Does Higher Unemployment Lead to More Drug Use?

According to Richard Florida, director of the Martin Prosperity Institute and professor of business and creativity at the Rotman School of Management at the University of Toronto, there is a statistically significant relationship between drug use and unemployment. He finds that the use of illegal drugs is positively correlated with state unemployment (.31). When he looked at marijuana and cocaine use, the correlations were even higher (both .36).

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How Long Does It Take A Top Athlete To Earn $100,000?

David Biderman from The Wall Street Journal writes:

According to the latest figures from the U.S. Census Bureau, it takes an average U.S. citizen a shade under four years to earn $100,000. Alex Rodriguez does it in six pitches.

Mr. Rodriguez has seen 1,593 pitches entering Monday’s game, so after prorating his $33 million salary, he earns roughly $15,856 every time he sees a pitch. But the Yankees’ third baseman doesn’t necessarily do the least amount of work in sports to pull down $100,000.

HT: Carpe Diem

‘The Inheritance of Education’

From Marginal Revolution:

Economix posted a graph showing a strong positive correlation between SAT score and parental income.  Greg Mankiw pointed out that the effect is unlikely to be purely causal because there may be an omitted variable bias, IQ for example. Paul Krugman and Matt Yglesias both attack Mankiw and point to graphs showing that income matters for college completion and enrollment, respectively, holding various achievement scores constant.  Brad DeLong crunches the numbers on IQ and income correlation to estimate that half the effect is due to IQ and half to something else.

All this is good but none if it gets at the heart of the matter because there are a lot of way that heredity/genes could explain the income/education correlation; IQ is only one possible mechanism, personality (e.g. conscientiousness) is another possibility.

The type of evidence that we need to resolve this question is adoption studies.  Fortunately, such studies have been done and indeed I have presented the data before in my post Nature, Nurture and Income.  Let’s do so again.

The graph below is from What Happens When We Randomly Assign Children to Families?, by Bruce Sacerdote.  Holt’s International Children’s Services places children, primarily Koreans, with families in the United States.  Holt has an interesting proviso to their adoption contract, conditional on being accepted into the program, children are randomly assigned.  Sacerdote has collected data from children who were adopted between 1970-1980, and thus who today are in their mid 20′s or 30′s, and their adoptive parents.

The graph shows how parent income at the time of adoption relates to child income for the adopted and “biological” (non-adopted) children.  The income of biological children increases strongly with parental income but the income of adoptive children is flat in parent income.  What does this mean?

The graph does not say that adopted children necessarily have low income.  On the contrary, some have high and some have low income and the same is true of biological children.  What the graph says is that higher parental income predicts higher child income but only for biological children and not for adoptees.

Now what about education?  Sacerdote looks at that as well.  He doesn’t have a child SAT-score, parent-income correlation but he does find:

Having a college educated mother increases an adoptee’s probability of graduating from college by 7 percentage points, but raises a biological child’s probability of graduating from college by 26 percentage points.

The effect for father’s years of education is even larger; about a ten times larger effect on biological children than on adoptees.  Similarly, parent income has a negligible effect, small and not statistically significant, on an adoptee completing college but an 8 times larger and statistically significant effect on a biological child completing college (Table 4, column 3).

Inside a Global Body Parts Business

According to Der Spiegel:

The German company Tutogen’s business in body parts is as secretive as it is lucrative. It extracts bones from corpses in Ukraine to manufacture medical products, as part of a global market worth billions that is centered in the United States.

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Criminalizing the sale of human organs, just like drugs, does not prevent innovative entrepreneurs from creating a market. Two alternatives almost always develop: either a black market is created or clever people discover loopholes. In both circumstances, the elimination of competition drives up prices at the expense of consumers. This is all the more harmful when the product, in this case human organs, saves people’s lives.

For more in support of organ sales, read our previous posts here and here.

Quote of the Day

“When freedom is outlawed … Only outlaws will be free!”

~ Anonymous

More Negative Effects of Progressive Taxation

Joseph Henchman of the Tax Foundation discusses Britain’s rising tax rates on the wealthy:

In April, the United Kingdom raised its top income tax rate from 40% to 50%, imposed on amounts over £150,000 (approximately $245,000), jumping past Italy, Germany, Spain, and France. At the same time, Spain has cut their top tax rate on “foreign executives” to 24%, leading to a flurry of well-known Britons reclassifying themselves as Spanish executives.

From NCPA and the Weekly Standard:

• [N]ot only did [Spain] create a massive loophole, they backdated it to 2003, which was, coincidentally, the year David Beckham left Manchester United to join Real Madrid.
• Beckham became the first man in Spain to acquire “foreign executive” status; the tax break came to be known as “the Beckham Law.”
• And it has become an almost insurmountable advantage for Spanish soccer teams
• Deloitte Sports Business Group estimates that between the falling pound, the higher British tax rate, and the Spanish tax break, U.K. clubs would have to pay 70 percent more in order to match a player’s take-home pay in Spain.

Countries and states should always keep other jurisdictions in mind when setting tax rates. If you raise the rates to an uncompetitive level, don’t be surprised if you become uncompetitive.

Wealth is not a static quantity and it does not exist in a vacuum. It must be created. When a society punishes the creators of wealth, that society is sowing the seeds of its destruction. The lives we, of the industrialized world, lead are made possible by those leaders and innovators who are so often punished for their ability. If we continue on our current path, we will remove any and all incentive for success. In other words, don’t bite the hand that feeds you.

Boudreaux on Ted Kennedy’s Canonization

In a brilliantly penned letter to the New York Times, Donald J. Boudreaux writes:

Ted Kennedy’s canonization is too much.  Every day brings the deaths of thousands of people, the vast majority of whom are known only to their families and friends.  These people aren’t mourned by politicians, reporters, or the general public.

Yet almost every one of these unheralded persons has been more productive than has Ted Kennedy – or Chuck Grassley, Nancy Pelosi, the Georges Bush, or any other politician you name, whether he or she be still breathing or buried.

Who installed the windows in my house?  I don’t know.  Yet he provided value to me and never forced his hand into my wallet or his nose into my eating habits.  Who will fly the plane that will carry me home tomorrow from Michigan to Virginia?  I have no idea.  Yet that pilot will render unto me (and dozens of others) a valuable service in exchange for funds that I voluntarily paid to his or her employer.  That pilot doesn’t force me to fly.  Nor does he or she presume to know better than I do what is best for my family and me.

Who caught the fish that I will eat tonight?  Who trucked it from the sea to my hotel?  Who will cook that fish?  Who designed the dishwasher that cleaned the plate and utensils that I will use?

I know almost none of the millions of people whose daily efforts make possible my life and that of countless other Americans.  These people don’t hatch grand plans for arrogantly re-working society.  They offer only to deal voluntarily with me and with others, never pretending – unlike Mr. Kennedy – to be endowed with a mysterious genius and a saintly inspiration justifying haughty intrusions into the affairs of others.

Politicians are mortals.  But as their greedy lust for power and glory reveals, they are mortals especially flawed.

Sincerely,
Donald J. Boudreaux

The Innovation Heat Map

The Urban and Regional Innovation Research Unit writes:

McKinsey has partnered with the World Economic Forum to create an “Innovation Heat Map,” by identifying factors that are common to successful innovation hubs. As part of this effort, they have examined the evolution of hundreds of such clusters around the world and analyzed over 700 variables, including those driving innovation (business environment, government and regulation, human capital, infrastructure, and local demand) along with proxies for innovation output (for example, economic value added, journal publications, patent applications) to identify trends among the success stories.

Click here to view the interactive version.

Drugs in Portugal: Did Decriminalization Work? Part II

According to The Economist, the evidence from Portugal since 2001 shows that decriminalizing drug use and possession has “benefits and no harmful side-effects”:

Officials believe that, by lifting fears of prosecution, the policy has encouraged addicts to seek treatment. This bears out their view that criminal sanctions are not the best answer. “Before decriminalisation, addicts were afraid to seek treatment because they feared they would be denounced to the police and arrested,” says Manuel Cardoso, deputy director of the Institute for Drugs and Drug Addiction, Portugal’s main drugs-prevention and drugs-policy agency. “Now they know they will be treated as patients with a problem and not stigmatised as criminals.”

The number of addicts registered in drug-substitution programmes has risen from 6,000 in 1999 to over 24,000 in 2008, reflecting a big rise in treatment (but not in drug use). Between 2001 and 2007 the number of Portuguese who say they have taken heroin at least once in their lives increased from just 1% to 1.1%. For most other drugs, the figures have fallen: Portugal has one of Europe’s lowest lifetime usage rates for cannabis. And most notably, heroin and other drug abuse has decreased among vulnerable younger age-groups, according to Mr Cardoso.

The share of heroin users who inject the drug has also fallen, from 45% before decriminalisation to 17% now, he says, because the new law has facilitated treatment and harm-reduction programmes. Drug addicts now account for only 20% of Portugal’s HIV cases, down from 56% before. “We no longer have to work under the paradox that exists in many countries of providing support and medical care to people the law considers criminals.”

Click here to read Part I.

Are workers more productive in highly populated areas?

A new paper by Matthew G. Resseger and Ed Glaeser, from Harvard University, shows a “strong connection between per worker productivity and metropolitan area population, which is commonly interpreted as evidence for the existence of agglomeration economies. According to the paper, the correlation is…

…particularly strong in cities with higher levels of skill and virtually non-existent in less skilled metropolitan areas. This fact is particularly compatible with the view that urban density is important because proximity spreads knowledge, either making workers more skilled or entrepreneurs more productive. Bigger cities certainly attract more skilled workers, and there is some evidence suggesting that human capital accumulates more quickly in urban areas.

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