Hear David Henderson's radio interview promoting his SU speech

Link here

Review of David Kendall's Morality and Capitalism

Before I get into the book, David Kendall is a professor of economics at UVA-Wise.  I met David when we both worked at RTI International between 2002-2004.  I always knew he was a libertarian, but I had no idea he was such a great writer.

In Morality and Capitalism: A Dialogue on Freedom,David teaches about why capitalism is the only economic system to use if you are concerned about morality.  He does this in an interesting way.  Much of the book contains a dialogue between a wise teacher and an inquisitive student.

The book is great and I highly recommend it.  It's not too long and you can get it for your e-reader for a reasonable price. (Right now it is $4.99.)

I don't want to give much away, but I can't resist listing a few excerpts:

1. All people want to be free.  Freedom is a universal human value.  But we cannot be free if we are compelled by others.  Consequently, if we want to be free, we should be moral.

2. Tyro: So, we should quit using the term "public property"? 

Solon: No, Tyro.  That would be impractical.  It is fine to call certain land "public property," provided we understand that such property is not and cannot be owned "collectively".

3. Rational People have but one right, the right to be free of unjust compulsion of others.

Quoted in NPR Philadelphia story

link here

You can read or listen!

Three great sentences ...

I don't normally read the comments on the articles I write, because often they can turn into harsh personal attacks.  But readers of The Federalist have seemed both intelligent and civil, so I checked out the comments from my recent oped.  Here is a great comment by someone with the screen name of "SpaceCommie":

The median world income is about ten thousand dollars a year, adjusted for buying power by country. A minimum wage worker in the US makes more money than over half the workers in the world.

This is not to say that people working for low wages in the US don't face serious problems, but it should be sufficient to establish that the idea that it's somehow illegitimate to pay workers below $10/hour is silly.

My new oped in the Philadelphia Inquirer

Here is my new oped in the Philadelphia Inquirer titled Three Keys to Prosperity

I think the timing of this is ideal, as it is the day Tom Wolf becomes governor of Pennsylvania.

Here is an excerpt:

For Pennsylvania's economy, 2014 was a good year. The unemployment rate fell, and few new impediments to working were created by our state lawmakers. Looking ahead, here are three recommendations for elected officials in Harrisburg to help make 2015 prosperous.

Anti-fracking insiders didn't disclose position when writing NY report

Very sleazy.  Not surprising, but sleazy nonetheless.

Link here

Excerpt:

One of the three peer-reviewers is Sandra Steingraber, a biologist and environmental advocate who is also co-founder of New Yorkers Against Fracking. Two others, Robert Oswald and Jerome Paulson, are vocal opponents. Several of the study's authors, though not all, are known fracking skeptics and have ties to groups that oppose the practice -- including Denny Larson, study co-author and director of Global Community Monitor, which is sharply critical of fracking.

And ..

“They do the studies to get the results they want,” he said. “They are not going to be objective, they have an agenda.”

My newest oped in The Federalist

Changing these two laws would appropriately commemorate MLK Day

Excerpt:

A day spent not working is a bad tribute to Martin Luther King Jr. We should instead provide more opportunities for African-Americans, and all Americans, to lead productive lives on MLK Day and every other.

Economics of Billy Elliot (The Musical)

I was with Susquehanna University's London Program students this week, and got the opportunity to see the musical Billy Elliot on Monday.

It was wonderful and there are economic issues everywhere in the show.

The show was centered around a boy, Billy Elliot, who's dad, brother, and much of the town are in the middle of a coal miner's strike.  The backdrop for this is the 1984-1985 coal miners' strike, which took place in the UK (wikipedia info here).

While I enjoyed the show, it certainly had a bit of a left-wing perspective.  Much of the show is from the striker's perspective.  That said, the dad is pretty terrible throughout the show, so the fact that he supports the strike and is an abusive father perhaps doesn't give much sympathy to strikers.

The questions I might ask if I took an economics student to this show is:

1. The strikers threatened violence to people who were willing to work for lower wages.  (I.e., the people willing to "cross the picket line".)  Why would society look down on those who are simply willing to work for a lower wage?  Why do so many in society think it is acceptable to commit violent acts against these workers?

2. If the strikers really felt like they were underpaid, why didn't they simply get a different job?

3. When multiple companies band together to force people to pay higher prices for products, this is called collusion and many people (at least in the US) have gone to jail for this.  Why does society treat strikers who are colluding together to force taxpayers or firms to pay higher prices different?  (I say taxpayers, as for government run sectors it is the taxpayers who pay the workers, not firms.)

My final comment isn't as much about economics but about the political realities of the world.  There is a song called "Merry Christmas Maggie Thatcher" ...

The lyrics include the lines "Merry Christmas, Maggie Thatcher; We all celebrate today 'cause it's one day closer to your death."  I wonder what would happen if a musical had the lines "Merry Christmas Barack Obama, we celebrate today because it's one day closer to your death"?  The riots and outrage from the left would be everywhere.  Yet I had heard barely a peep about this song ... Why is that?

Economic Impact Overestimate of the Day ... (updated): I

It comes from the University of Washington

Excerpt:

A new economic study says the University of Washington generates $12.5 billion in economic impact and supports 1 out of every 48 jobs in the state.

What?  

$12.5 billion?  

Well, here's another excerpt:

Of the $12.5 billion in economic impact, UW Medicine — which includes Harborview Medical Center, Northwest Hospital, UW Medical Center and a network of clinics — accounts for $7.8 billion. And UW Medicine was directly or indirectly responsible for 45,330 of the more than 79,000 jobs generated by the university.

To put this economic impact into perspective, for an enrollment of about 1/20 of the size, Susquehanna University's economic impact is about $100 million.  By extrapolating, a reasonable starting point for the economic impact of the University of Washington would be $2 billion, not $12.5 billion.  However, the $2 billion extrapolation figure is probably overestimating the economic impact of the University of Washington.  Given that Susquehanna is in an isolated area, it's reasonable to assume that almost all students who come to SU would not be living in the local area if it weren't for attending college.  

But the University of Washington is in Seattle.  There are other schooling options in that area, so it is likely that some of the people who attend UW would live in the Seattle area even if they didn't attend UW.  Thus, excluding the medical facilities, my initial thought is that it should be less than $2 billion.  

What about the hospital?  Does the hospital really create an $8 billion economic impact?  That is doubtful.  Hospitals are valuable to society, of course, but to have such a large economic impact, one would need significant numbers of people who visit that hospital who instead would have visited a hospital outside of the local area.  I can't find the actual study online to check how they came up with their $8 billion estimate, but that seems far-fetched.  If I can find it - I'll post an update with my analysis.


Update: 

I have now received a copy of the full economic impact report.  The analysis section contains too few details for anybody to really know whether this is accurate.  I think we can say, however:

1. There are almost no details on how they came up with specific calculations.
2. They did not appear to pose a "counterfactual", i.e., what is this economic impact judged against.  It appears that they assume that every dollar spent by the University of Washington would not have been spent in the area (whether the area is the state or local area) if it were not for the University.  That, of course, is a flawed assumption.
3. The economic impact of the University of Washington is going to be large, the question is "how large".  The assumptions used seem to inflate the estimate.
4. The amount of federal (external) research funding received is impressive - and that will have a big local and state impact.

The biggest problem I have with this study is that there is no way for an economist like me, who knows economic impact studies, to verify their estimates.  I'm quite certain that this estimate is inflated above the "true" economic impact.  But I can't be certain of the amount it is inflated

Learning Economics Through Pictures - Weight Loss Bets and Loss Aversion

This is picture from the site dietbetter.com.  At this site, you can actually make wagers with other people that you'll lose weight.

The amounts wagered are quite nominal.  $25 for a 30-day or 6-month weight-loss challenge.  That is far less than the expected gains an overweight person would see from decreased health care costs.  It's likely only a small fraction of the non-monetary value that a person who is 30-pounds overweight would find from dropping 15,20, or 30 pounds.

Yet - these bets work!  But why?  Why would such a small amount, likely 1/100 of the non-monetary value of the weight-loss to the overweight person induce people to lose weight?  Behavioral economics has some insight.

People value losses more than they do an equivalent gain.  This idea is called "loss-aversion", and was made prominent by Amos Tversky and Daniel Kahneman.  (Kahneman won a Nobel prize in 2002.  Tversky probably would have shared it with him, but he died young.)  Through a series of clever experiments, they found that people value items more when they have them.  That is, losing $25 would be more painful for a person than winning $25 is enjoyable.  

Many people want to lose weight but they just can't stay motivated to eat right and exercise.  But having a bit of money on the line - mainly because of the fear of losing it - can help people stay motivated and lose weight.

I am one of these people!  I offered my fall 2014 class $100 if I couldn't drop down to 193 pounds from a starting weight of 207.  Here is the progression of my weigh-ins throughout the fall semester.

September 12:

September 26:

October 7:

November 12:

November 25:

Weight loss bets work!

For more, see this longer-article describing weight-loss bets in the NY Times.

David R. Henderson at Susquehanna University - Jan 21st at 7:30 PM

I am pleased to announce the second speaker in the 2014-2015 Liberty and Economic Freedom speaker series. Dr. David R. Henderson will present “Seven Myths about Free Markets” on January 21^st at 7:30 pm in Isaacs Auditorium on the Susquehanna University campus.  Dr. Henderson is a research fellow at Stanford University’s Hoover Institution, and an associate professor of economics at the Graduate School of Business and Public Policy, Naval Postgraduate School, in Monterey, California. He will be discussing issues related to the national economy, including the benefits of capitalism and economic freedom. 

Dr. Henderson is the editor of The Concise Encyclopedia of Economics (Liberty Fund, 2008).  He has written two books:  The Joy of Freedom: An Economist’s Odyssey and Making Great Decisions in Business and Life.  He has also written about 200 articles for popular publications, including The Wall Street Journal, New York Times, Barron's, Fortune, Los Angeles Times, and Chicago Tribune. He has testified before the House Ways and Means Committee, the Senate Armed Services Committee, and the Senate Committee on Labor and Human Resources. Dr. Henderson has made several television appearances, including on C-SPAN, CNN, The Jim Lehrer Newshour, and The O’Reilly Factor. The lecture is free and open to the public.

Economic lessons of Downton Abbey

In honor of the fact that tonight is the start of the 5th season (in the USA), here is an old article on economic lessons from Downton Abbey.

Note - spoilers through season 4, no spoilers for season 5.

Excerpt:

Mr. Carson, Downton’s senior butler, offers Mr. Molesley a job as footman, a position demanding fewer skills and offering less money.Molesley was trained as a butler, and a butler was a skilled position in those days, requiring someone who knew how to manage the staff. When Matthew Crawley died, however, Molesley lost his position as a valet and couldn’t find another until the house’s senior butler, Mr. Carson, offered him a job as footman, a position demanding fewer skills and offering less money.“I have come down in the world, Mr. Carson,” Molesley says. “I am a beggar and so, as the proverb tells us, I cannot be a chooser.”

Happy New Year!

NPR article discussing economists predictions for this year ...

Excerpt:

"The economic news remains broadly encouraging," the Goldman Sachs forecasters write in their 2014 outlook.

And the brighter prospects are not limited to this country. "The global economy is likely to emerge in 2014 with modest growth of 3.3 percent compared with 2.5 percent this year," according to Nariman Behravesh, chief economist at the forecasting firm IHS Global Insight.