Thursday, November 29, 2007

Employment Is Cooperation

The Democratic candidates refused to cross a picket line of striking writers yesterday (thus canceling their debate), affirming their general support for the guild strike. As private citizens, it is their right to support or not support whomever they wish and they were put in the position to make one decision or the other. But their actions contribute to a disturbing conclusion emerging about the strike: the writers are downtrodden workers and the studios are the greedy extortionists.

Such a story is simplistic and deceptive. Employees are not victims and employers are not slavers. They work together in mutual cooperation; a strike is not a rebellion. To my knowledge, neither party (the Writer's Guild or the studios) use the law to force one to cooperate with the other. But the studio is increasingly seen as immoral and greedy.

This is no doubt in part due to the seemingly reasonable request of the guild--compensation on new media. Yet studios shoulder most of the risk for new projects and the risk is high. Most shows fail tremendously and it makes sense that the studios are trying to shoulder against that risk with enhancing the gains from the rare success. The point is it is not at all clear what the compensation--if any--should be. There are too many factors to take into account. Outsiders should be the last people to take sides. Let the informed decide for themselves.

Keeping us safe from leaves in the road

I'm tend to be skeptical of government's efforts, and this is another example why.

Grandmother Betty Davies has swept the street clean outside her house for the past 62 years without so much as raising an eyebrow.

The 88-year-old widow prides herself on keeping her front doorstep and pavement pristine.

But after one of her daily tidy-ups, a council worker knocked on the door of her home in Splott, Cardiff, to warn her she could be taken to court.

Mrs Davies was told she could be breaking litter laws and might be fined for brushing the leaves into the roadway.

So if a leaf falls from a tree to the road, that's okay. But if a leaf falls two inches from the road and you sweep it the two inches, that's a date in court.

Fortunately in this case sanity prevailed and the local government had to back down from fining an 88 year old woman for keeping things tidy.

Sunday, November 25, 2007

Panic Is Not Growth

In 1773 famed French astronomer Jérôme Lalande predicted that a comet would smash into the earth in 1789, destroying all life. Terror swept the country and church attendance skyrocketed.

But it was all for not. Lalande published his results and true enough, he predicted a disaster, but with only a chance of 1 in 64,000. As the panic subsided philosopher and mathematician Marquis de Condorcet noted that at least the sharp rise in unleavened bread boosted the economy.

The parable of the broken window was still 77 years away, so we can at least be sympathetic to the philosopher's poor economics. But that does not make the claim valid. The panicked purchase of leavened bread no more betters the economy than the purchase of bomb shelters during the Millennium bug scare. If it was truly this easy to grow the economy, then government agencies should relay false reports every few years predicting mass calamities. We'd be swimming in toilet paper, but we wouldn't be wealthier.

Source: The Measure of All Things. Ken Alder

Friday, November 23, 2007

Want Nothing Day

As the sun sets, another Black Friday concludes as does its perverse cousin, Buy Nothing Day, an anti-consumerism group.

What's strange about Buy Nothing Day is that activists gather outside stores and in shopping districts. The protest is directed at a group the vast majority of whom are buying things for others. If the goal is to assuage consumerism, their actions would merely shift the buying from the gift-giver to the gift-receiver. If they really wanted to be effective they would target those that accept gifts and do not give them. Cut consumerism off at the source.

Thus Buy Nothing Day protests should focus on the "purely greedy," the infants, toddlers, and kids who ask for, and often demand, mass-produced consumer products. Do not blame the shoppers who are merely following their wishes, and, arguably being the least selfish and contributory to "over-consumption." Protests should be outside Santa, not Sears.

Thursday, November 22, 2007

Happy Thankskeeping Day

John Stossel reminds us that Thanksgiving is really a celebration of private property, not community and hearth. The Pilgrims starved for their first two years in the New World because communal farming doomed them all. When they finally instituted private property, no one had an incentive to shirk; everyone worked harder. The result was a bumper crop and, in time, a new holiday.

HT: Matt Huber

Tuesday, November 20, 2007

To the Masses Go the Spoils

Last night during industrial organization, Alex Tabarrok told us something only an economist could truly appreciate: "People in China are now dying of cancer and this makes me very happy." It makes me happy as well. Yet we are not motivated by malevolence but a recognition of how humanity progresses.

As China becomes wealthier, its people no longer starve or work themselves to death. Instead they live longer and die of of other ills later in life. And in their wealth they gain the ability to pay to assuage their suffering. Firms the world over now have extra incentive to develop cures not just for cancer, but Parkinson's disease, Alzheimer's, and other aliments which tend to appear later in life. For most of human history, it was an extra burden to want something popular or common for everyone else wanted the same limited supply. But under capitalism, wanting what is popular often translates into getting it easier. Common diseases are rarely death sentences, a trend that is likely to intensify in the near future.

Saturday, November 17, 2007

A Multitude of Villianies Do Swarm Upon Us

Set aside the rampant talk on the campaign circuit about universal health care. Table arguments for protection at the cost of fundamental civil liberties. It is possible there is a candidate who would bring yet more nonsense to next year's election: Lou Dobbs.

Right now trade and immigration--especially immigration--are in party platforms. Despite that these issues are pretty much the same (both move jobs to foreigners), each of the parties treats them differently. Democrats don't like free trade, Republicans don't like illegal immigration. A crude line to draw, but useful.

Lou Dobbs, on the other hand, doesn't like either. At least he has the virtue of consistency. But if he would enter the race, his popularity would surely encourage candidates to call to assuage both instead of neither. Dobbs doesn't even have to be a viable candidate, he merely needs to make enough noise on the campaign trail. And when you're as popular and opinionated as Dobbs is, such a feat is as second nature as breathing.

HT: Mike Mills

Thursday, November 15, 2007

The Oath of Office

Senator Dodd:

Imagine if you will interviewing an applicant for a job opening you have. The first question you might ask is whether the applicant understands the job description. Let's imagine this applicant fails to understand even the most basic requirements of the job. You would be surprised, perhaps confused, as to why the applicant wasted everyone's time by failing to do even rudimentary research.

So you should understand my surprise, and my disappointment, when you failed to grasp the job description for the job you currently seek. To wit, in the debate tonight, you stated that "When you take the oath of office, on January 20, you promise to do two things, and that is to protect and defend the Constitution of the United States, and protect our country against enemies, both foreign and domestic. The security of the country is number one."

Sir, Article II, §1 of the Constitution lays out very simply the job description--the oath of office--as such: "I do solemnly swear (or affirm) that I will faithfully execute the office of President of the United States, and will to the best of my ability, preserve, protect and defend the Constitution of the United States." The President has but one duty, and that is to defend the Constitution. While the argument can be successfully and articulately made that national security is a component of defending the Constitution from its enemies, it is not the chief objective. This is not an issue of vague language or unclear intent by the founders. The Constitution is unambiguous on its supremacy. Article VI states, plainly, that "This Constitution . . . shall be the supreme law of the land." Were the values of the Constitution to come in conflict with national security goals, then the Constitution, and the Oath of Office, make clear which choice the President must make.

Security, sir, is emphatically not "number one," The Constitution is. I hope that going forward you take some time to read it, with particular attention to Article II. Should the people choose to elect you, it will be your job to uphold that document--and no other.

Tuesday, November 13, 2007

The Economic Report of EVE

EVE Online (an MMORPG) hired an economist back in June to better understand how their simulated, primarily player driven economy functioned. Dr. Eyjólfur Guðmundsson, former dean of business and science at the University of Akureyri, is the first economist to be hired in the gaming industry in this regard.

He released his first quarterly report yesterday, enumerating the challenges, advantages, and conclusion of analyzing a digital universe. The focus of the report concerns inflation and offers yet more evidence that the price level is driven by too many dollars chasing too few goods.

Right now, EVE is experiencing deflation despite the fact that the computer is adding more money than it is taking out. New players are currently out-pacing the growth in the money supply--there are more credits (ISK), but many, many more goods. However, inflation can still crop up in the long run if the supply continues to increase and the player growth stagnates.

Inflation in EVE can be a real problem for the company's bottom line. Rising prices make it harder for new players to join the game and could dissuade them from playing. It makes business sense keep the price level steady. In other words, we will likely see more economics PhDs hired in the future by big gaming companies. I wonder if any of them will be someone I know.

Monday, November 12, 2007

There Ain't No Such Thing As A Free Expansion

I hope my money and banking students can answer the following:
True or false (and justify your answer).

Expansionary monetary policy suggests TANSTAAFL/TINSTAAFL.

Sunday, November 11, 2007

Trading With Prometheus

South Korean farmers are erupting in anger over the trade talks with the U.S. Fearful that American produce will flood their market, calling that their livelihoods are threatened and the agricultural sector will collapse. I'm sure such phrasing gets a lot of support in Korea, as labor unions are sympathized here.

But few mind when technology threatens jobs. Farmers rally against imports, not hydroponics: life should be autarkist, but not archaic. Few tears are shed when a new technology wipes out old jobs. Luddites are rare, particularly in today's society. But protectionists always seem to have the ear of the public.

It's strange because trade and technology are functionally the same. In both cases, a good is made cheaper. In both cases, jobs are lost to those that can do the same for less. In both cases, there are winners and losers. In both cases, society changes in unpredictable ways. People are perfectly willing to erect trade barriers to "protect jobs," but the same does not go for outlawing technologies. Such arguments center around the ethics of playing God, not ensuring employment.

If you like technology, if you think it makes us wealthier because it swaps the cheap with the valuable, then you are right. We get to do more with less and we are better off for it. But what difference does it make if the goods transform by man instead of machine?

Monday, November 05, 2007

The Writing's On the Sign

Day One of the writer's strike leads to an interesting economic question. Not if writer's deserve a cut of new media revenue. Or how long a company should holdout before serious negotiations begin (though the strike does dispel the myth that firms care only about short-term profits and won't shoulder a huge expense for a long-term gain). No, the question is why are the slogans so uncreative?

Presumably, the WGA would be interested in conveying their side of the argument for the national news media, a capacity that increases as the writing improves. Pithy slogans, especially concerning the topic at hand, would certainly serve the organization better than simply "On Strike" paired with a cheesy lightning bolt/pen (note the illustration's better than the writing). The three signs pictured here seem to be making up the vast majority of them, mass-produced by the Guild.

Thus the puzzle. It only takes one person to make a good slogan that thousands can use. With over 10,000 in its membership, why didn't some of them come up with something better? They are writers, after all; this should be second nature, at least to a few. And it's not like they didn't know the strike was coming; the picture of the man in the clearly written shirt is a member passing out material three days ago. Even if you claim that they just have a bunch of generic signs "just in case" it begs the question, why aren't the generic signs interesting? You'd think their potential for reuse would make them more likely to be pithy, not less.

Strikes are costly, not just for the studios but for the writers. It's in their best interest to sway public support to their side in order to encourage their employers to fold sooner. Perhaps this is evidence that the studios really are paying them more than they contribute. Maybe they don't deserve any new media revenue.

Saturday, November 03, 2007

Calling India

A student sent me this video after our class on outsourcing and trade. I made the claim that one reason, perhaps the core reason, why people don't like international trade is for what are ultimately racist attitudes. It's about "us" versus "them." Protectionists make ultimately flawed economic justifications which are often inconsistent with other opinions they have about the economy.

I hasten to point out that there are some good reasons for a company to hire from it's native population. Cultural differences, for example, can be costly for customers to interact with (i.e. discerning through accents). However, people in practice seem to be unwilling to pay the higher price needed to ensure that common cultural ground.

The line between racism and issues of quality is a hard one to draw, but the video has clear examples of both.

HT: Ritu Joshi