21st Century Socialism

The New Model

"It might look great for a while, but we know these are formulas that don't work," said Hernando de Soto, a Peruvian economist who has written extensively about how to legitimize informal economies.

In co-ops and state companies, Chávez's policies have generated legions of devoted followers like Iris Pinto, 31, who said her life had been dull, mostly cleaning homes. Now she's at the shoe factory.

"He's a wonderful president, really socialist," she said. "President Hugo Chávez Frías gave us this opportunity, and it's been completely successful."

While a 45 year old Iris may not be bored when her primary diet turns to shoes, black, it is likely true that her economic ignorance only places her in the middle of the pack for the US Congress.

The Basis of Ron Paul's Economic Philosophy in 24 Pages

The Wild Wheel

The Wild Wheel

A great story about a moonlighting employee of Thomas Alva Edison.

The $18 paperback

The pdf file


The Case of the Minimum Wage Gas Station Attendant, a Problem in Economic Analysis

Vladimir is a legal immigrant working his second job on the lonely night shift at BORDER CITSTOP GAS, a station with three self-service pumps and one full-sevice pump. The station is located in Indiana, 200 yards from the Illinois border, and all of its effective competition comes from several nearby stations in Illinois.

Vladimir's shift is twelve hours long, from 8 PM to 8 AM, six days a week. He is paid the Indiana legal minimum wage, assumed to be $6 per hour for this problem, pre-tax, and no considerations of overtime are to be invoked. For simplicity, assume that the $6 per hour rate is also the total employment cost of Vladimir to the station owner.

The rounded pump prices are $3 a gallon for self-service regular, and $3.24 per gallon for full-service regular. For simplicity, premium grades of gasoline are to be ignored in this problem.

On the first of August, the Indiana legal minimum wage will increase by one third to $8 per hour.

What are the most likely expected consequences of this increase?



The key point is that the wages paid to Vladimir are not dependent on sales quantities or revenues, i.e. are not marginal or variable costs, and thus are not involved in the setting of profit-maximizing (or loss-minimizing) prices. Only if there were a non-slack, non-recoverable opportunity cost to the owner for Vladimir's time would there be an effect on prices. For example, if Vladimir spends the time not used  for servicing either self or full service customers knitting station momentos for owner sale, then their revenues forgone would be a marginal cost that could change the prices. More likely, Vladimir catches up on his sleep between customers.

So the simplest answer is that the prices will not  change and the station will be shut down overnight, as the extra (relative) fixed cost of $24 a day may destroy any profitability of remaining open, with Vladimir getting laid off. Note that some of the business lost during the night may reappear during the day.

This problem has a unusual characteristic in that the profit maximizing price for full-service alone increases when self service come into the picture. If the full service price is raised enough to reduce the quantity sold by one gallon, the full revenue loss only occurs if none of the demand is shifted into  self service.








Listening to a Red Sox radio commercial, does any country besides the US have independent mobile vans that come to your parked car in response to a call and replace a cracked windshield for almost any car?


If You Only Had a Brain

Tax Official All Wet

Tiny Brain No Problem for French Tax Official

Something that many people secretly believed has been confirmed: You don't actually need a brain to work in a tax office. A French civil servant has been found to have a huge cavity filled with fluid in his head -- yet lives a completely normal life.


Printer Privacy Invasion

The Declaration of Independence, Performed

What's Wrong With This Picture?

Lifeboat Economics

You're the purser of the Titanic and it has just hit an iceberg.

 You've escaped into a lifeboat with an 80 pound bag of gold, an 80 pound bag of silver, and an 80 pound bag of copper. The lifeboat starts to flounder* from being overloaded. You push Al Gore over the side, quieting and improving the lifeboat environment, but the lifeboat is still overloaded.

It is now clear that you will only be able to salvage one of the 80 pound bags if the lifeboat is to stay afloat.

You choose to save the gold bag, and toss the silver and copper bags into the Atlantic.

If this were an opportunity cost problem, then the opportunity cost would the second best choice, i.e. the 80 pound bag of silver. However, it is clear that the actual cost or sacrifice of saving the gold bag is the combination of both the silver and copper bags (and Al Gore, but he doesn't count).


If this is an opportunity cost problem, why is the opportunity cost not equal to the standard opportunity cost definition? (the silver bag alone)

If this is not an opportunity cost problem, why not, and what is it?

These are not known to be trick questions, but they are currently open questions with no known answers.


* = Usage Note: The verbs founder and flounder are often confused. Founder comes from a Latin word meaning "bottom" (as in foundation) and originally referred to knocking enemies down; it is now also used to mean "to fail utterly, collapse." Flounder means "to move clumsily, thrash about," and hence "to proceed in confusion." If John is foundering in Chemistry 1, he had better drop the course; if he is floundering, he may yet pull through.


The unanimous Declaration of the thirteen united States of America

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.




We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. --That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, --That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security. --Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain [George III] is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

  • He has refused his Assent to Laws, the most wholesome and necessary for the public good.
  • He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.
  • He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only.
  • He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public Records, for the sole purpose of fatiguing them into compliance with his measures.
  • He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.
  • He has refused for a long time, after such dissolutions, to cause others to be elected; whereby the Legislative powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within.
  • He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands.
  • He has obstructed the Administration of Justice, by refusing his Assent to Laws for establishing Judiciary powers.
  • He has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries.
  • He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people, and eat out their substance.
  • He has kept among us, in times of peace, Standing Armies without the consent of our legislatures.
  • He has affected to render the Military independent of and superior to the Civil power.
  • He has combined with others to subject us to a jurisdiction foreign to our constitution and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:
  • For Quartering large bodies of armed troops among us:
  • For protecting them, by a mock Trial, from punishment for any Murders which they should commit on the Inhabitants of these States:
  • For cutting off our Trade with all parts of the world:
  • For imposing Taxes on us without our Consent:
  • For depriving us, in many cases, of the benefits of Trial by Jury:
  • For transporting us beyond Seas to be tried for pretended offences:
  • For abolishing the free System of English Laws in a neighbouring
    Province, establishing therein an Arbitrary government, and enlarging its Boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule into these Colonies:
  • For taking away our Charters, abolishing our most valuable Laws, and altering fundamentally the Forms of our Governments:
  • For suspending our own Legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.
  • He has abdicated Government here, by declaring us out of his Protection and waging War against us.
  • He has plundered our seas, ravaged our Coasts, burnt our towns, and destroyed the lives of our people.
  • He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation and tyranny, already begun with circumstances of Cruelty and perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.
  • He has constrained our fellow Citizens taken Captive on the high Seas to bear Arms against their Country, to become the executioners of their friends and Brethren, or to fall themselves by their Hands.
  • He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless Indian Savages, whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions.

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.

Nor have We been wanting in attentions to our British brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our Separation, and hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by the Authority of the good People of these Colonies, solemnly publish and declare, That these United Colonies are, and of Right ought to be Free and Independent States; that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.



--John Hancock


New Hampshire:
Josiah Bartlett, William Whipple, Matthew Thornton

John Hancock, Samuel Adams, John Adams, Robert Treat Paine, Elbridge Gerry

Rhode Island:
Stephen Hopkins, William Ellery

Roger Sherman, Samuel Huntington, William Williams, Oliver Wolcott

New York:
William Floyd, Philip Livingston, Francis Lewis, Lewis Morris

New Jersey:
Richard Stockton, John Witherspoon, Francis Hopkinson, John Hart, Abraham Clark

Robert Morris, Benjamin Rush, Benjamin Franklin, John Morton, George Clymer, James Smith, George Taylor, James Wilson, George Ross

Caesar Rodney, George Read, Thomas McKean

Samuel Chase, William Paca, Thomas Stone, Charles Carroll of Carrollton

George Wythe, Richard Henry Lee, Thomas Jefferson, Benjamin Harrison, Thomas Nelson, Jr., Francis Lightfoot Lee, Carter Braxton

North Carolina:
William Hooper, Joseph Hewes, John Penn

South Carolina:
Edward Rutledge, Thomas Heyward, Jr., Thomas Lynch, Jr., Arthur Middleton

Button Gwinnett, Lyman Hall, George Walton

Health Care and Logic

Sad to say I expect this misuse of logic from CNN. But I do not expect to see Matthew Yglesias use it to buttress his argument:

CNN's SiCKO analysis concludes:

France . . . Canada . . . cheap . . . but does their health care suck? Well:

Like Moore, we also found that more money does not equal better care. Both the French and Canadian systems rank in the Top 10 of the world's best health-care systems, according to the World Health Organization. The United States comes in at No. 37. The rankings are based on general health of the population, access, patient satisfaction and how the care's paid for.

So, okay, it's not that hard to figure out. France and Canada both have two difference systems of health care delivery both of which are cheaper than the US system and both of which are more effective.

Let me repeat the key sentence with emphasis added:

The rankings are based on general health of the population, access, patient satisfaction and how the care's paid for.

Matthew - isn't that assuming your conclusion?

The Nine Circles of Libertarian Hell

And now for something completely different. Read with tongue ever-so-slightly in cheek.

First Circle—The Virtuous Heathens: Those who care strongly about liberty in one particular sphere (e.g. freedom of speech, freedom of religious practice, the drug war, etc.) but don't care much about it other spheres. These people are infuriating for their lack of general theory underlying their politics, but at least they've sorta got the right idea and can make themselves somewhat useful. This circle contains members of the NRA, ACLU & other such single-issue organizations, and is guarded by John Stuart Mill.

Second Circle—The Lustful: Those who fall madly in love with a dim vision they have of a more egalitarian society and then hastily rush off to elope with it, without giving much thought about just how much promise there really is in the relationship. These people's hearts are often in the right place but they show a frightening lack of concern for whether or not the policies they endorse are actually likely to accomplish the goals they desire. This circle is filled with innumerable bleeding-hearts and is guarded by Thomas Sowell.

Third Circle—The Gluttonous: Those who support illiberal policies simply out of percieved self-interest, and like to paint themselves as victims despite living at a level of material comfort that most previous generations would consider luxurious. Immigration & outsourcing restrictionists, farmers, labor unions, people who want to be insulated from the costs of their health care, etc. This circle is guarded by Benjamin Franklin.

Fourth Circle—The Greedy: Lobbyists who think their peculiar obsession should be the government's top priority. Corporations pleading for protectionism, finger-wagging nannies on a crusade to enforce "public virtue", and generally anyone who wants everyone else to suffer for their sense of ideological privilege. This circle's most recent acquisition was the execrable Jack Valenti, and is guarded by Milton Friedman.

Fifth Circle—The Wrathful: People who are socialistic primarily out of an ugly resentment of the wealthy or anyone else they percieve as enjoying benefits they privately wish they could enjoy. Their instinct is not so much to see everyone doing well as to see those currently best-off doing much worse. This circle is guarded by Ayn Rand, which I think is a suitable punishment for both parties.  

Sixth Circle—The Heretics: People who do seem to generally care about liberty but have an anomalous and largely sentimental attachment to illiberal policies in at least one sphere. They support freedom except the freedom to do drugs, or get an abortion, or freely migrate, or do anything they imagine undermines the war effort, etc. This circle is guarded by Ron Paul.

Seventh Cirle—The Violent: This circle is packed with tyrants large and small, politicians, bureaucrats and thugs—those who unquestionably do active violence to human freedom. (I would also add overdominant parents to this list.) They're enabled by the members of other circles, but these are the ones who do the actual trigger-pulling. This circle is guarded by Thomas Jefferson.

Eighth Circle—The Fraudulent: The Malebolge of public intellectuals—those who have a sphere of influence greater than most of us, and are negligent in their exercise of it by contributing to the darkness and confusion. This sphere contains everyone from know-nothing idiots like Lou Dobbs of CNN and Bob Herbert of the NYT, to people who are really smart enough to know better yet resolutely avoid any systematic examination of their moral premises, like Matthew Yglesias and Reihan Salam. This circle is guarded by, who else, Friedrich Hayek.

Ninth Circle—The Traitors: Here lie lawyers & law professors, and also a significant number of economists, who have some degree of influence over actual legislation and policy. Particularly the ones like Orin Kerr & Brad DeLong who are smart, reasonable, and may even have some pro-liberty sympathies, but when the rubber hits the road they do some showy handwringing before siding with illiberal policies. This circle is guarded by David Friedman.

Why the Standard of Living Cannot be Measured

You walk into a candy shop to buy a half dozen Hersey Kisses chocolate candies. They are available wrapped in either silver or gold colored foil, for the same price. You prefer, and purchase, the gold.

If we assume for simplicity that your preferences do not change, and that you are indifferent to whether the shop actually stocked any of the unpreferred silver colored foil units, then we can rank the standards of living that result from candy shops that carry only one choice as gold, then silver.

Since the prices are the same there is no way for an outside observer to distinguish, let alone measure, the standards of living that result from the consumption of gold vs silver foil wrapped candies.

While you may know that you prefer gold to silver, you have no way to quantify the difference, or the intensity of the preference, in the standards of living, at least without bring new subjectively valued goods into consideration.

From nomadic community to dynamic nation, hurting the state

What is the most effective way to hurt the state? Various people have various answers to this question, it can be direct action, politics, grey market economy, education, lobbying etc. In my opinion, one of the most effective way to hurst the state is to use competition, to migrate from one place to the other. Not only can you enjoy more freedom this way, you are also pulling out your skills, your capital, your tax money out of the system you wish to attack. It is very effective. I live by my standards and emigrated from France to the US. Ok, New-York city can be as socialist as France is, but I still get better wages and enjoy comparatively more freedom. In the recent years, France has known an exodus similar to the losses of World War I. Highly skilled people (who enjoyed free education) are leaving, wealthy people are leaving... they export masters and phds and import welfare receivers...  when you export assets and import liabilities, bankcrupcy is near. OK, I made my point, moving is beneficial for you and hurts the State. Well it's not necesseraly beneficial for you, otherwise everybody would move... so what's keeping people from moving? There are many reasons, work permit is one: it can be very hard to obtain permission to work and live in a foreign country... few things can be done about that. There is also family and friends. People spend time during their lives to build networks of friendship, and they are not ready to live that behind so easily. Social recognition is also valuable and can be lost when emigrating. Last but not least, it can be hard to leave your job.

I think there is a way to attenuate this difficulties and make moving less painful, less costly. The key idea is to create a mobile community. A community of people enter into a covenant to agree to move from one place to another when decided through a standard procedure (say voting for example). They befriend each other, create ventures together, even families. The fewer the people, the more difficult it is to have an autonomous community (in term of social links), the more the people, the more difficult it is to enter into a covenant and make everyone move. I believe however that mobile communities of a few thousand people are possible. They can even incorporate which makes it easier to work in foreign countries. Since they are incorporated, wages inside the community can be paid indirectly with dividends which might be a way around income tax in many countries. There is also a possibility of influencing local politics. Think of it as a kind as a movable "free-state-project"...  Of course, the purpose is not to move 10 times a year, and since politics can be slow, it may not even be necessary to move within a 20 years or so, but creating a strong community sense may enable the community to move costlessly over the generations to te freest places available. As the community evolves it can grow bigger and stronger (imagine a million people) it then becomes more and more influent : it could negociate taxes directly with governments before settling somewhere, it could even overpower a small state and decide to ignore it.

In Retrospect, Do the Atlanta Braves Regret Taking Batting Practice From Curt Schilling?

A week ago Monday, the Atlanta Braves pounded Red Sox pitcher Curt Schilling's 85-89 mph batting practice fastball for 6 runs in 4 + innings, driving him to the Disabled List.

This apparently screwed up their swings completely, having scored only a single run in total in the following 5 games.

Spot a typo?

From a comment on Greg Mankiw's blog :

aristotle said...

I agree with anonymous above, the demand for colleges like Harvard, Yale, Princeton, etc etc is too big that any one university can take all the top students leaving harvard with mormons.


Energetic Senate Morons

Senate passes energy bill

The Senate passed an energy bill late Thursday that includes an increase in automobile fuel economy, new laws against energy price-gouging and a requirement for huge increases in the production of ethanol....

But the legislation provides a bonanza to farmers and the ethanol industry. It requires ethanol production to grow to at least 36 billion gallon a year by 2022, a sevenfold increase of the amount of ethanol processed last year....

The Petty Tyranny of the NCAA

See here

The violations involved 133 walk-on student-athletes in six athletic programs (two men’s and four women’s) who were inadvertently undercharged for training table meals in two ways. The first violations centered on walk-on student athletes who ate at training table even though their practice schedules did not preclude them from dining in residence halls.


Et Voila

Behold the new design! We're still working the aesthetic kinks out (including the now fixed horrible black-on-green wysiwyg) but its getting better... :)