The Economic Way of Thinking

A Future Intermediate Micro Question

I'm less than two months away from beginning another semester of Intermediate Micro, which is one of the courses I most enjoy teaching.  Here's a future exam question that came to me while driving the other day:

In Macon, some of my friends describe the intersection of I-16 and I-75 as "the V of death."  Traveling in either direction on this stretch is dangerous.  That's because people wanting to exit onto Spring Street after getting onto I-16 have just 0.5 miles to get across three buzzing lanes of traffic.  People going west on I-16 must also quickly change lanes to get on 75 North or South.  Many horrible accidents have occurred in this area, and the Georgia DOT intends to seriously reorganize the interchange. 

Use price theory to explain why "fixing" this messy stretch of highway could, in theory, actually lead to more traffic fatalities in the future. 

For students looking to get a jump on their micro, here are 111 other questions from Walter Williams. 

Miscellany

* Another example of moral hazard.

* Barney Frank's hazardous bet.

* I've said this for years.

* What is the value of a college education? The answers differ (HT Tyler Cowen)

* Do babies adopt accents in the womb?

A Simple Public Finance Rule

Here's the rule: When the revenue on a tax is negative, repeal the tax!  (Or, at minimum, reduce the outlays!). 

Radical reactions seem especially appropriate when your state is in the red zone or near the red zone; according to this new Pew Report of states, Georgia is close to that point.   

Due to a number of year-end refunds, the state of Georgia's corporate income tax was negative for the month of October.  Lawmakers expect this to turn-around and, unfortunately, don't appear to be considering a repeal or cut in refunds any time soon. 

To quote my friend, Art Laffer, "Yikes!" 

Portugal: Our New Amsterdam?

Amsterdam and America's Prohibition are the two "controlled experiments" I frequently invoke when talking about issues related to legalization and prohibition.  Perhaps it's time to add a third, as it was recently brought to my attention that Portugal's experiment with decriminilization of all drugs, which began in 2001, seems to be working. 

Here's what Johann Hari had to say about the Portugal experiment a couple days ago:

On July 1^st 2001, Portugal decriminalized the possession of all drugs,including heroin and cocaine. You can have and use as much as you like for your own needs, and if you are caught, the police might refer you to a rehab programme, but you will never get a criminal record. (Supplying and selling remains illegal.) The prohibitionists predicted a catastrophic rise in addiction, and even I – an instinctive legalizer – was nervous.

Now we know: overall drug use actually fell a little. As a major study by Glenn Greenwald for the Cato Institute found, among teenagers the fall was fastest: 13-year-olds are 4 percent less likely to use drugs, and 16-year-olds are 6 percent less likely. As the iron law of prohibition predicts, the use of hard drugs has fallen fastest: heroin use has crashed by nearly 50 percent among the young, who were not yet addicted.

HT: Matt

Does Detroit Have The Potential To Be A Great American City?

According to this piece, yes.

HT:  Tyler Cowen

One More Hoop For Tenure

Inside Higher Ed has a story this morning about a new tenure policy introduced by the University of Toledo's president, Lloyd Jacobs:  Candidates up for tenure must meet with the president for a 30-minute chat.  While faculty are upset about the policy, the article makes it sound like the presidential visits are, for the most part, a formality. 

Let's think about some of the consequences of this policy.  On the one hand, the president has a bit more that he can stuff in his CYA file.  On the other hand, it opens the door for comments that could be used in a lawsuit. 

The policy can be thought to be introducing one last fail-safe before the university either cuts ties with a candidate denied or commits to an insanely long labor agreement with a candidate granted tenure. 

My biggest problem with the policy involves opportunity cost.  Presidential time seems like a tremendously scarce resource.  Time with tenure candidates is time not spent shaking hands, raising money, managing the university budget, etc.

Finally, if presidential chats ever become more than formalities and actually result in decisions being overturned, you can expect successful candidates to be, at the margin, tilted a bit more towards being more polished and able to explain their research and teaching interests succinctly. 

The Economic Way of Thinking Blog Is One Year Old: Thanks For Your Support

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Assorted Links

(1) I often ask students in Public Choice what would happen to policy if the franchise were extended to those under age 18.  Here's an Economist magazine article discussing why the franchise should be extended to prisoners.

(2) Are you a lurker?  I've been posting more Facebook updates to avoid being considered that kind of Facebooker! (HT: Anemone)

(3) My dog is the Nomar Garciaparra of labs.  That is, she has ticks like you wouldn't believe.  We're seriously considering giving this new collar, which was discussed in the Wall Street Journal's "Personal Journal" section today, a try. 

(4) One way of measuring the return on publicly funded stadiums. 

(5) Frank Jacobs discusses the excellent site, "Strange Maps" over at the Freakonomics blog. 

Remembering

The coverage of the 20th anniversary of the fall of the Berlin Wall on the blogosphere has been stellar.  Since I was barely 12 years old at the time and hadn't been exposed to the economic way of thinking, I remember the pictures on television more than anything else.

However, while in Prague with Pete in the early 2000s, we interviewed people involved in the transition.  Here's one of my favorite passages from an interview we conducted with a Czech citizen who was a teenager when communism collapsed in Czechoslovakia:

I went to Vienna with my mother.  I wanted to cry when I looked in the shop windows.  There were so many things in the windows that I could only dream of owning before that day.  By the end of our trip, my eyes were sore from looking at so many different goods, and my feet were sore because we could not afford public transportation around Vienna. 

Another EWOT Question Of The Day

From the Economics Students Association blog.

EWOT Question Of The Day

Who predicted the Great Depression?

Here's the answer.

Who Is John Galt?

One of my former advisees, Ashleigh, brought to my attention the above billboard.  The billboard can be found along I-95 near the Georgia-Florida border.  Here's a story about the person behind the Galt sign.  

I have seen a Mercer student driving around in a car with a "Who is John Galt?" bumper sticker.  After learning that I was teaching Atlas Shrugged last spring, the student e-mailed me and told me he was "the John Galt guy."

Do you, our readers, have any good John Galt sightings or stories to report?  

20th Anniversary of the Fall of the Berlin Wall

Monday November 9th, 2009 represents the 20th anniversary of the Fall of the Berlin Wall.  Richard Ebeling has a fitting retrospective.

What have we learned from the Fall of the Wall for the discipline of political economy?

Question for Dave.  We both started out as comparative systems economists (in fact passionate practitioners in that field), we both stopped being active in that field in the early 2000s after both publishing a series of books in the field, and several articles staking out our respective positions on real existing socialism in the Soviet Union and Yugoslavia respectively, and post-socialism in politics, economics, and culture.  Why? Or is our 'leaving the field' only apparent and not real?  And do you consider yourself still a comparative systems specialist?  Scott do you consider yourself a comparative systems specialist and/or development specialist?

BTW, I am going back to teaching Comparative Systems at the graduate level next academic year.