EclectEcon

What? No Christmas Music?

A couple of weeks ago, I felt like listening to some Christmas Carols, and so rather than dig through my CD and tape collections, I decided to check out what might be available on Shoutcast via Winamp.



Nothing. Nada. Not in April.



So I had to sing 'em myself. Next, I'll have to load 'em on my WMA player.

Keith Richards Is Out of His Tree!!

From the BBC, courtesy of Brian Ferguson:

Rolling Stones guitarist Keith Richards has been taken to hospital in New Zealand after injuring himself while on holiday in Fiji.



A band spokeswoman said Richards had suffered a "mild concussion" and was taken to hospital as a precaution.



Media reports in Australia and New Zealand said Richards had hurt his head when he fell out of a palm tree.

There are no reports on what he was doing when he fell out of the tree. Speculative comments are more than welcome!

Gaza, Israel, and Egypt; No need for lines on the maps

Who needs borders to see where the various jurisdictions lie?



I may have posted something like this before, but this is Google's satellite view of Gaza, Egypt, and Israel. If the lines are there, click on "satellite" and you can still tell pretty easily which country is which. You might also want to zoom in one more click.



John Chilton asked me a good question via e-mail: How much of the greening of Israel is due to diversion of water from the Jordan River?



I don't know. He and I both agree that having well-established property rights and following free market principles is important. I expect that we would also both agree that great infusions of foreign capital for investment have played a major role.



At the same time, I must ask why water from the Jordan wasn't and hasn't been used more effectively by Palestinians and why so much foreign aid to Palestine and the neighbouring areas has not had the same greening effect.

This is what I've been saying, too

From the NYTimes teaser for John Tierney's column (I don't subscribe to the pay portion):

A gas tax is a far better way to encourage conservation and combat global warming than more fuel-efficient cars.

Let me add that a higher gas tax would, in fact, induce more people to switch to more fuel-efficient autos. In the UK, where gasoline prices are roughly double those in North America, people tend to drive much smaller, more fuel-efficient cars; there are few big pickups and SUVs on the roads here.



Update: I meant to include a link to this piece by Don Boudreaux at Cafe Hayek:

...just a few years ago there were only three venture-capital firms focused on energy companies; today there are 76 such VC firms. So much money seeking ways to find new sources of energy!



Those entrepreneurs and investors who succeed will become fabulously rich; those who fail will be poorer than they would have been had they not entered the quest.



And those of us who do nothing but freely choose which fuels to purchase will benefit enormously.



I love this market process.

Me, too.

The Cardiologist's Diet

If it tastes good, spit it out.



source unknown [thanks to cmt].

Melanie Phillips on Jose Maria Avnar

Melanie Phillips has a gem on the importance of non-appeasement:

A splendid piece by the former Spanish Prime Minister, Jose Maria Avnar, reminds us of what a tragic day it was for both Spain and the defence of the free world when the Spanish buckled under the threat of terror and replaced him by an appeasement-minded government. Avnar is one of the few present or former world leaders who really gets it. NATO, he says, needs to articulate a new mission: to combat jihadism and the proliferation of weapons of mass destruction and concentrate its efforts upon fighting terror. Obvious. In pursuit of this aim, he says, it should open its doors to those nations that share its values and invite Japan, Australia, and Israel to become full members. Obvious: but only to some. Israel, as he says, may be in the Middle East but it is defending western values, and its half-century defence against the Arab enemies who have ceaselessly tried to exterminate it has now mutated into a defence against the Islamist extremism which has taken over the Palestinian cause. But as he says, there are many who don’t see it that way:

Click here to read the quotation and the rest of her piece.

Why I Want to Attend a Football/Soccer Match While I Am in the UK

It isn't the game so much as the ambience.

Sharing the Oil Wealth; Don't Use Labour Markets To Do It

John Chilton, who writes as The Emirates Economist, has often told us stories of how national workers in the United Arab Emirates quit jobs frequently. In his latest piece, he also points out that children in school have little incentive to work hard because they are virtually guaranteed a high-paying job that requires little effort or ability. As a result, these students are not particularly well-educated and are not the most highly sought-after employees.

The output of government schools for nationals needs improvement, and, in general, it is inferior to the output of private schools. In my judgment, government expenditure per pupil is sufficient. The trouble comes from two major factors.



The first is that schools are mismanaged and/or have imposed on them rules and regulations that many times make the job of management more difficult.



The second factor is weak incentives. Too often a young national's future has little connection to merit, to how well he or she does in school. This is not a problem schools can solve, but it does constrain what schools can achieve with the raw material - students - they are given.

Can Albertans see the handwriting on the wall?



The Emirates Economists elaborates on the problems here. One important difference between the UAE and Alberta is that Alberta cannot prohibit other Canadians from migrating there.... yet.

The Kafka Index

From the Private Sector Development Blog (affiliated with the World Bank):

The Kafka Index



France is campaigning to cut government red tape by using the name of writer Franz Kafka, who gave rise to the term Kafkaesque because of his portrayal of absurd, surreal and often frightening bureaucracies. The government has introduced what officials call a "Kafka" scale of one to 100 on how many forms, letters, phone calls and other steps are needed for companies and individuals to win state permits or aid for a project.

It's a great idea, and it fits nicely with the work Tim Harford did while at the World Bank, but it isn't quite the way I recall The Trial. Just having to fill out forms, write letters, make phone calls, and take other steps is greatly removed from the surreal terror of The Trial.





If you don't want to read it, watch Orson Welles in the movie version:







Note to Amazon.ca (and its potential customers): more often than not, Canada's prices are higher, even or especially after using exchange rates.

Oil Prices and Oil Futures

I just read Phil Miller's brief posting and graph, showing that US energy expenditures, as a percentage of total US consumption expenditures, while rising recently are well below historical highs and, this ratio is roughly in the same neighbourhood it has been in much of the time over the past fifty years. Instapundit has more on this relationship. However, be careful when you look at the chart he references. Things don't seem as rosy to me as they do to Insta.



Phil's piece prompted me to visit EconBrowser, where there have been two excellent pieces in the past couple of days. The first one asks "Who's Afraid of $3 gasoline?" and has a pretty pessimistic outlook for the US (and world?) economy.



The second addresses the role that speculation might or might not have in driving up the world price of oil. The conclusion is that speculators most likely are driving up the short-term futures prices because of concerns about fundamentals, namely a risk of disruption in supplies. A comment to that piece links to this graph of short- and long-term oil futures prices (it is a thumbnail; to see it more clearly, click on it):

What is going on here? I realize it isn't much in dollars, but why do longer term oil futures prices drop off like that?

the Castle

Having been here over 24 hours, I now feel well-ensconced at Herstmonceux Castle. Here are two photos I took of the castle today:





And here is a photo of a 300-year-old sweet chestnut tree (for those having trouble telling which is which, the tree is not wearing glasses).

Break-Even and Shut-Down Points:The Chunnel

We teach our introductory economics students that it is profitable (or loss minimizing) to keep producing so long as doing so covers the direct (or variable) costs of production and makes some contribution to the overhead (fixed costs). In algebra, the simplified rule is to produce in the short run so long as P > AVC or so long as TR > VC. Doing so will minimize the losses of the firm.



The Chunnel (tunnel under the English Channel) provides a good example of the rule. They're losing money hand-over-fist, but the losses seem to be due to the massive overhead costs arising from the initial construction costs [which suggest the Chunnel was probably not a good idea in the first place].



In fact, there is some evidence that the day-to-day operating revenues more than cover the day-to-day operating expenses. The implication of this comparison is that if, indeed, the Chunnel corporation is bankrupt, then someone should be willing to buy it (without its long-term debts) for some positive amount in the expectation of earning a nice stream of net revenues.



For more, see Kip Esquire and the comments there.

A Canada-US Softwood Lumber Deal Soon?

The Trono Globe and Mail reported yesterday that a resolution to the softwood lumber trade dispute between Canada and the US is near.

In a complex arrangement that would include both a quota and an export tax, Canada would agree to cap its share of the U.S. lumber market at one third, which is roughly the current level.... [and] ... the United States would lift duties on Canadian lumber and return most of the $5-billion it has collected from Canadian lumber companies.

Interestingly, this is fairly close to what Ron Wonnacott, the Canadian Dean of International Trade Economics, recommended in a confidential paper presented two months ago at The University of Western Ontario. A link to his paper is now available here.



There is one major divergence between the Globe's report and Professor Wonnacott's recommendation. The Globe says,

Canadian officials characterized talk of a deal as "speculation."



"Any numbers that might arise from this speculation can't be considered fact," said an aide to Trade Minister David Emerson Monday.



The U.S. proposal would leave many key issues subject to future negotiation.

whereas Wonnacott recommended,

While hope has recently been expressed for an agreement soon, it is very important that this be a long-term rather than a temporary solution.

Health Care: non-zero Price Elasticities of Supply and Demand

It appears that, now that the term has ended, Brian Ferguson, who writes A Canadian Econoview, is back just as strong as ever.

A couple of news items that seem to support the view that in medical care, as in all other sectors of the economy, demand curves slope down and supply curves slope up.



The demand side illustration comes from the US. According to this article from the New York Times ($ subscription required), the demand for certain types of medical care among auto workers has increased sharply in recent times.

The demand for knee replacements, for example, among retired GM workers seems to have skyrocketed. Brian points out that because auto workers (particularly those who are retired), like those at GM, face a risk of having to pay more for durable treatments if/when GM goes bankrupt, it makes sense for them to get the treatments done now, while they are covered by their insurance.



The supply side example comes from here in Britain, where the National Health Service [NHS] has suddenly found itself paying much more in total than it expected for physicians' services.

Part of the reason the NHS has managed to keep costs low over the years has been the rate it has paid its staff at. And the government didn't just hand large sums of money to doctors, it instituted something called the Quality and Outcomes Framework, which basically raised the price paid to physicians for supplying certain services.

But in the process,

...they seriously underestimated the price elasticity of supply of the services covered by the QOF. Normally when we talk about elasticities and expenditures we're looking at the elasticity of demand, but here the NHS has positioned itself as a quantity taker, announcing a price it will pay for certain services and saying that it'll buy all the services it's offered at that price. So when supply proved a lot more price elastic than expected (i.e. the increase in price resulted in a larger increase in quantity supplied than had been anticipated) the pressure on trust budgets was significant, to put it mildly.



So we've got two stories - one of which says that consumers of medical care do respond to price changes and another which says that suppliers also respond to price changes. They come from two different countries and two different health care systems, but the basic laws of supply and demand are universal.



Something which probably should be given greater weight than it currently is in Canadian health care planning.

Reviews of XBox Games

Kip Esquire has a lengthy review of some of the games available on the X-Box. If you're interested in that sort of thing, I recommend it.



I'm not interested in video games any more. I reached my limit with the advanced games for the Atari 2600. Nevertheless, I really enjoyed his review, especially this:

My single biggest disappointment with the Xbox 360 has been the online gaming. I admit it, I totally suck at it. "Suck" isn't even an adequate word — "hypersuck" is closer to accurate. I can't even begin to compete with these kids on any game I try to play online. (And boy do they have foul mouths!) The difference between single-player and multi-player gaming is like the difference between figure skating and ice hockey. [emphasis added] Oh well, I guess my descent into isolated sociopathy will progress undeterred.

Nice analogy.

Competition: A Positive-Sum Game

Contrary to everything Bob Franks has ever written, competition is not a constant-sum or even negative-sum game. Phil Miller has a great example.

Chicago School Failures

One of the best pieces I've read about the Chicago schools in the blogosphere is by Stephen Karlson at Cold Springs Shops. Here are some brief excerpts, but be sure to read the whole thing, especially some quotes from a teacher's blog.

Friday's Chicago Tribune reports that six percent of Chicago Public Schools' current freshmen will finish any kind of college by their mid-twenties. There is a lot of attrition in the high schools. The article's focus is on Chicago graduates' troubles at university.



... The universities are devoting resources to providing information that perhaps the high schools might have provided.



... Some of this work might fall into the category of "paying for the same work twice"...



... [T]he schools don't track any more. And the schools ought not view any kid a priori as a throwaway. But the schools ought not be enablers of dysfunctional and self-destructive behavior for fear of being called out as classist or elitist. Many of Ms. Ivy's [a student quoted in the full posting] classmates are done in by the local mores long before they have a chance to fill out Urbana's, or Northern Illinois's, or Loyola's application packets.

Newmark's Door

If you do not read Craig Newmark's blog, Newmark's Door, every weekday, you should. I especially recommend the postings amassed there today.

Pennies: the Loss Leader of the Mint?

I have long advocated that we get rid of the penny in Canada and the US. [see here, here, and here, for example].



I don't think the fact that the gubmnt earns negative seignorage on minting pennies provides a very strong argument for not using them. But that fact certainly adds to the case against having pennies (And, as I pointed out earlier, the negative seignorage that has made the news lately doesn't even take into account the distribution costs, which amount to several cents per penny). [thanks to Skip Sauer and JohnH for the pointer to this story from the NYTimes-Guardian]:

This week the cost of the metals in a penny rose above 0.8 cents, more than twice the value of last fall. Because the government spends at least another six-tenths of a cent — above and beyond the cost of the metal — to make each penny, it will lose nearly half a cent on each new one it mints.



The real problem could come if metals prices rise so high that it would be economical to melt down pennies for the metals they contain.



Appearances aside, pennies no longer contain much copper. In the middle of 1982, after copper prices rose to record levels, the mint starting making pennies that consist mostly of zinc, with just a thin copper coating.



But these days, zinc is newly popular. Rising industrial demand and speculation have sent the price rocketing. Since the end of 2003, zinc prices have tripled.

Tyler Cowen recommends that you hold onto your pennies awhile longer before selling them to the scrap metal dealer:

We all know, of course, that you should not exercise an option before its expiration. The longer time runs, the greater the chance for price to bounce around. Once you are "out of the money," further drops in price don't hurt you any. But "in the money," you gain from price movements in your favor. So hold onto those pennies and wait.

But what really frosts my whiskers in the NYTimes article is this:

Pennies, meanwhile, are in high demand. Last year, the mint made 7.7 billion of them — more than the number of all the other coins it produced. In the first three months of this year, the pace of penny production rose to an annual rate of 9 billion — the highest since 2001.



... [R]etailers demand pennies from their banks, the banks demand them from the Federal Reserve, and the Fed orders them from the mint. Many of the people who get the pennies in change throw them into a jar, where they may sit for years, requiring the mint to make more and more of them.

This argument is precisely the same as one I heard from a former executive with the Canadian Mint: banks want pennies, so we keep stamping them out. Surely if Parliament and Congress would just pass laws saying they aren't going to mint the one-cent coin any more, we would all be better off.



I must confess that I do not understand why retailers haven't gone this route themselves. They all have penny cups, but why don't they just round the final total, after taxes, etc., down to the nearest nickel? Heck, I'd be happy if they rounded it up to the nearest nickel (or dime even).



Oddity: last week at Starbucks, I received two pennies in my change. One was a 1946 and the other 1947 penny.

Interviews with Economists [not podcasts]

If you find podcasts too long to listen to, you might be interested in these interviews at SmartEconomist.com

Why Journalists Should Be Required to Study Math

and at a very basic level. From Power Blog (via the insta-man):

On April 20, the Times ran an article by Jennifer Steinhauer on the problems the City of Houston has experienced in coping with refugees from Hurricane Katrina. A principal theme of the article was that the federal government had failed to come through with needed or promised help:



Seven months after two powerful hurricanes blew through the Gulf Coast, elected officials, law enforcement agencies and many residents say Texas is nearing the end of its ability to play good neighbor without compensation.



That theme, of course, fit well with the Times' "bash Bush" obsession. Today, however, the paper admitted in its corrections section that it had completely misrepresented the facts:



A front-page article on Thursday about strain on government services in Texas caused by hurricane evacuees misstated the number of evacuee children in Houston public schools and the amount of Federal aid the state has received. The most recent count, in late February, showed 5,475 students, not 30,000. The aid is $222 million, not $22 million.



As Junie B. Jones says: Boom! Do the math. The Times reported that the feds had contributed $733 per student. In fact, the feds have paid $40,548 per student.

My guess is that these journalists would have no problem passing a basic mathematics exam. They would, however, have trouble passing an "objective" exam.



My friend, BenS, refers to that paper as "the Times-Guardian" because both the NYTimes and the Guardian seem to have similar leftist biases.

New Whitehouse Spokesman?

Tom Hanna recommends "Baghdad Bob" aka Muhammed Saeed al-Sahaf, the deuce of diamonds, for the job:

I can hear him now:



The budget is in surplus. Federal spending is at an all time low. Millions of Americans are illegally immigrating to Mexico. Republicans are going to add seats in Congress in November. And did I mention that we have the infidel troops on the run outside Baghdad?

Leaving for England Soon; [Field trips to pubs on the agenda]

In a few days, I will be leaving for England, where I will be teaching introductory economics at the International Study Centre in Herstmonceux Castle.



Several friends have asked how I ended up with this summer gig. The answer simply is that I responded to an advertisement and was offered the job. I must say that when I saw the ad, I knew I would be well-suited to the position, given the good match between what they were looking for and my own interests and background, and especially given the phenomenal joy I receive from teaching the intro courses. It was as if the ad said,

John Palmer! This gig has your name on it!

It looks as if the courses I will be teaching have quite small enrolments. This will be a big change for me; the classes here at The University of Western Ontario are comparatively large, with intro sections of 200 - 500 students.



Our first field trip as a class will be almost surely be to a pub, where we will spend much time inquiring:

1. How do consumer preferences change as people ingest more alcohol?
2. Could pubs sell more beer if they lowered their prices by 10%? If so, how much more?
3. Why don't pubs raise their prices by 10%?
4. What would happen to the price of beer if the minimum wage were increased? What would happen to the number of employees in larger pubs?

If you would like a postcard, send me private e-mail with your snail-mail address. Meanwhile, I expect I will be able to maintain regular daily postings to the EclectEcon while I'm there.

Free Exchange on Campus?beware of what is meant by "free"

David Horowitz, founder of Front Page Magazine [frontpagemag.com] has recently published a book called, The Professors: The 101 Most Dangerous Academics in America. The book profiles university professors who use their sinecured positions to promote leftist racism and to attack conservatives, all under the guise of academic freedom.



From the Publishers Weekly mostly negative review (surprise!) on Amazon.com come two examples:

a Northwestern University law professor has a sordid history involving the Weather Underground, and a Rutgers University professor's early poems included lines like, "Rape the white girls" and "I got the extermination blues, jewboys."

These should not be difficult cases. They do not represent academic freedom; they represent threats of violence and calls to violence. They should not be protected by any appeal to academic freedom.



Horowitz's book has caused quite a stir, with ultra leftist anti-Americans attacking it everywhere. In response, Horowitz is a contributor to a blog dealing with the issues raised by his critics. Here are excerpts from the latest posting there [this one by Jacob Laksin]:

What do you call a cadre of partisan groups determined to muzzle debate about the ills of modern academia? If you’re the ACLU, a leading teachers union, and eight other well-financed groups allied with the political left, you call it the coalition for “Free Exchange on Campus.”



... For all their indignation, Free Exchangers betray little evidence that they’ve actually read the book. For instance, in an interview with FrontPageMag.com, Adam Jentleson insisted that the book was utterly without merit. “The claim that a cherry-picked list of 101 people is a representative sample of the 2 million faculty members currently teaching in the United States is absurd from any statistical or methodological standpoint,” Jentleson said. Informed that the book made no such claim --that, in fact, it argued that a ten percent minority of radical professors, who did not reflect the academic disposition of vast majority of faculty had exerted a disproportionate influence on university curricula and hiring practices — Jentleson became defensive. “Free Exchange is not conceding anything against even the one three-thousandth of the faculty in America against whom you, Mr. Horowitz and your colleagues have made specific allegations,” protested Jentleson, thus declaring his loyalty to a position without any basis in fact. And despite his revealed ignorance, Jentleson stubbornly insisted that he had “indeed read the book” and, even if the evidence argued otherwise, “understood its argument.”



If their familiarity with The Professors’ argument leaves something to be desired, Free Exchangers nevertheless feel no compunction about impugning its author’s motives. Megan Fitzgerald, a paid operative at the Center for Campus Free Speech, a coalition group, has denounced David Horowitz as an “anti-free speech” activist. Since Horowitz has been a leading opponent of campus speech codes, FontPageMag.com asked her whether she had any evidence to support the charge. She responded by citing The Professors – a book — which, she claimed, attacked professors “for their personal political beliefs” and Students for Academic Freedom, which she accused of publishing “unsubstantiated and anonymous claims of classroom bias for administrators, students and legislators to see.”



In fact, The Professors specifically defends the right of all professors to hold and express political beliefs, as does Students for Academic Freedom and its Academic Bill of Rights. The Professors is a wide-ranging catalogue of academic decline that highlights the predilection of radical professors to use their classrooms as political soapboxes – a violation of the academic freedom guidelines of the American Association of University Professors and the Faculty Handbooks of most universities themselves.

There is much more at this site. Also, before you buy it, check out the reviews at Amazon.com, which are quite insightful [BenS argues this is yet another book the London (Ontario) Public Library will not order. It is getting so that "Not ordered by the London, Ontario, Public Library" has the same cachet that "Banned in Paris" used to have — makes me want to rush out and buy the book!]



King Banaian has a post that refers to this book in a piece about the Ohio State challenge to academic freedom.

How to Exploit Cheap Foreign Labour

Bill Sjostrom at Atlantic Blog has a wicked expose of lefty hypocrisy. He politely refers to a piece in The Guardian as a parody (but wonders whether it really is) in which the writer describes how to get the most work for the least pay out of nannies imported from Eastern Europe.

I am still laughing. This is one of the best parodies I have ever seen.



Um, it is a parody, right? The alternative is that a Guardian writer is advocating good left wing families do what they would denounce Nike for doing. Nah, the Guardian would never do that.

Beautiful.

More Bad Energy Policy

Demand curves are downward sloping. For example, if energy users face the prospect of rising energy prices, they will reduce their use of energy.



Furthermore, aside from some minor theoretical anomalies that appear in textbooks, supply curves are upward sloping, especially at the industry-wide level. In this example, higher prices for energy will induce people to provide more energy, whether by conventional or by alternative, renewable and non-carbon-emitting, means.



Also, when substitution in production is possible, when the price of one input rises, entrepreneurs will shift to using less of that input and more of others. In the case of electrical energy, this means that as the prices of oil and natural gas rise, electricity producers will shift toward making greater use of solar and wind energy, inter alia.



In other words, market forces and changing prices will induce consumers and producers to conserve oil and gas and invest in alternative energy programmes. We don't need no stinking incentive programmes. The market will provide efficient incentives.



But, no, in Ontario, politicians and bureaucrats think they can pick the winners better than private investors can [h/t to cmt]. So they have changed the incentive structure:

Ontario is offering to subsidize homeowners and businesses that switch to renewable power sources like solar panels or wind turbines.



The government will pay an inflated price for the energy for 20 years to help make the project attractive: 42 cents a kilowatt-hour for solar and 11 cents for wind, biomass, or small hydroelectric projects.

Fortunately, the programme might primarily be posturing:

The program is also being pitched to homeowners, but the upfront costs – as much as $30,000 – are substantial. Experts say it could take 20 years before homeowners pay off their initial investment and turn a profit.

The Deterrence Effect of Capital Punishment: Conflicting Results....again

The most recent issue of The Economist's Voice contains articles and comments on the deterrence effect of capital punishment. Paul Rubin asserts, as he did in earlier work, that each execution causes 18 fewer murders. In contrast, Donohue and Wolfers (here and here) claim that, if anything, each execution leads to more, not fewer, murders.



I have two reactions to these pieces.

1. As I have said before, I am not surprised by the mixed results and the debate. The hypothesis that capital punishment should have a deterrent effect on the commission of murder rests on the presumption that killing someone is the worst thing society can do to punish them. That is presumption is dubious at best. There are many fates worst than death.
2. Even if there is no deterrent effect, capital punishment provides social benefits in the form of retributive justice.

Do Higher Ticket Prices Enable a Sports Team to Buy Better Talent?

Phil Miller, at Market Power, is distressed by the St. Louis Cardinals' claim that they had to raise prices so they could afford to stay competitive [which for them presumably means win at least 90-95 games this season].

... [S]top justifying high ticket prices for "gotta stay competitive" reasons. The reason that ticket prices are higher is because demand for baseball in St. Louis is higher (new stadium, good team last year with important players on the roster this year (Carpenter, Pujols (the best overall hitter in baseball coming into this year), Edmonds) and a pitching coach in Dave Duncan who, like Leo Mazzone, has a knack for making pitchers better.

For the most part, I agree with Phil. He is a smart, energetic guy (and valued co-author), and I am reluctant to raise any questions about his assertions. But here goes (I don't think he would disagree with these extensions of his basic argument).

1. My first point is nothing new. Some sports team owners are not profit maximizers; they're jock-sniffers. It is possible to construct a model wherein such owners might find it utility-enhancing to increase prices, and spend more than the profit-maximizing amount on player talent.
2. What if maybe the PR department has it backwards? What if the team spends more money on talent in an effort to shift the demand curve outward, which then permits/induces even a profit-maximizing firm to raise ticket prices. In this case, yes, the ticket prices will go up and talent will go up, but the timing and causation were not the way the PR guys present it.

Either way, we know that ticket prices tend, on average and in general, to be demand-determined, which is the essence of Phil's posting. But the PR department cannot say,

"We thought we could increase our profits (and/or jock-sniffing frequency) by acquiring better players. Our expectation is that doing so will increase the demand for our games, and so we're hoping to sock it to the customers by setting higher ticket prices this season in anticipation of actually winning more games with these better players."

Never happen.

Increased Globalization;Despite, not because of, Trade Barriers

Steve Polos has an interesting tidbit in a recent column: the countries that have had the biggest growth in trade have also been the most protectionist!

[T]he economic benefits of globalisation in terms of enhanced productivity and purchasing power are sufficient that companies will probably continue to globalise despite attempts to stop them. Certainly, companies have overlooked trade barriers in the past.



Consider the countries that have enjoyed the most international trade growth in the last five years: Vietnam, China, Russia and India. These same four countries are perceived to have the greatest visible (tariffs) and invisible (red tape, intellectual property risk and so on) trade barriers, according to a 2005 survey by the World Economic Forum. India has the highest average tariff rate at 29.1%, Vietnam is at 16.8%, Russia is at 9.9% and China is at 10.4%. It is worth noting, though, that China’s average tariff rate has declined significantly since its accession to the WTO in 2001.



The bottom line? Globalisation is to economists what gravity is to physicists – an irresistible force. One can defy gravity temporarily, at high cost. Likewise, attempting to stop globalisation will come at a high cost – potentially a trip down memory lane, to the living standards of 20-30 years ago.

Cowen, Coase, and New Orleans

Tyler Cowen, of Marginal Revolution, has caused a stir with his latest column in Slate, where, in pure Coasian fashion, he writes,

...[I]n Louisiana I found that the various factions arguing about how to rebuild are too focused on finding "the right" master plan. A better approach is to support good institutions and freedom of contract so that many private plans can come to fruition.

This recommendation is superb. Too bad it probably won't be followed.