“It was a good idea to get science and democracy from the ancient Greeks. It’s not such a good idea to get fiscal policy from the modern Greeks.” — David Boaz from The Cato Institute
I’m guessing Professor Wulf would find this amusing.
Speaking of Professor Wulf and Freshman Studies, it is shaping up to be awesome this fall, so I encourage you to enroll as a Freshman to take advantage.
The Educated Entrepreneur blog has tipped us off to 10 TED talks for entrepreneurs. ”ideas worth spreading.” Their conferences and gatherings tend to host blockbuster talent, and this list of 10 talks is no exception. I suggest you listen to what Alex Tabarrok has to say. He argues that “free trade and globalization are shaping our once-divided world into a community of idea-sharing more healthy, happy and prosperous than anyone’s predictions.”
Let’s hope so.
Several blogs that I read have pointed to Russ Roberts’ new essay on the financial crisis, Gambling with Other People’s Money. This from the Executive Summary:
I argue that public-policy decisions have perverted the incentives that naturally create stability in financial markets and the market for housing. Over the last three decades, government policy has coddled creditors, reducing the risk they face from financing bad investments. Not surprisingly, this encouraged risky investments financed by borrowed money. The increasing use of debt mixed with housing policy, monetary policy, and tax policy crippled the housing market and the financial sector. Wall Street is not blameless in this debacle. It lobbied for the policy decisions that created the mess.
In the United States we like to believe we are a capitalist society based on individual responsibility. But we are what we do. Not what we say we are. Not what we wish to be. But what we do. And what we do in the United States is make it easy to gamble with other people’s money—particularly borrowed money—by making sure that almost everybody who makes bad loans gets his money back anyway. The financial crisis of 2008 was a natural result of these perverse incentives. We must return to the natural incentives of profit and loss if we want to prevent future crises.
Roberts, of course, is the voice of EconTalk, a principal at Cafe Hayek, and one of the brains behind the Keynes v. Hayek video. So, my guess is that this will have some elements of a “government failure” story.
Well, the Department of Interior finally got around to approving a wind farm off Cape Cod. This seems to be an executive branch move, though I suppose Congress could rescind it legislatively (if it could override a veto) or cut funding to Interior for implementation. The long-running, and I do mean long running, standoff pitted on the one side former Senator Ted Kennedy and like-mined people living there who think windmills are something of an eyesore. Others, such as Kennedy’s nephew, Robert, call them a financial “boondoggle,” that will cost Massachusettsians a lot of money in additional energy costs.
On the other side is an odd coalition of business and environmental groups. Businesses like money and environmental groups like wind, so there you have it.
Obviously, the monied interests will not throw in the towel after fighting this for nine years — they are going to sue sue sue.
Such is the regulatory process.
Yesterday, Professor Gerard posted the course offerings for fall. One of those, which should interest students who seek a broad based 200 level course will be the history of economic thought. The registrar suggests that students should sign up for the actual course rather than for a tutorial. This will be possible after May 12th. The course was last taught by Professor LaRocque here in 2001. We have resurrected the course number and title. SO: sign up for ECON 330 – The Evolution of Economic Thought after May 12th. If you seek further information, please contact Professor Finkler.
In Introductory Microeconomics, we have been discussing trade. We all know that Adam Smith wrote that trade was a result of people’s “propensity to truck, barter, and exchange one thing for another.” But did you know that he also wrote “Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. Nobody ever saw one animal by its gestures and natural cries signify to another, this is mine, that yours; I am willing to give this for that.” (Wealth of Nations, Book I, Chapter II) This video calls all of that into question, it would seem (thanks to Adam King). On a related note, listen to this podcast from NPR to get an interesting perspective on early trade (thanks to Max Randolph).
In a just published book entitled The Great Reset, Richard Florida explains how recessions can be Schumpeterian moments. See today’s Financial Times article on innovation inspired by economic recessions for some juicy examples.
Alright, folks, here is the unofficial unveiling of the courses coming for next year. If you don’t see what you think you should see here, get in touch with one of your friendly neighborhood LU economists and ask about possible independent and group study options.
Fall 2010
ECON 100 INTRODUCTORY MICROECONOMICS (Q) 9:50-11:00 MTWF Ms. Karagyozova
ECON 170 FINANCIAL ACCOUNTING 2:30-4:20 TR Mr. Vaughan
ECON 200 ECONOMIC DEVELOPMENT (G,W) 12:30-2:20 TR Mr. Finkler
ECON 390 HISTORY OF ECONOMIC THOUGHT 2:30-4:20 TR (Sign up for tutorial with Professor Finkler)
ECON 300 MICROECONOMIC THEORY (Q) 3:10-4:20 MTWF Mr. Gerard
ECON 430 CAPITAL AND GROWTH (Q) 9:00-10:50 TR Mr. Finkler
ECON 520 ADVANCED MACROECONOMICS (Q) 1:50-3:00 MWF Ms. Karagyozova
Standup economist Yoram Bauman was on campus all day, talking in two classes, brunching with interested students, and finally knocking us dead with his material from convex hulls (don’t ask if you aren’t a math-econ major), exotic grains (I always suspected quinoa was funny; now I’m convinced) and the American political spectrum. Bauman delivered what was certainly the funniest Povolny Lecture in the history of the series.
His primary work and his primary message has to do with climate change and the price of carbon. Bauman argues that a carbon tax of about $30 per ton would serve the dual purpose of reducing carbon use and generating revenue that could offset the reliance on distortionary taxes (e.g., sales and income taxes). His message is that this lunch isn’t free, the tax would translate into about $0.30/gallon on gasoline and $0.03/kWh on coal-generated electricity. And here’s the key to the message — these price increases are necessary in order to reduce the quantity demanded for fossil fuels in rich western countries. So, in that spirit, the idea of a cap and “tax” is perfectly consistent with the basic economics lesson: if you want to use the market to get people to buy less, then the so-called market signal is the higher price.
On behalf of the economics faculty and students, I’d like to thank Yoram for a great day and wish him the best in his careers.
After a week off, the Economics TeaBA is back and fighting mad. 
Well, not really mad, but Professor Azzi was a bit upset that he bought a storehouse of cookies last week and we had a cancellation. Based on my current projections, today’s TBA will feature tea, coffee, cookies, and possibly a guest appearance by George Wyeth.
The excitement starts at 4:15 p.m. in Briggs 217.
And, I’m certain that I don’t need to remind you about tonight’s Povolny Lecture featuring standup economist, Yoram Bauman, at 7:30 in Wriston Hall…
The indefatigable Ralph Nader came, he saw, he sold some books, and he raised some hell. Are you wasting the prime of your life with hang ups you should have dealt with as a teenager? Do you find yourself spending more time looking at yourself in the mirror than keeping tabs on Congress? Mr. Nader isn’t shy about asking the tough questions.
I was amazed and surprised with his digression on the 1872 Mining Law and his browbeating of the audience about our ignorance of the statute and its implications. Having done some research on the subject myself, I would put the ball back in his court. Does he know that environmental group opposition is stifling volunteer cleanups of abandoned mines? In this month’s Atlantic Monthly there is a short piece describing the situation. The basic problem is that there is a single policy instrument in place to prevent pollution and to govern cleanups. It turns out, this is like throwing one stone at two birds:
But as these volunteers prepare to tackle the main source of the pollution, the mines themselves, they face an unexpected obstacle—the Clean Water Act. Under federal law, anyone wanting to clean up water flowing from a hard-rock mine must bring it up to the act’s stringent water-quality standards and take responsibility for containing the pollution—forever. Would-be do-gooders become the legal “operators” of abandoned mines like those near Silverton, and therefore liable for their condition. In mid-October, Senator Mark Udall of Colorado introduced a bill that would allow such “good Samaritans” to obtain, under the Clean Water Act, special mine-cleanup permits that would protect them from some liability. Previous good-Samaritan bills have met opposition from national environmental organizations, including the Sierra Club, the Natural Resources Defense Council, and even the American Bird Conservancy, for whom any weakening of Clean Water Act standards is anathema.
In other words, it is the environmental groups who are standing in the way of environmental progress in this case. The reasons for this are straightforward, predictable, and understandable. It is all described cogently in this testimony on similar proposed legislation from ten years ago!
The sad state of affairs is that as the various groups dig in their heels, the acid drainage continues to pollute the waters in the west. Again, from The Atlantic:
Just a few miles from Silverton, in an icy valley creased with avalanche chutes, groundwater burbles out of the long-abandoned Red and Bonita gold mine. Loaded with aluminum, cadmium, and lead, it pours downhill, at 300 gallons a minute, into an alpine stream. The Silverton volunteers aren’t expecting a federal windfall anytime soon—even Superfund-designated mine sites have waited years for cleanup funding, and Udall’s bill has been held up in a Senate committee since last fall. Without a good-Samaritan provision to protect them from liability, they have few choices but to watch the Red and Bonita, and the rest of their local mines, continue to drain.
One-time Presidential spoiler (just don’t tell him that) and always consumer-rights advocate (though economists might sometimes disagree) Ralph Nader will visit campus Sunday to deliver “The Great Conversion: Environmentalism over Corporatism.” The show is in the Chapel at 7:30, and Mr. Nader will be around to talk and sign books before and after his talk.
Love him or hate him, Mr. Nader is certainly one of the more important figures of the last 50 years. Indeed, it would be hard to talk about the rise of safety and environmental policy without at least a hat-tip to Nader’s important role. The title of the talk suggests that he believes Americans actually buy into the message of environmentalism (however defined) over the types of results we’ve seen from corporatism (also, however defined). That’s a pretty provocative statement, and certainly Mr. Nader had no small role in fomenting these attitudinal changes. So, I encourage you to get over there and listen to what the man has to say.
What do the Goldman Sachs and the Catholic Church have in common? Is this comparison fanciful? Even Goldman CEO Lloyd Blankfein opined that the firm was doing “God’s work.” See if you agree with Stephan Richter’s argument.
The Economics Department is pleased to announce that Emeritus Professor of Economics Jules LaRocque will return this fall to teach a course in his specialty: the history of economic thought (see description below). This course will only be offered in the Fall term at the 2:30 – 4:20 time slot on Tuesdays and Thursdays. Timing prohibited publishing the course in the official course schedule prior to the registration period; therefore, if you are interested, please see or send an email to Professor Finkler. We are excited to provide this opportunity and encourage students to take advantage.
History of Economic Thought The course examines the origins and development of ideas pertaining to production and distribution of goods and services in ancient to modern civilizations. Special attention will be devoted to ideas (and their authors) that led to the emergence of market-oriented societies. Examples of such authors are Adam Smith, J.B. Say, David Ricardo, Karl Menger, Alfred Marshall, F.H. Knight, and J. M. Keynes. The Marxian and socialist challenges to the market-based ideas will also be examined.
Today’s headlines reveal that the Federal Reserve Bank of the United States contributed its net income (PROFITS) of $47B to the Federal Government in 2009. It is required to do so by law. Those who go on the Chicago trip in May (or who read the article) will learn that the Fed is a regular contributor to governmental coffers. Furthermore, it’s not just seigniorage (for those of you in Econ 320.)
