My next door neighbor wants to ban all guns

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Quote of the Day

“The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security is so powerful a principle that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often incumbers its operations; though the effect of these obstructions is always more or less either to encroach upon its freedom, or to diminish its security.”

~ Adam Smith

This makes my blood boil

‘Attorney General Tries to Silence School Choice Ad’

World Poverty Rates Decline

Maxim Pinkovskiy (MIT) and Xavier Sala-i-Martin (Columbia University) have a new paper on the world distribution of income:

We use a parametric method to estimate the income distribution for 191 countries between 1970 and 2006. We estimate the World Distribution of Income and estimate poverty rates, poverty counts and various measures of income inequality and welfare. Using the official $1/day line, we estimate that world poverty rates have fallen by 80% from 0.268 in 1970 to 0.054 in 2006. The corresponding total number of poor has fallen from 403 million in 1970 to 152 million in 2006. Our estimates of the global poverty count in 2006 are much smaller than found by other researchers. We also find similar reductions in poverty if we use other poverty lines. We find that various measures of global inequality have declined substantially and measures of global welfare increased by somewhere between 128% and 145%. We analyze poverty in various regions. Finally, we show that our results are robust to a battery of sensitivity tests involving functional forms, data sources for the largest countries, methods of interpolating and extrapolating missing data, and dealing with survey misreporting.

They also provide some lovely graphs. Here is one:

‘NBA Age Limits Are a Scam’

From Newser:

The NBA’s minimum draft age of 19, with one year of college—and a new proposal to make it 20—is nothing but a cynical ploy by pro basketball and the NCAA that “hasn’t helped players in any way,” Buzz Bissinger writes. Players can easily sail through a year of college without accruing any educational benefits whatsoever. But that doesn’t matter to the collegiate and pro coaches—for them it’s a moneymaker, and a moneysaver.

You see, Bissinger writes in the New York Times, college teams get to fill arenas with bankable talent that might otherwise have gone directly pro. Conversely, pro teams get players with free training from their schools. Meanwhile, all the anecdotal evidence that high schoolers just aren’t ready for the big leagues is phooey, he writes. They get into less trouble, and have better stats than their older colleagues. They’re just being ripped off harder. “The right decision would be to abolish the NBA age limit” and “stop jumping into the same Jacuzzi” with the NCAA.

Gender inequality in higher education

In a new blog post at The Enterprise Blog, economist Mark J. Perry quotes Stuart Taylor’s recent National Journal article “Selective Concern On Sex Imbalances”:

It is an article of faith in the Obama administration, Congress, and much of the academic establishment that there are no innate differences between females and males in interests or cognitive capacities. From this dubious premise, they conclude that only pervasive, ongoing sexism and stereotypes can explain the huge gender disparities in academic fields—hard sciences, engineering, and mathematics—that are still male-dominated.

But advocates of this disparity-proves-discrimination dogma apply it quite selectively. They have shown virtually no concern about the small and shrinking percentages of males in colleges generally and in most academic fields.

The graph and chart below, produced by Professor Perry, “provide new evidence of the shrinking percentage of men graduating from college in general, and the female dominance in almost all academic fields at the graduate level.”

Perry writes:

The graph documents the complete gender reversal between 1970 and 2007 in the percentage of college degrees granted to men and women, from men earning 59 percent of all college degrees in 1970, followed by a gradual and consistent shift towards women, so that by 2007 slightly more than 59 percent of all college degrees were awarded to women (Department of Education data here). For the class of 2007, 144 women graduated with a college degree (at all levels) for every 100 men. The shrinkage of males in higher education that Taylor discusses is real and will continue to worsen each year—within eight years the Department of Education estimates that 167 women will earn associate’s degrees for every 100 men, and 148 women will earn master’s degrees for every 100 men.

The table above displays graduate school enrollment by gender in 2008 using data recently released by the Council of Graduate Schools (CGS). Women represented 58.9 percent of all graduate students in 2008, meaning that there were more than 143 women enrolled in graduate school for every 100 men. Further, women outnumbered men in 7 out of the 10 fields of graduate study tracked by the CGS, and were underrepresented in only three fields (business, engineering, and physical sciences). In the field of health science, women now outnumber men in graduate school by almost 4 to 1, and in both education and public administration graduate programs, there are about three females enrolled for every male.

An Interview with Professor Robert M. Dunn

Free Market Mojo is proud to present an interview with Professor Robert M. Dunn, Jr., professor of economics at The George Washington University.

Professor Dunn was an undergraduate at Williams College and received a M.A. and Ph.D. in economics at Stanford University. Before coming to GW he was an economist at the Federal Reserve Board and a faculty member at Dartmouth College. Professor Dunn teaches international trade and finance, both at the undergraduate and graduate level. He is the co-author of a textbook, International Economics, which is now in its sixth edition from Routledge Publishing (UK). His publications include articles in the Journal of Political Economy, KYKLOS, Southern Economic Journal, Princeton Essays in International Finance, Foreign Affairs, and other academic journals. He has also written 39 columns that were published in The Washington Post, and nine op-ed columns in The New York Times.

On a personal note, Professor Dunn taught both authors during our freshman year at George Washington University. The introduction to macroeconomics that we took with Professor Dunn ignited our interest in economics and laid the solid foundation that the rest of our knowledge has been built on.

As with our other interviews, the author’s views are his own and are not necessarily endorsed by either author of Free Market Mojo.

FMM: In light of the unprecedented rise in government debt over the past months, the prospect of inflation seems to be an understandable concern. Ben Bernanke has worked closely with both Henry Paulson and Timothy Geithner, which raises the fear that government debt will be monetized. Are these concerns over government debt and the possible subsequent inflation well-founded?

Dunn: Any time the Fed has an expansionary open market policy, it is monetizing government debt.  The question is how much is appropriate.  A year ago it looked like we were headed for another early 1930s. The Fed headed that off by monetizing a LOT of government debt.  The money supply expanded hugely.  They must now pull dollars out of the system SLOWLY (don’t scare people) to avoid later inflation. So far, little or no inflation due to imports. China and India have saved us. Inflation only in the services sector where they cannot compete here.  Think of what has happened to the prices of medical care, travel, legal services, restaurants, etc. compared to clothing, shoes, consumer electronics, etc.

FMM: Some notable economists have charged the Federal Reserve with playing a part in the current recession. A recurring accusation is that the Federal Reserve, in large part, created the housing bubble by keeping interest rates artificially low, thus encouraging investment in long-term assets such as real estate. Do you think the Federal Reserve had a role to play in creating our current economic predicament? If so, in what ways?

Dunn: The Fed was too loose before 2007 and Greenspan (a fool) failed in his regulatory role.  The nonsense in NY financial never should have been allowed, but that is what you get with an Ayn Rand follower in that role.

FMM: What was your overall opinion of Ben Bernanke’s performance as Federal Reserve Chairman prior to the current recession? Has that opinion changed in the last year? If so, how and why?

Dunn: I think Bernanke has done a good job under VERY difficult circumstances.  Let’s see how he does in backing away from his very easy money, which was needed in 2008-9 but which needs to be reversed in 2010-11.

FMM: The current recession has invigorated critics of the Federal Reserve system. Is the Federal Reserve necessary?

Dunn: The Fed is absolutely necessary, but not with a Greenspan leading it.

FMM: Many critics of the Federal Reserve advocate a return to the gold standard. Is a pure gold standard practical and feasible?

Dunn: The gold standard is a VERY bad idea.  A major gold discovery, or (more likely) the development of cheaper ways to work low grade ore could be very inflationary. Look at Spain in the 16th century.  I did an op-ed on this in the NY Times in 1982.  The only argument for gold is that the head of the central bank is a weakling who lends the finance ministry as much as it wants.  Gold is probably better than a central bank that is under the thumb of the finance ministry. That is why the independence of the Fed from the Treasury Department is SO important.

FMM: In response to recent economic events, there have been moves by various parties around the world to end the U.S. Dollar’s role as the “world currency”. What is the U.S. Dollar’s role, internationally, in years to come? If the global economy, as a whole, does move away from the U.S. Dollar, what will be the consequences for the U.S.?

Dunn: The dollar will remain the largest reserve currency unless inflation here gets bad.  There was talk of dumping the dollar in 1979-80 when US inflation went over 13%. When Volcker was appointed as Chair of the Fed, that talk ceased.

FMM: Now that two of the big three U.S. automakers (GM and Chrysler) are essentially state-run, are they capable of remaining viable in the future?

Dunn: Ford and GM yes. Chrysler is probably done for. The goal is to get GM to a point where it can be sold, getting the government its money back.

FMM: How will the burgeoning economic protectionism in U.S. policy and increasing government involvement in the economy affect trade relations between the U.S. and its neighbors (particularly, major trading partners such as China, Japan, and the E.U. nations)?

Dunn: So far we have not gone protectionist except for cheap tires.  If we do, inflation will get a lot worse and our relations with China, India, etc. will go to hell.  Also our exporters will be hurt BADLY as other countries retaliate. A VERY bad idea.

We would like to thank Professor Dunn for his time. As we see, he wasn’t quite finished teaching us after we finished taking the final exam.

Click here to view other Free Market Mojo interviews.

Quate of the Day

“Today’s widening income disparities will be partly self-correcting. Granted, income statistics show the increasing disadvantages of persons with education deficits. But that is the market saying — shouting, really — “Stay in school!” Over time the voice of the market is rational, credible and therefore a potent instrument for changing behavior.”

~ George Will

Sidestepping Regulations

A month ago, my colleague posted on the FDA ban of flavored cigarettes. This ban included clove cigarettes (it did not, however, affect menthol cigarettes – a clearly protectionist move). As with most regulatory measures that attempt to ban mutually beneficial transactions between consenting parties, the FDA ban has merely encouraged questionable behavior. Kretek International, manufacturer of the most popular brand of clove cigarettes, Djarum, has begun to import clove “small cigars” into the U.S.  The “small cigars” are remarkably similar to the clove cigarettes (see photo below) and their packaging promises “a smoking experience you have come to expect”.

Clove "small cigars" on left, clove cigarettes on right.

If the FDA or Congress bans clove “small cigars” as well, will this put an end to the market for this product? Of course not. As history has repeatedly shown (with recreational drugs, alcohol, and prostitution as the primary examples), banning a product will not destroy the market, it will merely drive it underground – making the product less safe, providing a source of funding for criminals, and diverting productive energy away from the legitimate economy.

On teachers’ pay

A recent report on education released by The Organization for Economic Cooperation and Development (O.E.C.D.) finds that American teachers spend an average of 1,080 hours teaching each year.

So let’s put this into perspective: 2,080 working hours make up a year if no leave is taken (40 hour workweek). With 20 days work leave, the number drops to 1,920 hours. Both are well above the hours worked by teachers across the developed world.

The chart below illustrates the annual work hours for O.E.C.D. members for all professions:

Annual work hours (source: OECD (2004), OECD in Figures, OECD, Paris.

In the Netherlands, the average employee works 1,309 hours annually. This is the smallest hourly average in the developed world yet surpasses teaching hours in every country by a large margin.

According to the O.E.C.D. report, the average public primary-school teacher with 15 years of experience and the minimum amount of training earns $43,633, compared to the O.E.C.D. average of $39,007.

If you divide the hours worked (1,080) by the $43,633 average teacher salary, U.S. teachers earn an average of just over $40 an hour. Not too shabby.