Rent

In a discussion in our Theory of Moral Sentiments Readings Group, we delved into Prof. Gordon Tullock's pathbreaking article in which he introduced the idea of rent seeking (although the name came later from Anne Krueger). One of the questions Gordon raised was how one would measure rent seeking. For the United States, I have long promoted a metric such as "Count the number of Nordstrom and Neiman-Marcus stores in the Washington DC metropolitan area and multiply by the a normalized difference of the excess increase in housing prices in the D.C. area compared to the rest of the United States." Just kidding. But consider the news yesterday that the Washington, D.C. metropolitan area which historically has manufactured virtually nothing, long ago quit growing (gasp) tobacco, and has no known natural resources other than mosquitoes, is now officially the wealthiest (actually, highest income) part of the United States. This Versailles-on-the-Potomac produces one thing: government. I think that it's interesting to consider there were many things that the U.S. government, some of them relatively well, with Washington remaining a relatively sleepy Southern town. The big changes in D.C. came with the ramp up of the New Deal, then The Great Society, and then the social regulatory programs of one of America's most economically liberal Presidents, Richard Nixon (sorry Republicans, but do the math: OSHA, EPA, wage and price controls, AMTRAK, Title IX, and so forth). The current administration has successfully pushed the Washington team over the goal-line. (As long as I am ranting, can you imagine any other part of the country as hypocritical as Washington D.C. having a professional football team named the "Redskins" in the midst of all of the political correctness that it imposes on the rest of the country? To think that Florida State had to fight to retain the name "Seminoles" which is an actual (both historical and living) proper name and not an ethnic slur like "Redskins", well ... I guess it's time to stop ranting.)

Indeed

From the New York Sun, a quote from the just-announced winner of the 2011 Nobel Prize in Economics, Thomas Sargent:

“Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended.”

Could Not Have Said It Better

Brad Hansen, our co-author on Wise As Serpents, brought this video to our attention. It is part of the launch of a new initiative called povertycure.org which is designed to bring entrepreneurial solutions to issues of economic development, particularly in Africa. In the video, the narrator says that is it easy to have a heart for helping the poor, but harder to have the mind to do so. This is very much the motivation behind the FSU course on the Economics of Compassion. Best wishes to them in their efforts.

Name That President

A future President once said "Facts are Stubborn Things." So let's describe the facts about another President, because it's important in understanding macroeconomic policies.

This President did not believe in anything like what we would call the free market or spontaneous in order in things like wages and prices. In fact, he used the bully-pulpit of the White House to intervene to keep workers' wages high. Coming into office, Americans recognized him as one of the smartest men ever to hold the office, and he certainly believed in the appropriateness of an activist government managed by the elites of educated society. He approximately doubled the size of the federal government under his tenure, and ran unprecedented peacetime budget deficits, deficits so large that his successor campaigned vigorously against them. He raised taxes, with an especially big hit on what we would probably now call the millionaires and billionaires. He used federal funds in ways that most Americans had never anticipated were the province of the federal government: promoting home ownership, massive public works projects, and bailouts for failing banks. He was not generally a supporter of free trade, and under his watch he helped enact massive new barriers to the free flow of goods and services. Who was this President? Click here to find out.