I thought that message was clear for conservatives, especially economic conservatives. So when I heard Newt Gingrich, Rick Perry and others bash Mitt Romney for Bain Capital, a private company, laying some people off when they took over companies, I was disappointed. Private equity corporations buy failing businesses for one of two reasons: 1) they believe the company can be restructured, streamlined, updated, and reshaped to increase profitability, or 2) they believe the assets of the company can be put to a better use somewhere else, so they buy them to sell them. Perry and Gingrich have no problem with #1, but apparently think #2 is “vulture capitalism.” Apparently, they believe that the government should determine when companies can sell off assets that are more highly valued in other places. Frankly, they don’t believe in private property and they can’t call themselves conservatives with this kind of thinking.

“Creative destruction,” a phrase coined by Austrian economist Joseph Schumpeter decades ago, is the idea that with technological progress and changes in demand by consumers, some businesses die out and others thrive. Sony no longer makes the Walkman; now we have mp3 players. Many people no longer have home phones; now we all have cell phones. To lament the job loss in the landline phone industry is to ignore the fact that replacing that industry did several things: 1) created new jobs in the cell phone industry, 2) saved consumers money so that they could buy other things and create jobs in those industries. That’s why we are a service economy: our manufacturing base is so productive and things are so cheap, that we have all this money freed up for vacations, technology, tablet computers, etc. I remember a time when if your VCR broke, you took it in to get it fixed. Nowadays, if your DVD player breaks, it’s cheaper to buy a new one than to get someone to fix it. I guess Perry and Gingrich are upset at the lost job of the VCR repairman…

On This Week with George Stephanopolous today, Paul Krugman said that creative destruction is a fine concept when the economy is at full-employment, but when we’re in a recession, we should focus on demand. And with that statement, my satisfaction with my decision years ago to stop using his textbook tripled. According to Krugman, a Nobel-prize winning economist, we’re just supposed to stop technological progress when we’re in a recession. Other, sane economists would argue that a recession is the time when you need new products and processes the most, so we can create more jobs. No, in his mind, the government should just pay people to do the same thing they were doing yesterday, even if it’s not efficient, because, heck, someone got a job.

Let’s go back to Bain for a second. Seventy percent of the companies Bain bought were successful. If you’re crying for those 30% that failed and were sold for parts, don’t — the average success rate of companies is 50%. So Bain goes in, buys failing companies and 70% of the time they are successful, and somehow Romney is supposed to be ashamed of that record? The only difference between Bain capital and the Obama administration is that when Bain takes a gamble on a failing company, it risks its own money. When our government takes a gamble on companies like Solyndra and SunPower, because they’ve decided that solar power is the wave of the future, it’s our tax money they’re rolling the dice with. And still somehow Bain is the villain?

Capitalism has created more wealth than any other form of economic organization in the history of man. Trade is good. New technologies are good. The average life span of a person in the US increased by 2 years in the last decade, and the relationship between life span and per capita output is undeniable. People will lose jobs when their industries falter. Such is life. I understand the temptation to want to insulate people from hardship, but it’s impossible. I expect a liberal to want to prevent anything bad from happening to anyone, to save every job possible even if consumers don’t want the product any more. But I expect more from conservatives who tout their records of job creation and their love of free markets.

P.S. I also find it hilarious that Newt Gingrich will hammer Obama’s claim that he “saved or created” 3 million jobs (actually, the CBO estimates it’s between 1 and 3 million, but expect the President to use the highest possible number) by stating that government does not create jobs — the private sector does that… and then today on Meet the Press he took credit for creating 8 million jobs during Reagan’s administration and 10 million jobs during Clinton’s.

I had two problems with his arguments. If he had just said that, based on the research he could find, it is not effective at deterring murders, he might have had a point. The literature is mixed and, from what I can gather, doesn’t clearly show that the death penalty serves as a deterrent. Some proponents of the death penalty don’t care about this and support it more for its retributive aspects, arguing that if you kill a bunch of people you simply deserve to die. But his example of Texas was cited as evidence of the fact that states with the death penalty have high murder rates, so clearly the death penalty isn’t working.

Using this professor’s logic, one could also say that since the unemployment rate increased despite the stimulus bill, the stimulus bill didn’t work. When Republicans say that, they’re chastised as being idiots. And they probably should be, since it’s an argument not supported by facts, and the stimulus bill did keep unemployment from rising — albeit at the cost of rising debt. Whether it added between 1.5 and 3 million jobs, as the CBO says, or a half a million, as economist Ray Fair argues, is debatable and depends on assumptions of each model. We’ll never know. But it did increase output and employment. You can’t look at the fact that unemployment rate rose and conclude that the stimulus bill didn’t work any more than you can look at a state that has a high crime rate and conclude that one specific aspect of that state (that it has the death penalty) has no impact on crime or murder, ignoring every other thing that might affect the crime rate in that state (its other laws, its economy, its proximity to Mexico, etc.).

This professor and I are cordial with each other, so I decided I’d discuss his statement with him and give him a similar analogy based on what he said. I told him that, by his logic, you could also argue that cities that have more police officers often have more crime, so clearly law enforcement measures don’t work and we should spend less money on police. He backtracked quickly from his first argument and then retreated to the “it’s more expensive to execute” argument. Personally, I agree with that position and, as an economist who a) doesn’t see much deterrent effect and b) doesn’t much care for eye-for-an-eye retribution, I’m against the death penalty, too. But his students didn’t hear that and now probably think that because Texas has a high crime rate, the death penalty doesn’t work.

As professors, we’re supposed to be fostering our students’ ability to use their critical thinking skills. In economics, we spend a lot of time on the difference between correlation and causation, and how difficult it can sometimes be to prove causation. We’re supposed to model that kind of analysis for them so they can use their own brain to decipher specious arguments. If you think the death penalty is too expensive, fine — I agree with you. If you think it doesn’t deter other murders, cite the research. But it’s irresponsible to cite one data point as evidence of your conclusion when, as all social scientists know, a study that proves causation requires much more than that.

Then there’s Ron Paul. He didn’t back down, saying that markets should decide these things. That’s why people who support Ron Paul don’t just like him — they love him. He doesn’t cave to outside pressure and he has principles he doesn’t just talk about — he actually practices them. Global trade makes us better off. Sure, we get most of our clothing from China, but we also export most of our cotton to China. We do what we’re good at, they do what they’re good at, and in th eend we’re both better off. People who are offended that a presidential candidate does not buy American clothing are pointing at the American clothing industry but ignoring other industries that might be impacted negatively if we stopped importing Chinese clothing. Since we lifted import quotas on Chinese clothing in 2005, clothing prices have plummeted. Clothing prices have been falling for a decade, and that can’t be said for any other consumer product. (While computers get cheaper, they also get better and that keeps their prices stable; sure, adjusted for quality they are cheaper, but the CPI doesn’t accurately adjust for quality.) Prices of clothing at Walmart are ridiculously cheap — which is great for the poorest among us. But to believe ABC News, low clothing prices for poor people isn’t patriotic. It’s only jobs in one industry that matter because their news report is on that one industry. But what about other industries?

Remember back in September of 2009 when President Obama imposed tariffs on all Chinese-produced car and light truck tires? Usually tariffs are imposed on a specific product, not a specific country. Some economists, myself included, argued this was not a good idea as it would likely lead to the Chinese to impose retaliatory tariffs on our exports at a time when that was the only sector of the economy that was actually thriving. Especially with a tariff that is so specifically targeted to piss off one country.

As it turns out, I was right for once. China responded by putting tariffs on U.S. chicken. That’s right, chicken. And now the chicken industry in the U.S. is in dire straits, losing $.12 on every pound produced. Their tariffs have reduced our exports of U.S. chicken to China by 85%. So if you work in the chicken industry in the U.S., and you lose your job because of Chinese tariffs on our chicken exports, at least you can feel good that someone at Goodyear Tires still has their job.

There is a reason that growth expands when transportation costs fall. Free trade is a good thing. Sure, you can look at one market and see how it is impacted negatively by free trade, whether it’s U.S. clothing or U.S. tires. But what’s harder to see is all the jobs created in other markets as a result of free trade. U.S. chicken relies significantly on the ability to export its products. Other products made in the U.S., like tablet computers, vacations, etc., are only possible when we have more disposable income to spend. All the money we save on clothing and tires means we have more money to spend on these other things, and jobs are created there. Everyone wants free trade in every product but the one they produce, but if we all did that we wouldn’t have all the benefits of free trade.

You don’t abandon principles because someone with a microphone and a camera points out that someone might be impacted negatively by those principles. Ron Paul knows that. Many Tea Party members know that too, and stick to their principles whether someone calls them racists or terrorists. As the saying goes: if you stand for nothing, you’ll fall for anything. And if all you stand for is doing whatever is politically expedient to get elected or maintain a high approval rating while in office, the country is eventually worse as a result.

1. I have been notified by the President of SCSU that I was awarded tenure. (This happened a few weeks ago.)

2. My slow transformation into a grumpy old man has finally become complete. (This one happened today.)

First a little about the former. I haven’t been blogging much as of late — I was a bit shocked to see that my last post was back in May. I didn’t write much in Fall 2010 because I was preparing my tenure file, and cramming to finish up one last publication to make my tenure file stronger, so I just had no time. I didn’t write much in Spring 2011 because my tenure packet was out in the hands of the people who decide on these things. I’ve heard too many horror stories of people being denied tenure for political reasons, and the President of SCSU has very strong opinions, so I didn’t want to take any chances. That’s not to say I really worried that President Potter might call an audible on my tenure, given that I had the support of my department, chair and dean, but I didn’t want to risk it. As Treasurer of the Faculty Association, I get to attend the Meet and Confer meetings with my Executive Committee colleagues. I’ve seen Potter in action. He is a man of few words, but when he feels strongly about something, he has a way of making it very clear, and you really don’t want to be on the opposite side of him. I thought it best to let things cool for a while until the letter is in hand. Also, Spring 2011 was my most difficult semester teaching to date. I had six classes, four of which were upper division, including the senior research seminar, which involves supervising a dozen different research projects. Even if I had had the inclination to blog, I didn’t have the time.

Now summer’s here and I’ve got some more time on my hands, so I’m hoping to get back in the swing of things. The time off made me think about what I want to accomplish with this blog. I wasn’t really sure what I intended when I started, but after a few years, it’s clear what I believe my main focus has been: calling out politicians who are either misinformed or dishonest about economic issues. On that note, we’ll get to how I have become a grumpy old man. No, I’m not yelling at kids to stay off my lawn (although I have glared at a few in the last year). It’s the yelling at the television that is now apparently completely beyond my control.

I watch every Sunday news show religiously, usually while washing dishes or cleaning up the house. Occasionally, my girlfriend Sam will hear me yelling a rebuttal from the other room. Something along the lines of “The bill doesn’t even say that!” or “Sure, you were against the debt ceiling when it was a Republican, but now that it’s a Democrat it’s just fine!” Usually it’s because I’m annoyed, but last week I got angry.

Representative Xavier Beccera (D-CA) was on Fox News Sunday last week talking about our fiscal situation. Only, he doesn’t seem willing to do much other than tax people to fix it. When asked about one effective measure to slow the growth of Social Security spending, using a chain-weighted price index instead of the fixed basket Consumer Price Index (CPI) to adjust benefits, he said this:

“A chained CPI chains seniors to lower benefits. It’s unfair to them because they worked for those Social Security benefits.” It’s a great play on the word “chain,” I’ll admit, and it’s a good sound bite, but it actually gives them lower growth in benefits. There’s a difference. Why do benefits increase from year to year for retirees? To compensate for inflation. Economists can show that chain-weighted price indexes more accurately compensate people for inflation. Beccera also said that, unlike you and me substituting a cheap car for an expensive car, “seniors can’t decide to substitute for health care” if health care costs rise. Wait, I thought Obamacare was supposed to bring down health care costs anyway. Why is he even worried about health care costs rising? Finally, Beccera said we need to “strengthen Social Security and Medicare,” even though he voted for Obama’s health care reform which cut money from Medicare. Hmm.I guess  “Strengthen” means raise taxes.

It’s pretty clear to me that Rep. Beccera really has no idea what a chain-weighted price index is. I wouldn’t really blame him — it’s kind of hard to explain. I don’t even teach it in principles courses, but I do point out the issue with the CPI. A fixed price index like the CPI will overstate the impact of price changes on one’s well being because it assumes you buy the same amount of goods every year, when in fact you’ll substitute chicken for beef if beef prices rise more than chicken prices do. So when you get an inflation adjustment that compensates you for the increase in beef prices, you actually get too much money. Economists estimate that this kind of fixed price index overstates inflation rates by over 1% a year. Doesn’t seem like much, but when that’s compounded over decades, it makes a huge difference. Back when Social Security was first started, the amount of money the average recipient received was a pittance. There was simply no way you could live on it. Now you actually could live on it if you owned your home and car and didn’t have too many health problems. It’s gone from being a small amount of money that can be used for a stopgap to something that people expect will actually support them, and that’s partly because of the problem with the inflation adjustment. In fact, a story today reports that over 60% of seniors rely on Social Security for more than half of their retirement income. That’s not what the system was intended to do, and it’s grown so much largely because of the artificially high inflation adjustment.

Back in 2009, there was no inflation, but President Obama wanted to give Social Security recipients an extra $250 anyway because they’re used to getting an increase. That the annual Social Security increase is designed to compensate for inflation, which didn’t happen that year, is irrelevant. He said it would be yet another stimulus. Whether it was for inflation or just free money didn’t matter to him. Either way, it was more money for people to spend and, to quote Obama, “What do you think a stimulus is?” (By that I mean, according to our President, it doesn’t really matter how you spend the money or why you spend the money, only that you spend the money.) But the plan was stalled. It’s still in his 2011 budget and he’s still hoping to get it in there, retroactive to 2009. At this point, almost two years later, do we really need to give people an extra $250 to compensate them for inflation that didn’t happen? I think not.

So yeah, I yelled at the screen when Rep. Beccera was on. Then I watched it again and yelled again. He just wants to spend money. No cut to Social Security would be a good cut. Not even one that accurately adjusted benefits for the true impacts of inflation for a system that is going to be in jeopardy in a decade. President Obama said this week he would be willing to subject Social Security payments to “means testing,” which means that if you have the income to support yourself, you won’t get your full Social Security benefits. That will definitely save some money, although I’m against it on the notion of fairness. Remember that line that Rep. Beccera through out there: “It’s unfair to them because they worked for those Social Security benefits.” Poor and rich alike work for those, so it’s not fair in my book to use Social Security as yet another form of income redistribution.

This morning, on a few of the Sunday news programs, I saw a new AARP commercial. A kind old man comes on and says that some people in Washington are talking about cutting his benefits, and that old people need to band together and tell them to look at inefficiencies and waste instead of cutting Social Security spending. I wanted to yell at him but he seemed like such a nice man that I couldn’t do it. But here’s what I would have yelled.

“Nobody’s talking about reducing your benefits! Every plan out there says it wouldn’t touch anything for anyone over 50, and you have to be 50 to get into the AARP, so AARP members will not be affected at all! Quit fearmongering!”

Why am I so angry these days? Why is everyone so angry these days? This is the most polarized I’ve ever seen American politics. We have a August 2 debt deadline staring us in the face and there isn’t a single bill that can pass right now because nobody on either side is willing to give. Everyone is so dug into their positions that they can’t compromise. Why?

I think part of it is that the debt, the recession, the economy’s pathetic recovery, health care reform (I’ve been told it’s racist to call it Obamacare too much. I kid you not.) — all of these things have brought to the forefront a stark clash of visions for this country. The Democrats want business as usual, with some tax increases on the rich to pay for it. Some deny Social Security is even in jeopardy. I wonder how they would explain how the system will deal with the number of workers to retirees falling from previous levels of 20:1, then 10:1, now closer to 3:1, and eventually below 2:1. The math just doesn’t add up, especially when the federal government already owes trillions into the Social Security trust fund and life spans keep increasing. It’s pretty simple: either taxes have to go up or benefits have to go down. People are living longer and getting more out of the system, so it should only be fair to make them contribute more (either by pushing back the retirement date or raising taxes), but everyone’s so scared to do what’s necessary that it doesn’t get done. It reminds me of a young Annakin Skywalker thinking that with all the problems the Galactic Senate had governing, maybe it would just be better if one person told everyone else what to do. That worked out fine, right?

What we have here is a clash of political philosophies about the future, and that’s why people are so dug in and polarized. I understand that Republicans don’t want tax increases, but at some point we have to pay off this deficit. Personally, I don’t want tax increases either. But I also don’t want runaway debt, which is where we’re headed. Even in the $4 trillion debt reduction plan that Obama talked about last week, our debt would still increase by $10 trillion in the next decade. How many more times are we going to have to raise the debt ceiling?

But it’s one thing to increase taxes to pay off our debts — that’s what our country has typically done after major wars but is afraid to do now because of the slow economy. It’s quite another thing to increase taxes just so we can spend more. On a blog, I once read a Democrat respond to being called a “tax and spend” liberal by saying that “tax and spend” is a pointless criticism because the job of government is to tax and spend. It’s what government does, so how can you be upset when it does more of its job? (My job is to teach, but that doesn’t mean I do my job best when I lecture as fast as I possibly can for the entire period.)

The question I leave you with is this: what is the role of government? Democrats often argue that if we raise taxes, we’ll collect more revenues. Republicans, never seeing a tax cut they didn’t like, argue the opposite: lower tax rates cause higher growth and therefore more tax revenues. But they’re both just arguing about two different ways to do the same thing: increase revenues. Is it the government’s job to maximize the amount of tax revenues it can collect? Should government be as big as it can possibly be? To collect as much as it possibly can so that it can spend as much as it can? The authors of our Constitution would answer a resounding no to that questions. I just hope you’ll think about it. You have to think about how big you want government to be before you can start talking about taxing and spending.

The last question thrown at President Obama in his press conference this week revealed a lot to me. He said that we need to raise the debt limit and get a deficit reduction plan in place so that we can stabilize our economy. Sounds great, right? But why do we need to do this? According to the President, it’s so that we can spend more. He wants to get our debt down so that we can spend more…

And that, my friends, is why I yell at the television.

If you made it all the way through this post, I thank you. I had a few months of stuff to get off my chest. Sorry if I rambled a bit. I’ll try to tighten it up more next time, which I hope will be in the very near future.

Gambling is different than most goods, however. No tangible benefit is created in the process. There is no increase in ”social welfare” (our term for the benefits of trade), where a consumer and producer both benefit. The house wins and we lose, it’s just that some people lose more than others and some people get lucky and actually win. Nothing new is created in the process, except the occasional adrenaline rush. Normally, an increase in the supply of a product brings more competition and lower prices for consumers. Competition forces existing businesses to become more efficient or die, as firms that can produce at lowest cost thrive and push out unworthy competitors. But with gambling, the price of a bet doesn’t fall. A $10 bet is still a $10 bet regardless of how many casinos there are. 

However, more gambling options would be good for some Minnesotans. When I lived in Marquette, MI, I was about 15 minutes from a casino where I could spend hours with friends playing $2 blackjack on a random weeknight. It was nice knowing that I would never lose too much money, but I still had fun and there was always the chance I could come back up a few bucks. (Nevermind the fact that my behavior implies I’m both risk averse and risk loving at the same time — how do I live with myself?!). It was nice to have the convenience that more gambling locations offered. While a $10 bet is still a $10 bet, the cost of getting to the nearest casino to place that bet falls when there are more casinos — that’s the main benefit of increased gambling establishments.

But when other states have increased gambling, like Pennsylvania did recently, it has led to a significant increase in the number of people calling Gamblers Anonymous. If you haven’t seen the interview Ed Rendell did on 60 Minutes, I recommend it. He keeps arguing that more gambling is good for PA because the same people that used to leave the state and gamble elsewhere now just stay in PA. He argues that there was absolutely no increase in gambling when it was legalized, which is pretty absurd on its face. You have to believe that people don’t care about transportation costs (i.e. they place no value on their time or gas money) and a reduction in these costs has no impact on the demand for gambling. I’d link to a video but I was having a difficult time finding a clean copy, so I recommend you search for one.

So why are we considering expanding gambling in Minnesota? Is it because the state has finally realized that gambling between consenting adults should be legal if we actually care about personal freedoms and liberty? Wishful thinking, but no – it’s because of tax revenues. We’re in a budget deficit and the state sees this as another source of funding. But I find it completely inconsistent to say that gambling should be illegal except when the state needs it to increase its tax revenues. If you’re going to tell me that something I want to do is illegal, you need a compelling reason for it — public safety is usually a good one. I understand that I can’t drink at school or smoke indoors or do a lot of other things because it might negatively impact someone else. But gambling is between me and the casino. It has no downside unless you’re worried that someone will get in over their head and lose their home, but with E-trade and futures markets, anybody can do that these days.

The inconsistencies abound when it comes to gambling. The state makes it illegal because it’s supposedly bad, but the state is allowed to benefit from it by having a lottery. We want to increase the number of gambling establishments so we can collect more taxes on an increased amount of gambling, but legislators (and governors like Rendell) want to claim that nobody who isn’t gambling already would gamble so that we don’t feel bad about the increase in gambling. But that argument defies the law of demand. And aside from that, you can’t have it both ways: either more people gamble so we get more tax revenues, and we increase the number of people getting into problems from gambling but we collect more in taxes (yay!)… or the expansion of gambling opportunities has no appreciable impact on tax revenues and we can still feel good that we haven’t created more gambling addicts (yay?). At this point, I’m not clear whether we want more people gambling or not.

Gambling is entertainment. Do some people get carried away with it? Sure. But right now they can do with with lottery tickets and pull-tabs. Even if I’m expected to lose in the long run, I’m willing to gamble because of the adrenaline and the fun that I have trying to beat the house. I’m convinced I’m a horrible gambler because, in order to do it right, you have to increase your bet at certain times and the risk averse wuss inside of me is too afraid to do that. But it’s still fun. And who is the state to say that this kind of entertainment is any less worthy than spending $100 on a Twins or Vikings game?

When I first started this post, I think I was actually against the racinos and gambling expansion. My argument was largely based on the second paragraph: it doesn’t really decrease prices so you can’t make the traditional argument that greater supply is good for the market. But that’s why I love having this blog — you start writing, you start thinking, and at some point you stop and go back to first principles. What is important to me? What do I believe in? I believe more in personal freedom and liberty than I do in economics. I doubt anyone can make an argument that you have to ban gambling to prevent people from hurting themselves any more than you can make an argument to me that you have to ban Hardee’s to prevent people from eating too much. Are there negative consequences? Sure. But freedom isn’t free.

His guest for that episode was David Boaz from the Cato Institute. My favorite part of the episode, just over halfway through, was when he talked about the Hillaries and the Huckabees. His argument was that the Democrats and Republicans are really not too different from each other. The Democrats (the “Hillaries”) think you’re too stupid to even know how to burp your own child. They need to provide a class to teach you how to do that because you’re too stupid to read a book. They have to ban Happy Meals in San Fransisco because you don’t have enough discipline over your kids to not be suckered into overfeeding them fast food. They think they should run your life. In contrast, the Huckabees think that God should run your life. You shouldn’t be able to control what you drink or smoke or who you marry if it goes against what the Bible tells them. Libertarians are the only significant political party that thinks that you know how to run your own life better than Washington does.

It’s an argument I’ve made before on this blog. Republicans want you to do whatever you want with your money but they want to limit what you can do with your body. Democrats will let you do anything you want with your body but want to limit what you can do with your money. (Their ideal situation is to let you smoke marijuana but tax it so they can spend the money.) But your income is a product of what you do with your body and your mind. It is an extension of yourself. Controlling my behavior and controlling my money are the same thing. I make a living so I can do things I want to do. Regulate how I can make a living or what I can do, and either way you’re interfering with my ability to pursue my happiness. That’s why I’m a Libertarian.

A radio personality on SIRIUS, Andrew Wilkow, took up a similar topic a few days later, saying that Washington is full of people who are perfectly fine with dictating behavior until it’s a behavior they want to do that is in jeopardy, and then suddently there’s a massive enfringement on their fundamental liberties. Some don’t want gays to be married, but heaven forbid you make them register to buy a deadly weapon and wait a few days to get it. Others want you to be able to smoke marijuana whenever you want, but heaven forbid our children be able to buy a soda from a school vending machine.

I wanted to write about that episode for a week now, but was too busy and needed something else to add to bring it together. Then today I saw this article about a school in Chicago that does not let students bring their own meals from home. It seems parents don’t pack lunches as healthy as the ones the school provides. Never mind that fact that a) the kids don’t eat the healthy lunches because they taste horrible, and b) the school gets more money if it forces students to buy school lunches. You don’t know how to parent your own kids — the nanny state (literally!) will take over from here.

(FYI: The new season of Jamie Oliver’s Food Revolution starts tomorrow, and if it’s anything like last season, it will be an education about just how hard it is to put healthy food in schools that schools can afford and kids will actually eat. You can put all kinds of healthy food in front of kids but if it’s not tasty, kids just throw it away, like they did in the story above.)

When I was a kid, I ate peanut butter and jelly sandwiches and Fritos for lunch. So did all my friends. The reason most of us aren’t obese even to this day is that we were allowed to play tag during recess. These days you can’t even do that in some schools, lest someone fall down and scrape a knee or, even worse, someone’s feelings get hurt when they aren’t fast enough to outrun another student. Government controls your kids behavior (for their own good) by limiting how they can play, then they get fat, and then they have to control their diet because, gosh darn it, for some reason kids are getting fat these days.

This brings me to Michelle Obama and her program to change the way children eat. I’m fine with the goal, but it’s the sheer arrogance that offends me. She’s saying that we have to get restaurants to change menus, schools to change menus, and educate parents because they’re too stupid to know how to keep their kids from getting fat. What spurred this mission of hers on? Her daughters were getting chunky when they were kids and she didn’t realize it until a doctor told her they needed to lose weight. What did she do about it then? She exerted some parental control, changed the way she did things, and now her kids are fine. Funny how she didn’t need a government program or some bureaucrat telling her she couldn’t give her kids a lunch to bring to school. She worked it all out on her own. But she’s on a mission because there’s no way that the unwashed masses could do what she did.

I’ll finish by reminding people that when you allow legislators to enfringe on your neighbor’s liberties because you think they should do something differently, you should worry about them doing the same back to you when they’re in the majority. Politics is littered with people who drink too much (Ted Kennedy), smoke too much (John Boehner), cheat on their spouses (too many to list), and do illegal drugs (all of our last three presidents). And yet so many Americans seem to have no problem letting these horribly imperfect people tell you how you should live your life and raise your kids, as if they actually know better. News flash: if you think politicians and bureaucrats actually know how to raise your children better than you do, they probably do; and if that’s the case, it says a whole lot more about you than it does about them.

The companies sent their executives to live in Geneva so that they can be in compliance with the law if it’s passed. Now not only does the U.S. not get to tax their companies’ profits, they don’t get taxes on all the daily items their executives buy because they’re spending most of their time in Geneva. Way to think that one through, Rep. Doggett.

As the congressman says, “We can’t write a law that their lawyers can’t get around. That’s the whole problem here.” Although it pains me to say this, the problem is not the lawyers. The problem is that we have the second highest corporate tax rate in the developed world (soon to be the highest when Japan lowers its next month) and, duh, companies are going to want to get around it. If you try to make them file taxes where their executives are, they’ll move their executives where it is cheap. If they tried to make them pay where their production facilities are, guess what? Some of them will move their production facilities and we’ll lose even more jobs.

Ms. Stahl responds: “You’re in Congress. Why did Congress write these laws that allows (sic) this to happen?”

I don’t know who is revealing their ignorance more in this interview, but clearly neither of them has heard of the Law of Unintended Consequences. Rep. Doggett seems to think that we need to find a way to draft a law that forces people to stay in this country, prevents any company from moving, and makes people do what the government wants to them to do so they can collect their taxes. Ms. Stahl implies that it’s possible to write a law that will have no unintended consequences, and seems to chastise Congress for not having done so already.

They both need to read Applied Economics: Thinking Beyond Stage One by Thomas Sowell to understand that if all you’re thinking about is the immediate impacts of a law, you’re bound to write a bad law. Every policy has initial impacts and then secondary and tertiary impacts as people respond to it. Focusing on stage one is easy, and is what our lawmakers do most frequently. It also often leads to bad policy.

People are rational. The tax base responds negatively to higher tax rates. Raise taxes and people will try to find ways around paying them. Change the rules and they’ll find even more ways. What’s so hard to understand about that?

The problem Doggett has is not with the laws. He has a problem with basic human behavior and rational thinking — the people responding to laws by changing their behavior to make themselves as well off as possible are rational; the people writing laws thinking they can control how people will respond are the irrational ones.

This comes on the same day I received an e-mail from my school asking me to take a survey about online research and resources.

The survey made me realize that almost all of my research is based online now. All journals have an online presence, and some like Berkeley Electronic Press are exclusively online. The costs of printing used to limit the supply of available journal spots, making it harder to publish. But that doesn’t necessarily mean that the standards of online journals are any less strict. My work was peer-reviewed, by the editor of the journal himself, James Dearden, who was the most helpful editor I’ve ever had the pleasure of working with. I’ve since done a review for another article in BEPress, and I took the same care I did with other print-based journals.

Online is going to be the future of academic publications, and it doesn’t have to be inferior. BEPress does a great job and I recommend it to my colleagues in academia.

For those unfamiliar with cruise ship drink policies, most of them have already gone to an “all you can drink” flat fee pricing scheme for sodas, somewhere in the range of $30 or $35 for a 7-day cruise. They used to give you sodas for free but that changed many years ago. Now all you can get for free is tap water. You can’t buy alcohol in the duty free store on board and drink it — they stow it below and give it to you when you leave the ship. And any alcohol you buy in port is likewise confiscated until the trip is over. If you want to drink, you’re going to have to either smuggle alcohol on board or pay some pretty exorbitant prices for alcohol.

Now Royal Caribbean is experimenting with a range of all-you-can-drink policies for alcoholic beverages: one for just beer and house wine, a more expensive one that includes mixed drinks with cheap liquor, and the primo one including top shelf liquor. Right now it’s only on a few ships in Europe, where people tend to handle their liquor a little better and the “all inclusive” is more of a staple. Their argument is that it will help people determine the cost of a cruise more accurately. The likely impact is that people will spend more total on alcohol, but have a much better time, and profits for the cruise ship will increase. Everybody wins. They might even be able to start a beer pong tournament. The ocean swells would make it a real challenge, I’m sure.

While some will argue that making alcohol cheaper is a bad thing, those people have obviously never been on a cruise before.

I was just hearing about it for the first time, and of course the libertarian streak in me thought “If I want to put a sprinkler system in my home, I’ll probably pay less in homeowner’s insurance, but that should be a choice I make, not one the goverment imposes on me.” I haven’t been through a house fire and I can’t remember anyone I know ever going through one. They’re not that common these days. In 2009, only 2,564 people died from a fire in a home. I say “only” because more people than that die each year while waiting for kidney transplants they never receive, but the government still won’t let people sell their kidneys to people whose lives would be saved. And now suddenly we have to require people to do spend $3,000 to $5,000 (plus 30 years of interest on it) so that we can stop all the deaths caused by housing fires?

When this came on the television, I said to my girlfriend Sam, “The real question is, how many houses catch on fire every year?” Is it even worth the cost? In 2009, firefighters responded to 362,500 home structure fires. There are over 128 million homes in this country, so your odds are pretty slim that you’ll need a fancy new sprinkler system in your home. As a sign of how much she’s rubbing off on me, my initial concern wasn’t even the price tag it would add to a new home. It was how it might affect the aesthetics of the ceiling.

And as a sign of how much I’m rubbing off on her, her answer to me was, “Actually, the question is, how many house fires result in neighboring houses catching fire?” In that one question, she showed me she understands externalities, insurance markets, and personal responsibility.

I was proud of her last week as we swam with dolphins, snorkeled, and ziplined our way through the treeline outside Puerto Vallarta, and she did it all like she’d been doing it for years. But I think I’m more proud of her for this.

P.S.: A note from a colleague: According to him, the estimated cost is closer to $12,000, and the number one issue with them is false alarms that cause major water damage. Since he’s an economist, he reminds me there are always both Type 1 and Type 2 error. This reminds me of a recent Valentine’s Day dinner gone wrong resulted in a small fire in the dining room. Apparently really tall candles can fall over relatively easily. Who knew? Anyway, I shudder to think that something like that, which we put out in 10 seconds and which caused essentially no damage, could have flooded our whole house.

I wish I could blame it all on that, but it’s also the tenure issue. My department has recommended me for tenure and my dean has written to me indicating he will recommend me to the provost. But there’s still a few more months until the university president makes the final decision. I already broke one of Greg Mankiw’s rules for tenure-track faculty (don’t start a blog!), and I’m trying not to break another by getting all political.

It’s a shame in these crazy times that I feel like I have to shut up lest someone take what I say the wrong way and hold it against me but such is life. While I haven’t been posting on political issues, I’ve been following them still. More than I wish, I follow the opinion section of the St. Cloud Times, ABC News, Washington Post, and New York Times. I’ve noticed that the quality of the discourse is largely determined by whether you are allowed to post under a pseudonym or whether you have to put your actual name on your comment.

Where anonymity is protected, the discourse is harsh and personal. I have learned that people “like me” are: evil, stupid, ignorant, in the pockets of corporations, racist, hate the middle class, and want to destroy this country. It doesn’t matter whether the issue is whether we should raise taxes, whether we should allow smoking in restaurants, or whether we should fund Planned Parenthood with tax dollars. Instead of making rational arguments, people just insult each other. It’s sad.

I remember after Gabrielle Giffords was shot how the tone was supposed to change. We were told by our President that we should look at the words we use and ask if they help or if they hurt. I guess it’s easy to take sides when the person you’re taking sides against is a mentally unstable guy with a gun who shoots innocent people. But as soon as real issues came up again (tax increases vs. spending cuts, the rights of government workers to bargain collectively, etc.), the vitriol is back. Wisconsin Governor Scott Walker is equated to Mubarak and Hitler. A left-wing woman attacks an African-American Tea Party member by calling him stupid and asking him how many children he has that he “claims.” (And the media wants to paint the Tea Party as racist and violent?) Maybe the President should issue a reminder about the Giffords rule.

I’m sad for my country that we can’t have debates about these issues without people impugning each other’s personal character. I hear a lot of debate over what the “facts” are — do Wisconsin teachers make more than the private sector? Are unions good or bad for education? Is it more cost-effective to give Planned Parenthood money now than to have to spend money on other social programs later? (Maybe more on that issue in another post.)

Sure, those are important facts for discussion, but in some cases they’re completely irrelevant. You’re not going to change someone’s mind on abortion by pointing out that the government might save money in the long run if there are more abortions. And you’re not likely to change someone’s mind on the other side of the issue by pointing out that our fiscal situation would be improved if we had more young people to work and pay taxes. These are issues of principle, not issues of fact. We are a country made up of different groups of people who feel very differently about the appropriate role of government in our personal and economic decisions. These are very personal beliefs formed by one’s life experiences. People are not likely to change their minds on fundamental issues because you tell them they’re stupid for thinking what they think.

So how about a little more mutual respect and a little less personal attacks?

Dozens of e-mails were exchanged on our university’s “discuss” list — an e-mail listserv for faculty to exchange ideas and discuss topics — trying to explain why this might be the case and what we can do about it. Among the explanations and possible solutions were:

1. This is simply a communications problem. We’re better than students think we are and we just need to tell them that.
2. We need to explain to students how harmful it is to our “image” when they say bad things about us.
3. Students at SCSU are simply more vicious than students at other schools, and this has nothing to do with our faculty or administration.
4. Writing negative comments on evaluation forms without ever speaking up during the actual class is a cultural thing, common not just to Minnesota but to Nordic cultures.
5. Good students aren’t posting on the site for some reason, so it skews the numbers. (Why this would be specific to SCSU and not apply to every other school was not explained.)
6. We try to give access to non-traditional students who may come in with less academic qualifications and who, as a result, may do worse and be more frustrated and more likely to vent on RMP.
7. It’s a Midwest thing. We take lots of rural students and expose them to a diverse, mostly non-rural faculty, and apparently that makes them dislike us.
8. Our students are biased, possibly racist and sexist. They claim that female professors hate men and that minority professors hate white people, yet never claim that white men hate women or minorities.

Not surprisingly, there was not one e-mail that said “You know what, maybe we could learn from this and try to do a better job of teaching in ways that our students will appreciate.” Not one. Apparently we’re perfect here and if any student thinks otherwise, it’s their problem. One colleague did say that they try to learn from RMP and pay special attention to comments that are specific and explain what the professor could do to improve. Kudos for that.

A colleague in my department had a different take on it. He said we should wear our 9th worst ranking with pride. The “worst 25 schools” include many good universities, schools of engineering, and institutes of technology. Maybe students simply give you bad ratings if the subject is difficult to learn. There may be some truth in that — I’m not sure how easily students can separate the level of difficulty of the material and the quality of instruction received. I know I always wanted professors who could make difficult concepts seem easy, but sometimes the concept is so difficult that it’s simply impossible to make it as simple as we would like it to be. I know I certainly felt that way during my graduate Time Series Econometrics course, but my experience teaching helped me separate the course difficulty from teacher quality. Your average undergrad may have difficulty doing that.

There may be a modicum of truth in a few of these explanations, but I have a real problem with the “blame the student” mentality that predominated these e-mails. I have a lot of respect for students — I was one once, as were all of these other professors, although they make me wonder if they may have forgotten what it was like. I have a job because of them. I not only teach them, I learn from them. It frustrates me when I hear professors discount their opinions or knowledge. In my opinion, students usually know a good teacher when they see one. If, as a professor, you are going to claim that your students are too ill-informed to appreciate how amazing you are, either a) you’re mistaken, or b) you’re not communicating well enough to your students about why you’re doing things. If I thought I were the best boyfriend in the world but my girlfriend did nothing but complain about me, either I’m horribly wrong or she’s just not understanding how awesome I am. You can imagine how well it will go over when I tell her it’s the latter. (Or, as an analogy to #2 above, I tell her that it makes me look bad when she complains about me to her friends so she really just needs to stop complaining.)

Once students know why they have to do an assignment, and what they’re supposed to get out of it, they are usually willing to do the work. Maybe in the “real world” you’ll have a boss that will tell you to do something without explaining why, and perhaps this kind of teaching is just good preparation for the workplace. But is college simply a preparation for how awful the work world can be? Not hardly. The ironic thing is that professors are often the kind of people that most want to know why they have to do something. We’re intellectuals, after all. We are always questioning and looking for an explanation or a purpose — if you can tell me why I have to fill in a “last date of attendance” for a student, then I won’t complain as much about having to spend some time on Christmas Eve doing it. If you have a method to your madness, it would be wise to let students know what it is at some point.

Maybe students write comments that are snide, but I’ve seen many of them that are actually constructive and specific. Granted, I take every bad rating I get like a dagger to the heart, but when there’s something specific I try to address it. But I know not everyone does that. I’ve seen some professors with the same kinds of specific comments year after year after year, evidence that they’re not taking any of the criticism to heart and trying to fix what students seem to think is a weakness. Aren’t we supposed to be continually striving to improve?

A colleague of mine at a previous university once told me that she didn’t pay any attention to student evaluations. Her statement was something like, “Students don’t know what they’re supposed to learn in a course, so how can they evaluate how effective you were at teaching them the material?” Actually, I think they have a pretty good idea. You have a textbook with 20 chapters. Did you get through only 10 of them or did you cover almost all 20? Did you help make the material more clear or more convoluted? Did you use interesting examples to bring the course material to life and show them how it applies to them, or bore them to death? I think students are perfectly qualified to judge the people who are teaching them and take issue with anyone who feels otherwise. At that point, you’re basically the chef that’s telling the patron that, no, that steak is not undercooked — it’s supposed to be purple, and if you can’t appreciate it that way, you’re not refined enough to be eating at my restaurant.

On a related note: I wonder how many faculty who completely discount RMP will pay attention to a product’s ratings on Amazon.com or equivalent website before purchasing a product? It doesn’t matter if it’s not a statistically perfect sample of the class — there’s still information in there you can use. We all use it. But when it’s about us, suddenly it’s flawed and should be dismissed? I disagree.

For me, the heart of this issue is this: are we to assume that students are adults capable of independent thought, or sheep to be guided to the final destination of a diploma?

I once served on a committee that heard cases of students who were suspended or expelled and wanted to be reinstated to the university. Most of us felt that in order to be admitted before you were scheduled to be readmitted, you had to show that you were taking positive steps to correct the problems that got you in trouble in the first place. But some professors were very sanctimonious about it — they insisted that students should be treated like adults and be fully responsible for their own behavior, and there was little they could do to gain early admission. I then asked everyone in the committee to raise their hands if they graded attendance and almost every hand went up, especially those that were most insistent that students are adults. If they’re adults, why should their attendance be graded? If they can learn the material without listening to your lecture, shouldn’t they have that option without it adversely affecting their grade? If they’re adults, why don’t you treat them like adults?

We cannot have it both ways. We cannot assume that students are free-thinking, autonomous individuals who have their own thoughts and ideas, and then turn around and say they’re too stupid or racist or uncultured to know whether we are teaching them effectively.

It may be true that remarks on RMP often are not the nicest form of criticism, but it’s criticism nonetheless. Simon Cowell may be a pretty mean judge, but there’s certainly a lot of truth in most of his critiques. You can either learn from criticism and try to improve, or you can bury your head in the sand.

The piece is a discussion of a private dinner that Austan Goolsbee and Valerie Jarrett had with about 20 business leaders. Gasparino reports that some of the business leaders told him some startling things, but I want to focus on two.

1. Obama does not really believe that the rich need to pay more. That was just campaign talk.

2. They admit that the stimulus did not really work.

Wow. I don’t know whether to a) presume they were lying because this goes against everything they’ve said before, b) believe them and be happy about finally getting some honestly about this, or c) believe them and be sad that the administration has been knowingly pushing the successes of a failed program for a year and a half. The last one would explain Christina Romer’s departure, given that she had to advocate for policies that her own research said would not work. Given everything we’ve heard in the last two years, I really don’t know what to believe any more. Joe Biden said the stimulus was the perfect size and worked wonders — but after the horribly wrong prediction of “Recovery Summer,” who believes Joe on economic issues any more? The NBER says the recession stopped as of June 2009, which makes me wonder: if the recession was over before any of the stimulus really had any chance to be implemented (because there are, in fact, no shovel ready jobs, as President Obama admitted), how can you honestly claim that the stimulus saved us from another Great Depression? You can’t. It’s like saying that a medicine you took prevented you from dying, when your symptoms were already disappearing before you started taking it. Apparently the administration is finally willing to admit that.

When Obama claimed that he wanted to take Joe the Plumber’s money so he can spread it around, I was horrified. Last week, Claire McCaskill (for whom I gained a lot of respect the week before when I discovered that she’s never requested an earmark), actually said that letting rich people keep their money is “giving them money.” Another Democrat said that letting rich people keep their own money is actually “welfare for the rich.” News Flash: welfare is when you give people money that is not theirs, not when you let them keep what they earned. I honestly believe these people believe the things that they say, because to believe otherwise means I’m even more cynical than I already know I am. I would like to believe they have some integrity, even if I do think their position is misguided. I can at least respect that.

In regards to statement 1, I think only 3 things are possible:

a) Valerie Jarrett is telling the truth, and Obama really was just lying to people to get elected. So much for change we can believe in and a new kind of politics.

b) Valerie Jarrett is lying, and Obama really does want to redistribute wealth, but now she has to try to convince business people to invest even though Obama wants to take their profits because, you know, “at a certain point you’ve made enough.”

c) Valerie Jarrett is telling the truth, and Obama really did believe in social justice and income redistribution, but just got a little overheated in his campaign rhetoric — and now that he’s in charge and he sees that it was a lot eaiser to criticize other people’s policies than it is to actually come up with your own policies that work, he’s changed his mind and is trying to be more constructive with business leaders.

For our economy’s sake, I really hope it’s that last one. (But I suspect it’s the second.)

Our employment contract states that for teaching faculty, “effective teaching shall be the principal proportion of the five criteria considered in evaluation.” (For the record, the five are: effective teaching, scholarly or creative achievement or research, evidence of continuing preparation and study, contributions to student growth and development, and service to the university and community.) Part of effective teaching is trying new things, making changes, and improving your course. Sometimes those changes don’t quite work out the way we thought they would, but if we don’t try, we’ll never know if they work or not.

I am so thankful now that years ago I put our student evaluation process online instead of the traditional paper evaluations. Students have the chance to complete it at a time that is convenient to them, and they write a TON of comments that are more specific and helpful than the ones I got when I was using paper. I’ve tried to focus on the answers I’ve received to “What are the weak parts of the course that could be improved?” and have been fortunate to receive some really great suggestions from students. A few years ago, a few students suggested using an in-class exercise as a way of breaking up a 3-hour night class. I tried it the next semester and got great comments on it, so I’ve added it to almost all of my courses. That’s just one example. There are many more.

And that’s why I’m writing this post today, as another semester comes near to an end. Students: please take your evaluation process seriously. Give your professors useful comments. If they’re not doing something well, tell them how they can improve. (As I tell my students: if you think I suck, don’t just say “you suck” — tell me exactly WHY I suck so I can try to suck less in the future.) If you want your professors to care and to really do a good job, then you have to do your part to give them information they can really use. Don’t just say “I don’t like the homework.” Explain exactly why you don’t like it and suggest how it could be changed in the future. Sure, some of your professors are so set in their ways that they’ll probably ignore your suggestions anyway, but there are enough of us out there who really want to improve that it’s worth a shot. Chances are that some of the useful things your professors are doing in class now are the result of a student giving feedback years ago. And it’s probably also the case that your less-than-effective professors aren’t even sure what they’re doing wrong — or if they know, they don’t quite know how to fix it.

So be specific, be constructive, and be creative in your comments and suggestions, and we’ll all be better off for it.

But whenever that argument is put to someone who disagrees, they often counter by saying, ”Government isn’t bad. Government is people.” That’s the argument used by frequent O’Reilly Factor guest, Dr. Mark Lamont Hill in a special by John Stossel.

But just because there are people in government, and we want to believe that people are generally good (despite all evidence to the contrary), that doesn’t mean that government is therefore good. By that logic, gangs and drug cartels are good. They are all made up of people, too, right? I’m not saying the government is as bad as a drug cartel (again, despite all evidence to the contrary). I’m trying to point out that the government is not just people, just as a firm is not just people.

What is a firm? Ask 10 economists and you’ll get 10 different definitions, but my best attempt is this: a firm is a collection of assets, long-term contracts, people and incentive structures designed to maximize profits. Change the people in a company and you often get different results. Change the contract structures in place and you’ll get a different outcome — just ask Netflix, who proposed a different form of video rental business that has helped destroy the traditional video store like Blockbuster. Change the incentive structure for your employees and suppliers, and you’ll get a different outcome.

Some incentive structures are good, and people are rewarded for working hard. Other incentive structures are bad. Take those evil subprime lending banks. Loan officers had an incentive to make NINJA loans (no income, no job, no assets) because they were paid a loan origination fee. Why take the risk of making bad loans for your company? Because the company could sell them off to Fannie Mae and the risk was no longer their problem. The incentives and contracts that were in place induced utility-maximizing employees to behave in a certain way that, in the end, was destructive to the economy. The collapse of the housing market should not have been a surprise if you just followed the incentives that were created from a) The Community Reinvestment Act and regulations requiring banks to lend to less-than-qualified borrowers or face regulatory scrutiny, b) loan companies that pay their loan officers a commission of every loan they make, c) Fannie Mae’s policy to buy more subprime loans, and d) securitization of these loans so that the risk was spread over a wide swath of investors. That doesn’t mean the banks who made the loans were bad — it means the laws, regulations and incentives all combined to create a bad outcome. And instead of blaming the laws they put in place, people in Congress simply villify the banks.

I recently tried to save my university money by buying a 3-year membership to the Western Economics Association International instead of a 1-year membership. One year was $60, 3 years was $125. I opted for the 3-year “green” membership to save money and trees, which cost me $110. When I applied for reimbursement, so that the $110 would come from my professional development fees, I was told that I’m not allowed to buy a 3-year membership, and must buy a 1-year membership instead. Instead of being thanked for saving money for the university, I was told that we’re not allowed to do that. Do I think that the person who e-mailed me informing me of this policy is bad? No — she’s just doing her job. There’s a reason for the rule (so that all payments are counted in the right fiscal year), but that doesn’t make it a good rule overall.

So when people like myself say they distrust government, or think government is bad, please don’t counter with the simplistic argument that “government is people.” Government is a set of laws, institutions, and regulations that often end up rewarding people for behaving in ways that are not optimal for the economy or society as a whole.