You should be watching...

Seinfeld's new show, "Comedians in Cars Getting Coffee".

TEAnocratic Nonsense or Let's Ban Bans

Economist Barry Nalebuff has always been an insightful, out-of-the-box thinker. I've long admired his work.

So it is with great disappointment that I read this.

Nalebuff wants to rewrite New York City Mayor Michael Bloomberg's proposed regulation that bans beverages in NYC from being sold in sizes greater than 16 ounces. If "rewrite" meant "erase completely and never bring up again in the Land of the Free", then I'd be on board. But Nalebuff instead wants to reconfigure the regulation to be smarter. Apparently, the dumbness of the regulation only occurred to him once he realized his former beverage company's products were out of compliance. He does make a case for one kind of smarter regulation. But that is far short of sufficient to justify such a blatant violation of free choice with both its benefits in principal and practicality.

Very disappointing to see yet another good thinker turned into a technocrat. He fails to realize that his preference shouldn't necessarily be everyone else's preference and that government regulation's effectiveness along one dimension (in this case potentially a more effective health rule in one health dimension) comes at the expense of less effectiveness in most other dimensions (in this case certainly less effective consumer utility). Or perhaps as a professor of economics he rejects revealed preferences—a foundational tenet of economics.

Me as Fed Chairman

Following the advice of David Owen, author of The First National Bank of Dad, as heard here on EconTalk, I created a savings account for my nine-year-old daughter to help her understand the value of savings and the power of compound interest. Complete with spreadsheet and graphs, she can watch her money grows at 5% per month while invested with me. We are just a couple of weeks in. So far, so good. She seems interested and is getting the concept. Her track record was good to begin with having just saved up enough to purchase her own iPad.

This post by Scott Sumner got me thinking about my little experiment in financial education. Let’s assume that there is no trade done with the world outside of our household—we are purely self-sufficient. But instead of being ludicrously poor as we actually would be, let’s assume all the goods and services we currently have access to are of our own making. Let’s further suppose that in our little household economy we begin to fall below trend in aggregate demand and a gap opens between potential and actual GDP. I as Fed chairman now feel compelled to deliver a boost to our household economy. I need to get my daughter spending her money. Question: what is the most effective way for me to do so?

I could of course tinker with the interest-rate being paid to her on savings. We are very far from the zero-rate boundary; thus, fears of a liquidity trap are not relevant. But I suspect that interest-rate adjustments downward would have little effect on her spending decisions. Here is an alternative: I can buy her stuff. I start with some of her less appreciated toys and clothes and eventually, if necessary, move up towards American Girl dolls and the iPad. As she realizes money balances far in excess of what she desires, the spending will commence and in force, I can assure you.

This is not a perfect analogy namely because we are talking about physical/use assets rather than financial assets. But I believe it captures the point that interest-rate targeting and manipulations are not the most direct and effective monetary policy to achieve what is actually desired.

PS. In a later post I will expound upon my theory as to the factors that caused this past recession and current recovery to be so difficult, deep and slow. Hint: I don’t believe it is all about AD.

Progressives and the new NCAA helmet rule

Progressives believe that if you get the right people in place, government can solve problems. I believe their claim is that the problems would be solved in a net beneficial total outcome sense. The “right” people designing policy are a combination of well-intended, highly intelligent, and expert in the particular field for which they guide policy. Here is an example showing just how weak this philosophy can be. It is a beautiful example of the law of unintended consequences.

The NCAA fits the “right people” bill near perfectly in this case. And what do you want to bet that the solution will not be to reverse the rule but rather to institute a new array of rules designed to counteract the undesirable side effects?

My guess as to how good (or bad) the next president will be

Looking at the two leading contenders, Mittens and Bolsharack, I have this evaluation on how good or bad each would be as the next POTUS. I'm trying in my mind to only evaluate each prospectively without holding past sins/virtues against/for them. That doesn't mean without thought to past performance as that is the leading source of thought toward projection. Keep in mind that the categories "Great" and "Awful" are highly selective company among past presidents. In each case I'm assuming the respective candidate wins election. Notice I include a 95% confidence interval around each.

                                                 Probabilities
Category:           for Mittens to be:             for Bolsharack to be:

Great                    5%   (+/- 3%)                  3%   (+/- 1%)

Good                  15%   (+/- 10%)              15%   (+/- 10%)

Middling              50%   (+/- 15%)              35%   (+/- 15%)

Bad                     25%   (+/- 10%)              35%   (+/- 10%)

Awful                  10%   (+/- 5%)                12%   (+/- 5%)

These expectations are valued against how good a U.S. president reasonably should be within the circumstances of the politics of the day. Obviously, the actions of Congress and to a lesser extent geopolitical events play a large role in determining the potential a president can reach and the opportunities to achieve either extreme.

The Revolution Will Be Free and Online

The super heroes from Marginal Revolution have begun a new and exciting endeavor. They are launching a free, online economics university. From their website:

That’s Marginal Revolution University, MRU, or I suppose to some “Mister” University.

We think education should be better, cheaper, and easier to access.  So we decided to take matters into our own hands and create a new online education platform toward those ends. We have decided to do more to communicate our personal vision of economics to you and to the broader world.

You can visit www.MRUniversity.com here.  There you can sign up for information about our first course, Development Economics, which is described by Alex below.

Here are a few of the principles behind MR University:

1. The product is free (like this blog), and we offer more material in less time.

2. Most of our videos are short, so you can view and listen between tasks, rather than needing to schedule time for them.  The average video is five minutes, twenty-eight seconds long.  When needed, more videos are used to explain complex topics.

3. No talking heads and no long, boring lectures.  We have tried to reconceptualize every aspect of the educational experience to be friendly to the on-line world.

4. It is low bandwidth and mobile-friendly.  No ads.

5. We offer tests and quizzes.

6. We have plans to subtitle the videos in major languages.  Our reach will be global, and in doing so we are building upon the global emphasis of our home institution, George Mason University.

7. We invite users to submit content.

8. It is a flexible learning module.  It is not a “MOOC” per se, although it can be used to create a MOOC, namely a massive, open on-line course.

9. It is designed to grow rapidly and flexibly, absorbing new content in modular fashion — note the beehive structure to our logo.  But we are starting with plenty of material.

10. We are pleased to announce that our first course will begin on October 1.

A New Hope, the rebels are organizing

Warren Zola of The Sports Law Blog brings good news in the struggle for justice against the mighty NCAA cartel. The plaintiffs in the O'Bannon vs. NCAA case have moved to have their case certified as a class action and seek to have the damages used to pay college athletes via trusts. I feel a disturbance in the force...