no. He got this for him­self. He wanted it," Reid said.

For the full story, see:

JOSEPH MORTON. "Reid thought Nelson should boast of 'kickback'; The Senate leader says it was a "terrific" Medicaid deal that all states now share." Omaha World-Herald (Weds., April 7, 2010): 5A.

(Note: first ellipsis added; second ellipsis in original.)

May 25, 2010

Walter Scott Endorses Nuclear as Only Economically Viable Green Energy Source


"MidAmerican shareholders. David Sokol, Walter Scott, Greg Abel and Warren Buffett." Source of caption and photo: online version of the Omaha World-Herald article quoted and cited below. (Note: bold added.)

(p. 1D) Despite recent steps to encourage wind-generated electricity in Nebraska, Omaha businessman and philanthropist Walter Scott said Thursday that nuclear power is the only economically viable way to generate electricity without carbon-dioxide emissions.

"To me, that is the ultimate answer if you want to reduce carbon dioxide," Scott told about 150 people at a breakfast session of the Omaha chapter of the Association for Corporate Growth, held at Happy Hollow Club.

Solar and wind-generated electricity require government subsidies, Scott said. And because the 1979 accident at Three Mile Island, Pa., shut down nuclear energy construction in the United States, this country will have to buy its new nuclear-generating equipment from France and Japan, which dominate that industry, he said.

"Isn't that a wonderful thing?" asked Scott, who also said electric vehicles eventually will capture a significant market.

The Three Mile Island accident "shook people up" even though no one was killed and the containment vessel worked as designed by engineers to prevent radioactive material from spreading, said Scott, chairman-emeritus of Peter Kiewit Sons' Inc. and a director of several corporations, including Berkshire Hathaway Inc.

Kiewit has been involved in the energy industry for decades, he noted, and Berkshire's energy division, MidAmerican Energy Holdings Co., has substantial wind farms in Iowa and several other states. But those wind farms are viable only because they operate under government rules that guarantee a return on investment, even with their higher costs, Scott said.

For the full story, see:

Steve Jordon. To Cut Carbon, Go Nuclear; It's the Ultimate Answer for Reducing Emissions, the Kiewit Official Suggests in a Speech." Omaha World-Herald (Friday, May 14, 2010): 1D-2D.

(Note: the online version of the article had the title "Scott: To go green, go nuclear.")

May 24, 2010

FDR Cared About the Politics, But Not the Economics, of Social Security

(p. 116) Roosevelt's social security plan created an array of problems. First, it retarded recovery from the Great Depression by contributing to unemployment. From 1937 to 1940. employers and employees were docked for social security, and that money was out of private hands and lying fallow in the treasury. Lloyd Peck of the Laundryowners National Association concluded, "The burden of this proposal for employers to carry, through a payroll tax, will act as a definite curb on business expansion, and will likely eliminate many businesses now on the verge of bankruptcy."

. . .

(p. 117) When an accountant quizzed Roosevelt about the economic problems with social security, especially its tendency to create unemployment, he responded, "I guess you're right on the economics, but those taxes were never a problem of economics. They are politics all the way through." Roosevelt explained that "with those taxes in there, no damn politician can ever scrap my social security program. That's why, as Roosevelt admitted, it's "politics all the way through." Most politicians, following Roosevelt's lead, have taken delight in raising social security payouts and using that gift to plead for votes from the elderly at election time.


Folsom, Burton W., Jr. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America. New York: Threshold Editions, 2008.

(Note: ellipsis added.)

May 23, 2010

Ben "Kickback" Nelson Seeks More Earmarks

NelsonBenEarmarksGraph2010-05-18.jpg Source of graph and photo: online version of the Omaha World-Herald article quoted and cited below.

(p. 1A) WASHINGTON -- In the battle to secure federal earmarks for Nebraska, Sen. Ben Nelson is feeling lonely this year.

The Nebraska Democrat is seeking 51 earmarks worth $183.1 million. The four other members of the Nebraska con­gressional delegation, all Republicans, have submitted no requests this year, three of them agreeing to a House GOP moratorium.

That's a big change from 2009, when Rep. Lee Terry re­quested 11 earmarks totaling more than $85 million, Rep. Jeff Fortenberry sought 28 earmarks totaling more than $75 million and Rep. Adrian Smith sought two earmarks to­taling $1.2 million.

Sen. Mike Johanns has abstained from seeking earmarks since joining the Senate in 2009.

. . .

(p. 2A) Johanns has criticized ear­marking as a method of direct­ing taxpayer money based on lawmaker clout rather than a project's merits. He said last week that the process would be better if lawmakers had to jus­tify their individual earmarks at hearings.

For the full story, see:

JOSEPH MORTON . "Nelson stands alone on earmark requests; He is seeking $183 million for Nebraska projects while the state's GOP lawmakers sit out this round." Omaha World-Herald (Tues., May 18, 2010): 1A & 2A.

(Note: ellipsis added.)

May 22, 2010

After Health Care Plan, Are There Any Limits to What the Government Can Mandate?

(p. A10) As they constructed the requirement that Americans have health insurance, Democrats in Congress took pains to make their bill as constitutionally impregnable as possible.

But despite the health care law's elaborate scaffolding, attorneys general and governors from 20 states, all but one of them Republicans, have now joined as confident litigants in a bid to topple its central pillar. In the process, they hope to present the Supreme Court with a landmark opportunity to define the limits of federal authority, perhaps for generations.

In the seven weeks since the legislation passed, at least a dozen lawsuits have been filed in federal courts to challenge it, according to the Justice Department. But the case that could carry the most weight, and may be on the fastest track in the most advantageous venue, is the one filed in Pensacola, Fla., by state officials, just minutes after President Obama signed the bill.

Some legal scholars, including some who normally lean to the left, believe the states have identified the law's weak spot and devised a credible theory for eviscerating it.

The power of their argument lies in questioning whether Congress can regulate inactivity -- in this case by levying a tax penalty on those who do not obtain health insurance. If so, they ask, what would theoretically prevent the government from mandating all manner of acts in the national interest, say regular exercise or buying an American car?

. . .

Jonathan Turley, who teaches at George Washington University Law School, said that if forced to bet, he would predict that the courts would uphold the health care law. But Mr. Turley said that the federal government's case was far from open-and-shut, and that he found the arguments against the mandate compelling.

"There are few cases in the history of the court system that have a more significant assertion of authority by the government," said Mr. Turley, a civil libertarian who acknowledged being strange bedfellows with the conservative theorists behind the lawsuit. "This case, more than any other, may give the court sticker shock in terms of its impact on federalism."

For the full story, see:

KEVIN SACK. "Florida Suit Rated Best As Challenge to Care Law." The New York Times (Tues., May 11, 2010): A10 & A11.

(Note: the online version of the article is dated May 10, 2010 and has the slightly different title "Florida Suit Poses a Challenge to Health Care Law.")

(Note: ellipses added.)

May 21, 2010

"The Evolutionary Concomitant of Incessant Climate Change Was Human Resilience"

CreativeObjectsEarlyMan2010-05-14.jpg"Early Homo sapiens created these symbolic objects between 60,000 and 30,000 years ago. Using natural materials and creativity, they combined animal and human features into fantastical creatures and fashioned instruments for making music. "Source of caption and photo: online version of the WSJ article quoted and cited below.

The sort of artifacts displayed above have been used to argue that homo sapiens had essentially reached their modern capabilities at least by 40,000 years ago.

The handaxes below are fascinating, in that they clearly display progress, and they clearly display how slow that progress was.

(p. D13) The mysterious Ice Age extinction of the Neanderthals, losers in the competition against modern humans, still fires the popular imagination. So it's startling to learn that as recently as 70,000 years ago, at least four human species coexisted, including tenacious, long-lived Homo erectus and diminutive, hobbit-like Homo floresiensis, found in Indonesia in 2003.

The sensational 1974 discovery in Ethiopia of "Lucy," resembling an ape but walking upright, located human origins 3.2 million years in the past. Those same fossil deposits have recently yielded even more-ancient ancestors, who stood on their own two feet as far back as six million years ago.

Paleoanthropology is thriving, and human fossil finds--more than 6,000 and counting--regularly force revisions of old timelines and theories. Our species, Homo sapiens, turns out to have had an abundance of long-lost cousins, though scientists are still arguing about the closeness of those relationships. The new David H. Koch Hall of Human Origins at the Smithsonian National Museum of Natural History, whose opening marked the museum's centennial, provides a formidable overview of this still-developing story.

. . .

It's long been accepted that different human species were adapted to thrive in specific climatic niches. Neanderthals had short, compact bodies to conserve heat and large nasal passages to warm frigid air, while some of our African forebears had long, skinny frames suited to hotter climes. But this exhibition contends that the evolutionary concomitant of incessant climate change was human resilience--the flexibility to make it almost anywhere, thanks to large, sophisticated brains and social networks.

Versatility apparently characterized even our oldest relatives. The ability to walk upright through the drier, more open grasslands did not immediately divest them of their penchant for climbing trees in the shrinking woodlands. A diorama of Lucy (Australopithecus afarensis) depicts her with one foot on the ground and another on a tree limb, symbolizing her straddling of two environments.

For the full review, see:

JULIA M. KLEIN. "Natural History; Our Species Rediscovers Its Cousins." The Wall Street Journal (Tues., May 11, 2010): D13.

(Note: ellipsis added.)

HandaxesSlowlyEvolved2010-05-13.jpg"Handaxes -- multipurpose tools used to chop wood, butcher animals, and make other tools -- dominated early human technology for more than a million years. Left to right: Africa (1.6 million years old), Asia (1.1 million years old), and Europe (250,000 years old)." Source of caption and photo: online version of the WSJ article quoted and cited above.

May 20, 2010

"I Cannot Consent to Buy Votes with the People's Money"

(p. 91) . . . Thomas Gore, . . . was first elected to the Senate in 1907, the year Oklahoma became a state. Gore had a populist streak in him, but he always recognized the protections to individual liberty that came from limited government. In the 1930s, therefore, he strongly opposed the federal government going into the relief business. Interestingly, Gore was made totally blind by two childhood accidents. He still managed to become a lawyer, and as a senator, he had to have family members or staff assistants read bills, books, and newspapers to him. Yet he claimed to see clearly through the political chicanery that would occur if the federal government entered the relief business. No depression, Gore argued, "can be ended by gifts, gratuities, doles, and alms handed out by the Federal Treasury and extorted from taxpayers that are bleeding at every pore." On the issue of relief, especially, Gore argued that state and city officials "have immediate contact" with hardship cases and can best "superintend the dispensation of charity." Soon after the ERA brought federal relief into existence, Gore said, "The day on which we began to make these loans by the Federal Government to States, counties, and cities was a more evil day in the history of the Republic than the day on which the Confederacy fired upon Fort Sumter."

In 1935, Gore helped lead the charge in Congress against funding the WPA with $4.8 billion. After he spoke against the bill, thousands of people in southeast Oklahoma held a mass meeting to denounce Gore. They sent him a telegram demanding that he cast his vote for the WPA and, by implication, start bringing more fed-(p. 92)eral dollars into Oklahoma. Gore responded with a telegram of his own. Your action, he wrote, "shows how the dole spoils the soul. Your telegram intimates that your votes are for sale. Much as I value votes I am not in the market. I cannot consent to buy votes with the people's money. I owe a debt to the taxpayer as well as to the unemployed." Shortly after dictating these words, the blind Senator was led to the Senate floor to cast a lonely vote against the WPA.


Folsom, Burton W., Jr. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America. New York: Threshold Editions, 2008.

(Note: ellipses added.)

May 19, 2010

Russell Crowe as a Libertarian Robin Hood Fighting High Taxes

RobinHoodRussellCrowe2010-05-14.jpg "Mr. Crowe as Robin Hood." Source of caption and photo: online version of the NYT review quoted and cited below.

Ridley Scott has directed some entertaining movies (Blade Runner and Alien to name two) and he also directed one of the most famous tech ads of all time: upstart Apple smashing the uptight corporate conformity of IBM.

And now he brings us what we could use about now: a libertarian Robin Hood who defends property rights and fights high taxes.

When all is said and done, liberal NYT reviewer A.O. Scott doesn't much like the movie in the full review that is briefly quoted below. (But I want to see the movie anyway.)

(p. C1) You may have heard that Robin Hood stole from the rich and gave to the poor, but that was just liberal media propaganda. This Robin is no socialist bandit practicing freelance wealth redistribution, but rather a manly libertarian rebel striking out against high taxes and a big government scheme to trample the ancient liberties of property owners and provincial nobles. Don't tread on him!

For the full review, see:

A. O. SCOTT. "Rob the Rich? Give to the Poor? Oh, Puh-leeze." The New York Times (Fri., May 14, 2010): C1 & C14.

(Note: the italics in the title of Scott's NYT review, appeared in the print, but not the online, version of the review.)

May 18, 2010

Housing Crumbles Under Portugal's Rent Control Laws

Stigler and Friedman's only co-authored paper showed the flaws in rent controls. Although excellent, the paper apparently is seldom read in Portugal (or New York City).

(p. B3) LISBON -- José Gago da Graça owns a Portuguese real estate company and has two identical apartments in the same building in the heart of Lisbon. One rents for €2,750 a month, the other for almost 40 times less, €75.

The discrepancy is a result of 100-year-old tenancy rules, which have frozen the rent of hundreds of thousands of tenants and protected them against eviction in Portugal. Mr. Gago da Graça has been in a lawsuit for a decade over the €75-a-month apartment, since his tenant died in 2000 and her son took over and refused to alter his mother's contract, which dates to the 1960s.

"We're the only country in Europe that doesn't have a free housing market and that's just amazing," Mr. Gago da Graça said.

Rules like these, which economists also blame for contributing to Portugal's private debt load, help explain why this nation of 11 million has followed Greece and Spain into investors' line of fire.

. . .

The . . . rules helped protect tenants, but also led to a chronic shortage of rental housing. This, in turn, persuaded a new generation of Portuguese to tap recently into low interest rates and buy instead -- often in new suburbs -- thereby exacerbating the country's mortgage debt and leaving Portugal with one of Europe's lowest savings rates, of 7.5 percent.

"This system of controlled rents is a major problem for the Portuguese economy, but we will probably be waiting for a generational change to have room for institutional reform," said Cristina Casalinho, chief economist of Banco BPI, a Portuguese bank. Beyond fueling housing credit, she added, the system "basically stops flexibility and mobility in the labor market because you can perhaps find a new job in another city but it will then be very difficult to rent a house there."

. . .

"Nobody has had the political courage to change something like these rental laws and I don't see the situation changing in the short term, even if I don't think the Portuguese tend to react as dramatically as the Greeks," said Salvador Posser, who runs a family-owned company renting out construction equipment.

Besides distorting pricing in the housing market, the tenancy rules have left physical scars. Portugal's historic city centers are dotted with abandoned and crumbling houses that are either subject to a court dispute or have rental income that cannot cover repair and maintenance costs.

"This economic crisis is clearly keeping our very slow courts even more occupied because of the amount of conflict that it is creating between landlords and tenants," said Menezes Leitão, a law professor and president of PLA, a property owners association.

Mr. Posser cited a recent estimate that 8 percent of the buildings in central Lisbon were deserted, in large part because of rent-related obstacles. In Porto, the second-largest city, less than 10 percent of inner-city housing is available for rent, which has helped shrink the population by a third over three decades.

"We're still losing about 30 inhabitants a day," said Rui Moreira, president of the Porto Commercial Association.

For the full story, see:

RAPHAEL MINDER. "Like Spain, Portugal Hopes to Make Cuts, but It Is Mired in Structural Weakness." The New York Times (Fri., May 14, 2010): B3.

(Note: the online version of the article is dated May 13, 2010 and has the title "Portugal Follows Spain on Austerity Cuts.")

(Note: ellipses added.)

The original source of the Friedman and Stigler article (in pamphlet form) was:

Friedman, Milton, and George J. Stigler. Roofs or Ceilings? The Current Housing Problem. Irvington-on-Hudson, New York: Foundation for Economic Education, 1946.

May 17, 2010

CNN Says Omaha Economy is Strong Because Citizens "Living Within Their Means"

"Why Omaha, Nebraska, is seeing a small business boom and boasts of having one of the lowest unemployment rates." Source of caption and video: http://money.cnn.com/video/news/2010/05/06/n_omaha_economy.cnnmoney/

Several days ago, CNN Money ran a very nice clip focusing on why Omaha's economy has fared better than the economies of many other U.S. cities. The piece was mainly brief fluff, though pleasant, complementary fluff.

But the one message of substance was that Nebraskans, and usually Nebraska governments, work harder at not spending more than we take in.

(The reporter for the piece is CNN Money's Poppy Harlow. Posted by CNN on May 6, 2010. Run time: 02:09.)

May 16, 2010

Under FDR, WPA Workers Were Coerced to Support Democrats

(p. 87) According to Lyle Dorsett, who has studied the Hague machine in detail, "Concrete evidence shows that from the outset of the New Deal, Frank Hague was in complete control of all patronage in the state." And Roosevelt poured patronage into New Jersey in the form of massive public works (Hague owned a construction company), which included almost 100,000 WPA jobs annually during the 1930s and the highest rate of pay in the nation for these skilled jobs. One minor drawback to the high pay was that WPA workers in New Jersey had to "tithe" 3 percent of their salaries to the Democrat Party at election time. One WPA director in New Jersey--a corrupt but candid man--answered his office phone, "Democratic headquarters!"

Hopkins received mail regularly from people all over the nation who were denied federal jobs, or fired from them, because of their (p. 88) political views. Many of these letters are available in files for each state and housed in the National Archives. The title of these files is "WPA--Political Coercion." The hefty New Jersey file is very illuminating. One WPA worker complained about a mass-mailed postcard he received that stated, "You are either on the WPA or employed in some government department and by virtue thereof you owe a duty to the [Democrat] Party to do your part in making the canvass. Failure to do your active share will be reported to our county chairman, and you may find your position in jeopardy."


Folsom, Burton W., Jr. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America. New York: Threshold Editions, 2008.

(Note: italics in original; ellipsis added.)

May 15, 2010

Cheap New Technology for the Masses Is Financed by First Adopters' High Priced Buys

iPadEarlyBuyerSayuriWatanabe2010-05-14.jpg "Buying on Day 1: Sayuri Watanabe came from Japan to be among the first to get an iPad last month at the Apple store in downtown San Francisco." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 6) WHY would anyone rush to buy a product knowing full well that it would be cheaper -- and probably better -- in a matter of months?

Hundreds of thousands of iPad buyers did just that last month. Steven P. Jobs, Apple's chief executive, crowed that in the first 28 days on the market, Apple sold one million iPads. He found it remarkable that buyers snatched up this new slate computer at twice the fervid pace of the first iPhone.

But what is truly remarkable about this surge in consumption is that early adopters -- those who simply have to own a new gadget right away -- cheerfully exhibited what might seem to be irrational behavior. These ardent consumers will stand in long lines, if that's what it takes, to get an overpriced gadget ahead of everyone else they know.

A tough lesson about buying early could have been learned by the iPhone's first buyers back in 2007. Those early adopters paid $600 for a phone. Two months later, Apple dropped the price to $400. Then, in June 2009, it introduced a better version, with twice the storage, for $200, one-third the original's price.

. . .

Dan Ariely, a professor of behavioral economics at Duke University and the author of a new book, "The Upside of Irrationality," has studied why earlier adopters do what they do. "It's not about the cost-benefit analysis," he says. And rarely is it a successful calculation of higher productivity, though many a person has tried to justify purchases of expensive toys that way.

It can be more about cementing one's identity. Although people who want to be first with a product aren't making a direct calculation -- "I'd pay $100 for my ego" -- they may derive value from showing off a new product or being perceived as being at technology's forefront.

"I realized years ago that I derive great pleasure from buying a new gadget," said Professor Ariely. "I bought a Segway."

And public awareness may matter. Professor Ariely says the behavior is akin to how we can be more willing to do something good if the public knows about it.

. . .

But even if you would never be the first in your neighborhood to buy a gadget, don't scorn the early adopters. They are working for you. "They, in a sense, provide valuable services to other consumers by their willingness to serve as a guinea pig," said Jay Pil Choi, a professor of economics at Michigan State University, who wrote a much-quoted paper on herd behavior and the "penguin effect."

. . .

HE described early adopters as pioneers. "If all consumers are striving for value and take the approach of 'wait and see,'" he said, "the new products will never be able to take off or take much longer to succeed in the marketplace."

He added, "Their early purchase allows the firms to go down the learning curve and enables a lower price for other consumers."

For the full commentary, see:

DAMON DARLIN. "Everybody's Business; Applause, Please, for Early Adopters." The New York Times, SundayBusiness Section (Sun., MAY 9, 2010): 6.

(Note: ellipses added.)

(Note: the online version of the article is dated May 7, 2010.)

May 14, 2010

"Empower Parents to Choose the School that's Best for Their Children"

The author of the commentary quoted below is an African-American Democratic State Senator in Pennsylvania, and is running for Governor in that state's Democratic primary which will be held on May 18, 2010.

(p. A17) As an African-American legislator, I've seen children in inner-city schools trapped, and I've seen kids in rural areas with no choice but to stay in underperforming schools. Changing the status quo is a big reason why I'm running for governor.

My mom was also a public school teacher, so make no mistake, I know how hard they work. At the same time, schools must also be able to terminate, not just reassign, poor performing teachers. And when we empower parents to choose the school that's best for their children, it serves as a constant audit of a school's quality because parents are able to leave bad schools and enroll their children in better performing schools.

I hope that Pennsylvania receives a Race to the Top grant. But unless we're willing to fundamentally change the system, the money's impact will be minimal. Children in our state can't wait any longer: Now is the time for school choice.

For the full commentary, see:

ANTHONY HARDY WILLIAMS. "Pennsylvania Kids Deserve School Choice; Bad public schools hurt poor and rural children the most." The Wall Street Journal (Weds., MAY 12, 2010): A17.

May 13, 2010

PowerPoint Useful for Graphs and for "Hypnotizing Chickens"

PowerpointChartAfganStrategy2010-05-12.jpg"A PowerPoint diagram meant to portray the complexity of American strategy in Afghanistan certainly succeeded in that aim." Source of caption and graphic: online version of the NYT article quoted and cited below.

(p. A1) WASHINGTON -- Gen. Stanley A. McChrystal, the leader of American and NATO forces in Afghanistan, was shown a PowerPoint slide in Kabul last summer that was meant to portray the complexity of American military strategy, but looked more like a bowl of spaghetti.

"When we understand that slide, we'll have won the war," General McChrystal dryly remarked, one of his advisers recalled, as the room erupted in laughter.

The slide has since bounced around the Internet as an example of a military tool that has spun out of control. Like an insurgency, PowerPoint has crept into the daily lives of military commanders and reached the level of near obsession. The amount of time expended on PowerPoint, the Microsoft presentation program of computer-generated charts, graphs and bullet points, has made it a running joke in the Pentagon and in Iraq and Afghanistan.

"PowerPoint makes us stupid," Gen. James N. Mattis of the Marine Corps, the Joint Forces commander, said this month at a military conference in North Carolina. (He spoke without PowerPoint.) Brig. Gen. H. R. McMaster, who banned PowerPoint presentations when he led the successful effort to secure the northern Iraqi city of Tal Afar in 2005, followed up at the same conference by likening PowerPoint to an internal threat.

"It's dangerous because it can create the illusion of understanding and the illusion of control," General McMaster said in a telephone interview afterward. "Some problems in the world are not bullet-izable."

. . .

(p. A8) Gen. David H. Petraeus, who oversees the wars in Iraq and Afghanistan and says that sitting through some PowerPoint briefings is "just agony," nonetheless likes the program for the display of maps and statistics showing trends. He has also conducted more than a few PowerPoint presentations himself.

. . .

Senior officers say the program does come in handy when the goal is not imparting information, as in briefings for reporters.

The news media sessions often last 25 minutes, with 5 minutes left at the end for questions from anyone still awake. Those types of PowerPoint presentations, Dr. Hammes said, are known as "hypnotizing chickens."

For the full story, see:

COREY ELISABETH BUMILLER. "We Have Met the Enemy and He Is PowerPoint." The New York Times (Thurs., April 27, 2010): A1 & A8.

(Note: ellipses added.)

(Note: the online version of the story is dated April 26, 2010.)

An interesting, but overdone critique of PowerPoint by an intelligent expert on graphics is:

Tufte, Edward R. The Cognitive Style of PowerPoint. Cheshire, CT: Graphics Press, 2003.

May 12, 2010

FDR Spent Other People's Money Freely, But Was Stingy with His Own

(p. 75) . . . when Roosevelt was spending his own money, he was sometimes very stingy. For example, when Roosevelt traveled by train from Washington to Hyde Park, he always wanted a private car for himself and his staff: Servicing this private car, which might include providing dozens of meals, newspapers, and various amenities for the president and his staff would require great diligence and attention to detail. But for round-trip service on Roosevelt's private car, he tipped the porter a mere five dollars. The reporters. on their car nearby, combined to tip eight to ten times more than the president did. Walter Trohan of the Chicago Tribune observed the unhappiness this created:

FDR wasn't a heavy tipper at any time, but was less so aboard trains. He gave five dollars to the porter on his car for the round trip from Washington to Hyde Park, which included payment for what guests he might have in his car. In the press car we each gave two dollars for the trip, but there were about twenty of us all told. Sam [Mitchell, the porter] soon begged off the private car; the honor of serving the President faded for a man raising a family and sending a boy to college as well as paying for a home, when he could count on forty dollars in the press car as against five dollars in the private car.


Folsom, Burton W., Jr. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America. New York: Threshold Editions, 2008.

(Note: italics in original; ellipsis added.)

May 11, 2010

Alert Street Vendor Hero Saves the Day

OrtonLanceStreetVendorHero2010-05-05.jpg"Lance Orton, center, who sells T-shirts, said that as a veteran he was proud of his actions. But he spurned most questions." Source of caption and photo: online version of the NYT article quoted and cited below.

Hernando de Soto has shown that entrepreneurial street-vending is an important path for the very poor to constructively improve their lives. And yet governments around the world, including ours, consistently make it hard for street vendors to ply their trade.

Yet, on balance, street vendors make our lives better, not only through their products and services, but also through their alert eyes that make our city streets safer. Jane Jacobs made the point that the presence of good people observing the streets is a key ingredient of urban safety, one that was too-often removed by well-intentioned, but ill-conceived city-planners' urban-renewal projects.

The incident recounted below also adds one more case to the well-documented conclusions of Amanda Ripley, who showed us that our safety in avoiding and being rescued from disasters rests in the alertness, preparation, level-headedness and good will of ordinary citizens on the scene.

There may be professionals who are better trained, but outcomes often depend on what is done quickly, and usually only those who are on the scene are able to act quickly.

And although the politically correct will glower at you for mentioning it, there are obvious implications for the issue of gun control.

(p. A19) Even in Times Square, where little seems unusual, the Nissan Pathfinder parked just off Broadway on the south side of 45th Street -- engine running, hazard lights flashing, driver nowhere to be found -- looked suspicious to the sidewalk vendors who regularly work this area.

And it was the keen eyes of at least two of them -- both disabled Vietnam War veterans who say they are accustomed to alerting local police officers to pickpockets and hustlers -- that helped point the authorities to the Pathfinder, illegally and unusually parked next to their merchandise of inexpensive handbags and $2.99 "I Love NY" T-shirts.

Shortly before 6:30 p.m. on Saturday, the vendors -- Lance Orton and Duane Jackson, who both served during the Vietnam War and now rely on special sidewalk vending privileges for disabled veterans -- said they told nearby officers about the Pathfinder, which had begun filling with smoke and then emitted sparks and popping sounds.

. . .

But in a city hungry for heroes, the spotlight first turned to the vendors. Mr. Orton, a purveyor of T-shirts, ran from the limelight early Sunday morning as he spurned reporters' questions while gathering his merchandise on a table near where the Pathfinder was parked.

When asked if he was proud of his actions, Mr. Orton, who said he had been selling on the street for about 20 years, replied: "Of course, man. I'm a veteran. What do you think?"

Mr. Jackson, on the other hand, embraced his newfound celebrity, receiving an endless line of people congratulating him while he sold cheap handbags, watches and pashmina scarves all day Sunday.

. . .

As for Mr. Orton, he rested on Sunday at a relative's house, leaving others to talk on his behalf. "When he was in Vietnam, he said they had to make decisions and judgments from their gut, from their own feelings," said Miriam Cintron, the mother of Mr. Orton's son. "His instinct was telling him something's not right. I guess he was right."

She said Mr. Orton would mediate disputes between the police and other vendors, and when something did not look right, he would alert the police. "He always said, 'Downtown is where they're going to come to, and I'm going to be right there,' " Ms. Cintron said.

When Mr. Orton left Times Square about 7 a.m. on Sunday, he did so to a hero's reception. As he walked down the street, employees from Junior's restaurant stood outside applauding him. He briefly entered the restaurant before heading toward 44th Street.

Using a cane and wearing a white fedora, Mr. Orton limped away and hopped a cab home to the Bronx, but not before repeating a terror-watch mantra: "See something, say something."

For the full story, see:

COREY KILGANNON and MICHAEL S. SCHMIDT. "Vendors Who Alerted Police Called Heroes." The New York Times (Mon., May 3, 2010): A19.

(Note: ellipses added.)

(Note: the online version of the story is dated May 2, 2010 and has the title "Vendors Who Alerted Police Called Heroes.")

The most relevant Hernando de Soto book is:

Soto, Hernando de. The Other Path: The Invisible Revolution in the Third World. New York: Basic Books, 1989.

The most relevant Jane Jacobs book is:

Jacobs, Jane. The Death and Life of Great American Cities. New York: Random House, 1961.

The Amanda Ripley book mentioned is:

Ripley, Amanda. The Unthinkable: Who Survives When Disaster Strikes - and Why. New York: Crown Publishers, 2008.

May 10, 2010

Profits on Economics Documentary May Not Be Dismal

(p. B6) If Steven D. Levitt and Stephen J. Dubner, the authors of "Freakonomics," were to examine the movie business, they might ask: Why do documentary filmmakers keep doing it?

It can't be the money, because the world is awash in documentaries that make little at the box office or are not distributed at all. Occasionally, though, a documentary makes a buck for those involved -- and the new documentary based on "Freakonomics" could do just that.

Magnolia Pictures is expected to announce on Monday that it has acquired domestic distribution rights to the film, which was produced by the Green Film Company and directed, in parts, by a series of well-known documentarians. Those include Alex Gibney ("Taxi to the Dark Side"), Rachel Grady and Heidi Ewing ("Jesus Camp"), Morgan Spurlock ("Super Size Me"), Eugene Jarecki ("Why We Fight") and Seth Gordon ("The King of Kong").

"Freakonomics," the film, got started when Chad Troutwine, a producer who worked on an earlier multidirector movie, "Paris, Je T'aime," became interested in the best-selling book, which looks into matters like the socioeconomic implications of baby naming.

For the full story, see:

MICHAEL CIEPLY. "'Freakonomics' Documentary May Be a Rarity: Profitable." The New York Times (Mon., April 5, 2010): B6.

(Note: the online version of the story is dated April 4, 2010.)

The source information on the revised edition of the Freakonomics book is:

Levitt, Steven D., and Stephen J. Dubner. Freakonomics: A Rogue Economist Explores the Hidden Side of Everything. Revised and Expanded ed. New York: William Morrow, 2006.

May 9, 2010

Maddison Showed Per Capita Income Stagnation from 1000 AD - 1820 AD


Angus Maddison. Source of photo: http://www.ggdc.net/maddison/

I neither met Angus Maddison, nor ever heard him speak, but I have often seen his work praised by those whom I respect.

One example is the praise given to Maddison by Brad DeLong in his wonderful "Cornucopia" essay that documents the benefits from the process of creative destruction.

(p. B10) Professor Maddison, a British-born economic historian with a compulsion for quantification, spent many of his 83 years calculating the size of economies over the last three millenniums. In one study he estimated the size of the world economy in A.D. 1 as about one five-hundredth of what it was in 2008.

He died on April 24 at a hospital in Paris after a long illness, his daughter, Elizabeth Maddison, said.

. . .

In his research, he tried to reconstruct thousands of years' worth of economic data, most notably in his 2007 book "Contours of the World Economy 1-2030 A.D.." He argued that per capita income around the globe had remained largely stagnant from about 1000 to 1820, after which the world became exponentially richer and life expectancies surged.

. . .

In his archaeological excavation of the economies of other eras, he was "trying to explain why some countries achieved faster growth or higher income levels than others," he wrote in an autobiographical essay, "Confessions of a Chiffrephile" published in 1994. He wanted to know what some countries did right and what others did wrong, and to figure out how growth influenced culture, and was influenced by it.

Professor Maddison often referred to himself as a "chiffrephile," or lover of numbers, a term he invented to characterize economists and economic historians like himself who were prone to quantifying the world.

While macroeconomic research in the last few decades was dominated by elegant mathematical models and technical wizardry, his focus on meat-and-potatoes data and cross-country historical comparisons has come back into vogue in recent years, especially in the wake of the financial crisis.

For the full obituary, see:

CATHERINE RAMPELL. "Angus Maddison, 83, Who Quantified Ancient Economies." The New York Times (Mon., May 3, 2010): B10.

(Note: ellipses added.)

(Note: the online version of the obituary is dated April 30, 2010 and has the title "Angus Maddison, Economic Historian, Dies at 83.")

The Maddison book mentioned in the obituary is:

Maddison, Angus. Contours of the World Economy, 1-2030 AD: Essays in Macro-Economic History. Oxford and New York: Oxford University Press, 2007.

May 8, 2010

FDR's Bad Bet on Aksarben

The "RA" mentioned in the passage quoted below, refers to FDR's "Resettlement Administration" program.

"Aksarben" is much better known to Nebraskans today as a much-beloved, but now defunct, horse racing track in Omaha, than as Nebraska's part in FDR's government housing debacle.

(p. 69) With a staff of (p. 70) 13,000 and a mammoth $250 million to spend, Tugwell made plans for resettling thousands of tenants and marginal farmers into new model communities.

The result was a disaster. "It was all done awkwardly and wastefully," Tugwell later confessed about the work of the RA. Even Roosevelt himself conceded, "I don't think we have a leg to stand on," when confronted with the high costs of the model towns Tugwell was building. Drawing model communities on paper was one thing, but it was another thing to relocate real tenant farmers into affordable houses far away in real towns with functioning services. One of Tugwell's model communities was Arthurdale in West Virginia. A major problem there was that the ready-made houses could not fit their foundations. Once that problem was solved, the planners discovered that most residents, people from poor backgrounds, could not afford to live there. That protest became a common one in model communities all over the nation. Finding meaningful and profitable work for unskilled laborers was another recurring complaint.24

What that meant was that sometimes the RA had communities built, but no residents either willing or able to move in. An example of this was Ak-Sar-Ben (Nebraska spelled backward), a "dream city" of thirty-eight green-shuttered houses, each on seven acres of land twenty miles west of Omaha on the Platte River. The problem was that no one wanted to move in. Ak-Sar-Ben became deserted. Nearby farmer Henry C. Glissman observed this project and drew this conclusion: "I predict that in time these homes will all be abandoned and stand as a gruesome monument to a government's inefficiency and folly in fostering a movement that to a practical mind has the earmarks of failure from the start."


Folsom, Burton W., Jr. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America. New York: Threshold Editions, 2008.

(Note: ellipses in original.)

May 7, 2010

The Nanny State Versus Fun

MonsterSlide2010-05-05.jpg"A boy slides down the enclosed "Monster Slide," which drops riders the length of three flights of stairs." Source of caption and photo: online version of the WSJ article quoted and cited below.

We took Jenny to several children's museums when she was young, but none was as neat as the City Museum.

It appears that it has continued to get better in the years since.

My view is that a child's parents should generally decide what risks their child should be allowed to take. Parents have a right to be parents, and they generally do a better job of it than the government does.

(p. A1) The City Museum, housed in 10-story brick building, shows none of the restraint or quiet typical of museums. A cross between a playground and a theme park, it recycles St. Louis' industrial past into such attractions as slides made from assembly-line rollers. Just about everything can be touched or climbed, including dozens of Mr. Cassilly's sculptures, among them a walk-through whale on (p. A10) the first floor.

Despite the whiff of danger, or perhaps because of it, the City Museum is one of St. Louis's most popular attractions. Its 700,000 annual attendance is roughly twice the population of St. Louis and dwarfs the turnout at refined destinations such as the St. Louis Art Museum.

The injuries and lawsuits put the City Museum at the center of an enduring argument over the line between liability and personal responsibility. Some of the injured and their lawyers say the museum is deceptively dangerous and doesn't do enough to publicize its risks through signs or other warnings.

Mr. Cassilly counters that it is as safe as it can be without being a bore. "They [lawyers] are taking the fun out of life."

. . .

Mr. Cassilly trained as a sculptor but made most of his money as a developer, having bought, renovated and sold some four dozen homes and commercial properties over the years. In 1993 he paid $525,000 for two downtown St. Louis buildings once used by a shoe company, and opened the City Museum in 1997. It's now a for-profit enterprise that he co-owns with a local investor.

He says the museum is about first-hand experience, a "computer-free zone" where rules are kept to a minimum. At the "skateless park," kids run up and slide down wooden skateboard ramps now used as slides. One smaller ramp has a rope swing that kids use to swing across the ramp, not always successfully.

"I slipped and the edge scraped my leg," said Garett Vance, 11, sitting atop what the museum bills as the world's largest pencil with a museum-provided ice pack taped to his leg. His mother, Mindy Vance, says a friend warned her that the museum was dangerous but she wasn't deterred.

"You take a risk when you go anyplace," says Ms. Vance, a nurse-practitioner who lives in Springfield, Ill., about two hours away.

For the full story, see:

CONOR DOUGHERTY. "This Museum Exposes Kids to Thrills, Chills and Trial Lawyers; Defiant St. Louis Venue Owner's Claim: Attorneys 'Take the Fun Out of Life'." The Wall Street Journal (Sat., MAY 1, 2010): A1 & A10.

(Note: ellipsis added.)

DarkTunnell2010-05-05.jpg"Visitors passed through a dark tunnel. The injured and their lawyers say the museum is deceptively dangerous and doesn't do enough to publicize its risks. Mr. Cassilly, the founder, counters that it is as safe as it can be without being a bore." Source of caption and photo: online version of the WSJ article quoted and cited above.

May 6, 2010

School Choice "Lifts the Performance of Public-School Students"

(p. A15) There is . . . clear evidence that many private schools outperform public schools academically. The first children to enter the Washington, D.C., voucher program, for example, now read more than two grade levels above students who applied for the program but didn't win the voucher lottery.

Researchers from Northwestern University will soon release a study on how competition from Florida's education tax-credit program is impacting the performance of children who remain in public schools. The preliminary evidence is that school choice lifts the performance of public-school students significantly.

Florida's scholarship program appears to be the first statewide private school choice program to reach a critical mass of funding, functionality and political support. As an ever increasing number of students in Florida take advantage of the scholarship program, other states will find it hard to resist enacting broad-based school choice.

For the full commentary, see:

ADAM B. SCHAEFFER. "Florida's Unheralded School Revolution; A scholarship program could produce a new era of choice." The Wall Street Journal (Fri., APRIL 30, 2010): A15.

(Note: ellipsis added.)

May 5, 2010

Leapfrog Competition in the Wine Industry


"A machine makes Portugal whine." Source of caption: print version of the WSJ article quoted and cited below. Source of photo: online version of the WSJ article quoted and cited below.

(p. A1) ZEBULON, N.C.--In a nondescript factory in this small, wooded town, 10 giant machines worked around the clock last year to churn out 1.4 billion plastic corks, enough to circle the earth 1.33 times if laid end-to-end.

Unknown to most American wine drinkers, the plant's owner, Nomacorc LLC, has quietly revolutionized the 400-year-old wine-cork industry. Since the 1600s, wine has been bottled almost exclusively with natural cork, a porous material that literally grows on trees in Portugal, Spain and other Mediterranean lands.

But over the past 10 years, an estimated 20% of the bottle stopper market has been replaced by a new technology--plastic corks that cost between 2 and 20 cents apiece. More than one in 10 full-sized wine bottles sold worldwide now come with a Nomacorc plug, while another 9% or so come from other plastic cork makers. Screw caps took another 11% of the market.

"We infuriated the cork industry," says Marc Noel, Nomacorc's chairman.

. . .

The story of how Nomacorc and other stop-(p. A10)per upstarts broke the centuries-old cork monopoly is a lesson in how innovation, timing and hustle combined to exploit an opening in a once airtight market. It shows that any dominant industry can be vulnerable to competition, especially if it grows complacent about its position.

For the full story, see:

TIMOTHY AEPPEL. "Show Stopper: How Plastic Popped the Cork Monopoly." The Wall Street Journal (Sat., MAY 1, 2010): A1 & A10.

(Note: ellipsis added.)


Source of graph: online version of the WSJ article quoted and cited above.

May 4, 2010

Henry Ford's Finest Hour

(p. 52) Not all men who refused to sign the code could be easily intimidated. In the auto industry Henry Ford refused to sign the NRA code and jack up his car prices, as his competitors were doing. "I do not think that this country is ready to be treated like Russia for a while," Ford wrote in his notebook. "There is a lot of the pioneer spirit here yet:' However, General Motors, Chrysler, and the smaller independents eagerly signed Blue Eagle codes, which, under penalty of fine and imprisonment, regulated their production, (p. 53) wages. prices, and hours of work. Ford was astounded: his colleagues preferred stability and government regulation to competition and free trade. He was especially irked when Pierre S. DuPont, the former head of General Motors, urged him at a party to sign the code.

In the face of strong pressure from the NRA, Ford refused to sign the auto code. He defied the law, pronouncing it un-American and unconstitutional. Hugh Johnson, the NRA chief, and President Roosevelt, however, wanted government control as well as compliance. They tried to pressure Ford into signing the code, and when he refused they tried force. Ford would receive no government contracts until he signed--and with the large increase in government agencies during the 1930s, that meant a huge business. For example, the bid of a Ford agency on five hundred trucks for the Civilian Conservation Corps was $169,000 below the next best offer. The government announced, however, that it would reject Ford's bid and pay $169,000 more for the trucks because Ford refused to sign the auto code. As Roosevelt announced at a press conference, "We have got to eliminate the purchase of Ford cars" for the government because Ford has not "gone along with the general [NRA] agreement:"


Folsom, Burton W., Jr. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America. New York: Threshold Editions, 2008.

(Note: ellipses in original.)

May 3, 2010

New York City Government Protects Us from More than Three Living in an Apartment

RoommatesBreakingLawMouaGroup.jpg"From left, Doua Moua, 23, George Summer, 30, and David Everett and Jasmine Ward, both 21, are among six people in a four-bedroom apartment in Hamilton Heights. "It's part of New York City culture," Mr. Moua said." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A16) Doua Moua, 23, played a menacing gangster in a Clint Eastwood movie, but Mr. Moua swears he really is a nice, gentle and rules-abiding fellow. At least he was until he moved to New York City and unwittingly slipped into a world of lawlessness.

Mr. Moua lives with five roommates. And in New York, home to some of the nation's highest rents and more than eight million people, many of them single, it is illegal for more than three unrelated people to live in an apartment or a house.

. . .

Mr. Moua's landlord, who did not want his name published for fear of a crackdown, said he wrestled with converting some of his apartments into four-bedroom units. He knew it was illegal to allow four unrelated people to live together, but decided that if tenants were willing to live in what was once a dining room, it was fine with him. He could collect slightly more in rent over all and charge less for each room.

"If it's done in a good way, and there's not unlimited cramming in, and the shared facilities are adequate," the landlord said, "then it actually helps solve the affordable housing problem, which I think is a good thing."

For the full story, see:

CARA BUCKLEY. "A Law Limits Housemates to Three? Who Knew?" The New York Times (Mon., March 29, 2010): A16.

(Note: ellipses added.)

(Note: the online version of the article is dated March 28, 2010 and has the title "In New York, Breaking a Law on Roommates.")

RoommatesBreakingLaw2010-04-30.jpg"From left, Anya Kogan, 27, Jordan Dann, 33, Nick Turner, 29, and Michelle McGowan, 32, share a town house in Brooklyn." Source of caption and photo: online version of the NYT article quoted and cited above.

May 2, 2010

Higher Unemployment Benefits May Result in Higher Unemployment Rates

The size and structure of the "safety net" is a subject of hot debate. Hayek in The Road to Serfdom suggested that higher benefits would lead to slower labor market adjustments.

There may have been multiple causes for the high unemployment rate in the U.K. in the 1920s and 1930s. But it is highly plausible that higher unemployment benefits would have made the unemployed more selective in which jobs they would accept, and hence would have contributed to higher rates of unemployment and higher average duration of unemployment.

(p. 7B) The ultimate evidence . . . is from the 1920s, when the Labour Party came to power in the U.K. for the first time. As scholars Daniel K. Benjamin and Levis Kochin pointed out in a Journal of Political Economy paper, the moment was one in which "unemployment benefits were on a more generous scale relative to wages than ever before or since."

The result was the mother of all jobless recoveries. For almost two decades, from 1921 to 1938, U.K. unemployment averaged 14 percent and never got below 9.5 percent.

For the full story, see:

Amity Shlaes. "Help can hurt job hunters." Omaha World-Herald (Friday April 16, 2010): 7B.

(Note: ellipsis added.)

May 1, 2010

Pear Growers Suffer From Unintended Consequences of Land-Use Law

PearGrower2010-04-30.jpg""We hit the wall," the 63-year-old grower says. . . . , Mr. Naumes showed off a Bosc pear." Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A3) MEDFORD, Ore.--Farmers say conditions in southern Oregon's Rogue River Valley are among the best in the world for raising pears. Yet for the past decade, acreage planted in pears has been halved, as has the number of growers.

Land-use regulations designed to maintain open space and preserve farmland are to blame, pear growers here say.

It is a paradox few foresaw in 1973, when Oregon passed Senate Bill 100. That measure, considered a landmark of the budding environmental movement, put Oregon on the map as the "greenest" of U.S. states by placing zoning decisions with a central agency, outside the purview of local authorities.

The law had a huge impact in restricting suburban sprawl throughout the state, preserving environmentally critical habitats.

But since the mid-1990s, more than 3,500 acres planted in pears have gone out of production here. From 87 pear farms operating in 1992, only 48 remain.

. . .

The credit crunch and consumers unwilling to splurge for $30 boxes of pears are behind much of the pain, growers say. Yet they insist their real headache is their inability to raise capital by selling land at top value, which they say would let them buy farmland further from residential areas. That is because land-use laws say their orchards must remain in agriculture.

"It's the worst case of unintended consequences you can imagine," says David D. Lowry, chief executive of Associated Fruit Co., the smallest of Medford's Big Three, who fears his business could be the next to close. Like others, he has plenty of land to sell, but no one willing to buy as long as it is zoned for farming only.

For the full story, see:

JOEL MILLMAN. "Oregon Pear Growers Sour on Land Law; Farmers Say Landmark 1970s Measure Aimed at Conserving Agricultural Areas Limits Their Ability to Nurture Investment." The Wall Street Journal (Fri., APRIL 2, 2010): A3.

(Note: ellipses added.)


Source of graph: online version of the WSJ article quoted and cited above.


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