Saturday, September 25, 2010

Carlos Lozada Discusses My 'Envy' Lecture in the Washington Post Sunday 'Outlook'

In this Sunday's "Outlook" section of the Washington Post, Outlook editor Carlos Lozada reflects on my lecture earlier this week at the American Enterprise Institute:
"Greed, for lack of a better word, is good. Greed is right. Greed works."

Gordon Gekko's infamous speech in Oliver Stone's 1987 film "Wall Street" came to embody the excesses of 1980s high finance. Now Gekko, fresh out of prison, is back in Stone's "Wall Street: Money Never Sleeps," which features the financier (played again by Michael Douglas) warning of the impending economic crisis of 2008. Turns out greed caused some trouble while Gekko was locked up.

But is greed capitalism's worst sin? Not so, argues economist Victor Claar. In a speech at the American Enterprise Institute last week, Claar posited that another deadly sin -- envy -- is an inherent part of the free-market system and can prove even more insidious.

Claar, a co-author of Economics in Christian Perspective, relied on Thomas Aquinas's definition of envy: sadness at the good of another. He cited the biblical parable of the prodigal son, in which the older sibling is envious of his dissolute brother, whose return home sparks a big party. "It sounds like blue-collar frustrations that we hear today," Claar said. " 'I did everything the right way, I played by all of the right rules -- and here I am.' "

Whether because of differing intelligence, skill, ambition or luck, free markets produce different outcomes for different people, so envy is inevitable. . . .


Friday, September 17, 2010

Ten Hot Dogs & Eight Buns? No longer

Even though hot dogs and hot-dog buns are a classic example of complements in consumption, there is a frustrating mismatch between the number of hot dogs per pack (normally ten) and the number of buns per pack (normally eight).

Here is one lone consumer's effort to bring peace and common sense to the matter:

Saturday, September 4, 2010

The Funnies on the Minimum Wage

Two comic strips on the minimum wage. First, from The Wizard of Id:

Wizard of Id

And from Frank and Ernest:

Frank & Ernest

Michael Hicks: What do economists do?

I did some office cleaning during the WVU vs. Coastal Carolina game this afternoon.  While I was sorting I discovered an excellent clipping I had saved from the Muncie Star Press by Michael Hicks, who directs the Center for Business and Economic Research at Ball State.
I am frequently asked, "just what does an economist do anyway?" It is a surprising question,
especially to an economist. It is certainly worth answering.

There are about 600 economics Ph.D.s produced annually in the U.S., and about of a third of them are American students. Most work at colleges and universities, though a significant number also go to state and federal government (including the Federal Reserve banks). A smaller number go to work in industries or think tanks. Of course lots of folks actually perform economic work without having a Ph.D. We don't give licenses.

Most economists spend some time teaching, but the vast majority of our time is spent doing research. Most research that economists perform consists of very narrow studies of a particular issue. For example, we might evaluate whether or not tax incentives have altered the rate of purchase of electric cars, or what the effect of a mother's educational achievement is on her children's earnings. The narrow focus of these studies is necessary to isolate and statistically test the relationships of interest. There are obviously lots of things that could cause people to buy electric cars, teasing out the effect of tax rates is the scientific part of the process (and truth be told, pretty darned fun, in a twisted sort of way).

Economists also run forecasting models of economic activity in regions, or for specific industries or occupations. Whatever research we do, the goal is to understand a problem and if possible draw general conclusions from analysis. Most of the rewards to academics (I call them Scooby snacks) come from having your work stand up to lots of external scrutiny. If they help a policymaker -- so much the better.

Despite a lot of jokes, economists are largely in agreement about big economic questions. . . .