Government – Page 95 – artdiamondblog.com

Raising Minimum Wage Hurts Working Poor

(p. 592) Using data drawn from the March Current Population Survey, we find that state and federal minimum wage increases between 2003 and 2007 had no effect on state poverty rates. When we then simulate the effects of a proposed federal minimum wage increase from $7.25 to $9.50 per hour, we find that such an increase will be even more poorly targeted to the working poor than was the last federal increase from $5.15 to $7.25 per hour. Assuming no negative employment effects, only 11.3% of workers who will gain live in poor households, compared to 15.8% from the last increase. When we allow for negative employment effects, we find that the working poor face a disproportionate share of the job losses. Our results suggest that raising the federal minimum wage continues to be an inadequate way to help the working poor.

For the full article, from which the above abstract is quoted, see:
Sabia, Joseph J., and Richard V. Burkhauser. “Minimum Wages and Poverty: Will a $9.50 Federal Minimum Wage Really Help the Working Poor?” Southern Economic Journal 76, no. 3 (Jan. 2010): 592-623.

How Politics Trumps Peer Review in Medical Research

Abstract

The U.S. public biomedical research system is renowned for its peer review process that awards federal funds to meritorious research performers. Although congressional appropriators do not earmark federal funds for biomedical research performers, I argue that they support allocations for those research fields that are most likely to benefit performers in their constituencies. Such disguised transfers mitigate the reputational penalties to appropriators of interfering with a merit‐driven system. I use data on all peer‐reviewed grants by the National Institutes of Health during the years 1984-2003 and find that performers in the states of certain House Appropriations Committee members receive 5.9-10.3 percent more research funds than those at unrepresented institutions. The returns to representation are concentrated in state universities and small businesses. Members support funding for the projects of represented performers in fields in which they are relatively weak and counteract the distributive effect of the peer review process.

Source:
Hegde, Deepak. “Political Influence Behind the Veil of Peer Review: An Analysis of Public Biomedical Research Funding in the United States.” Journal of Law and Economics 52, no. 4 (Nov. 2009): 665-90.

Macaulay Argues that a Limited Government that Protects Property Will Promote Economic Growth

Our rulers will best promote the improvement of the nation by strictly confining themselves to their own legitimate duties, by leaving capital to find its most lucrative course, commodities their fair price, industry and intelligence their natural reward, idleness and folly their natural punishment, by maintaining peace, by defending property, by diminishing the price of law, and by observing strict economy in every department of the state. Let the Government do this: the People will assuredly do the rest.

Source:
Macaulay, Thomas Babington, Lord. “Review of: Robert Southey’s “Sir Thomas More; or, Colloquies on the Progress and Prospects of Society”.” In Critical and Historical Essays Contributed to the Edinburgh Review. London: Longman, Green, Longman, and Roberts, 1830.
(Note: the quote above appeared on the back cover of The Cato Journal 30, no. 1 (Winter 2010); Macaulay’s full review, including the quote, can be viewed online at: http://www.econlib.org/library/Essays/macS1.html )
(Note: the online version does not give page numbers, but gives what I think are “screen” numbers. The passage quoted is all of “SC.96” which appears at the very end of the essay.)

Mitt Romney on Innovation and Creative Destruction

Source of book image: http://mittromneycentral.com/uploads/No-Apology1.jpg

(p. 108) Innovation and Creative Destruction

The key to increasing national prosperity is to promote good ideas and create the conditions that can lead them to be fully exploited–in existing businesses as well as new ones. Government is generally not the source of new ideas, although innovations from NASA and the military have provided frequent exceptions. Nor is government where innovation is commercially developed. But government policies do, in fact, have a major impact on the implementation of innovative ideas. The degree to which a nation makes itself productive, and thus how prosperous its citizens become, is determined in large measure by whether government adopts policies that stimulate innovation or that stifle it.
The government policy that has the greatest effect on innovation is simply whether or not the government will allow it. It’s sad but true: Government can and often does purposefully prevent innovation and the resulting improvement in productivity. Recall my hypothetical example of a society in which half the farming jobs were lost due to innovation in the use of a plow? Some nations accept and encourage such “creative destruction,” recognizing that in the long run it leads to greater productivity and wealth for its citizens. But other nations succumb to the objections of those in danger of becoming unemployed and prevent innovation that may reduce short-term employment.
Two centuries ago, more than three-quarters of our workforce actually did labor on farms. Over the succeeding decades, innovations like irrigation, fertilizer, and tractors were welcomed, and eventually large farming corporations were allowed to prosper, despite protests from family farmers and the often heart-wrenching dislocations that accompanied consolidation of farmlands. The result was the disappearance of millions of agricultural jobs and the large-scale migration of Americans from rural regions to our cities. Once there, they provided the labor that powered America’s new industrial age. And at the same time, because farming innovation and productivity were allowed to flourish, America became the leader in agriculture education, research, and industry. Innovations from these sources have enabled us to produce sufficient food to feed not only our growing population but other parts of the world as well.

Source:
Romney, Mitt. No Apology: The Case for American Greatness. New York: St. Martin’s Press, 2010.
(Note: bold in original.)

“People Were Being Infantilized and Made Dependent”

Mayor of London Boris Johnson. Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 16) While I was reading your book “Johnson’s Life of London,” in which you take readers on a tour of the city while discussing some of history’s most famous Londoners, I thought to myself, Being mayor of London can’t be that taxing if you could find time to write such a decent book.
The job of mayor of London is unbelievably taxing, particularly in the run-up to the Olympics. It just happens I write fast and always have done. Some people play the piano, some do Sudoku, some watch television, some people go out to dinner parties. I write books.
. . .
Do you remember the moment you knew that you were a Conservative?
When I was a 22- or 23-year-old reporter in a place called Wolverhampton. I got impatient with some of the stuff I saw going on about damp and mold, about who’s ultimately responsible for improving the ventilation in people’s houses. I felt that people were being infantilized and made dependent by the system and that the local Labour politicians had no interest in sorting it out, were content to harvest these people’s votes without improving their lives.
Wow. You were politically formed by mold.
It was the spores of damp, of mold forming on the walls in Wolverhampton.

For the full interview, see:
ANDREW GOLDMAN, interviewer. “TALK; Boris Johnson, Tory With an Attitude.” The New York Times Magazine (Sun., June 3, 2012): 16.
(Note: ellipsis added; bold in original.)

Johnson’s book is:
Johnson, Boris. Johnson’s Life of London: The People Who Made the City That Made the World. New York: Riverhead Books, 2012.

Overly Optimistic Entrepreneurs Seek Government Support for Projects that Will Usually Fail

People have a right to be overly-optimistic when they invest their own money in entrepreneurial projects. But governments should be prudent caretakers of the money they have taken from taxpayers. The overly-optimistic bias of subsidy-seeking entrepreneurs weakens the case for government support of entrepreneurial projects.

(p. 259) The optimistic risk taking of entrepreneurs surely contributes to the economic dynamism of a capitalistic society, even if most risk takers end up disappointed. However, Marta Coelho of the London School of Economics has pointed out the difficult policy issues that arise when founders of small businesses ask the government to support them in decisions that are most likely to end badly. Should the government provide loans to would-be entrepreneurs who probably will bankrupt themselves in a few years? Many behavioral economists are comfortable with the “libertarian paternalistic” procedures that help people increase their savings rate beyond what they would do on their own. The question of whether and how government should support small business does not have an equally satisfying answer.

Source:
Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011.

“Discovering a Viper in the Bed of Their Child”

Source of book image: http://files.list.co.uk/images/2011/09/15/arguably-lst090367.jpg

(p. 8) Anyone who occasionally opens one of our more serious periodicals has learned that the byline of Christopher Hitchens is an opportunity to be delighted or maddened — possibly both — but in any case not to be missed. He is our intellectual omnivore, exhilarating and infuriating, if not in equal parts at least with equal wit. He has been rather famously an aggressive critic of God and his followers, after cutting his sacrilegious teeth on Mother Teresa. He wrote a deadpan argument for trying Henry Kissinger as a war criminal, then was branded an apostate by former friends on the left for vigorously supporting the wars in Afghanistan and Iraq. (He memorably — a lot of what Hitchens has written merits the adverb — shot back that his antiwar critics were “the sort who, discovering a viper in the bed of their child, would place the first call to People for the Ethical Treatment of Animals.”) And he is dying of esophageal cancer, a fact he has faced with exceptional aplomb.

This fifth and, one fears, possibly last collection of his essays is a reminder of all that will be missed when the cancer is finished with him.
. . .
(p. 9) At times the book feels like an ongoing argument with the leftist intellectuals on the other side of the Atlantic, who tend to view America as lacking in history, culture or moral standing.
In an essay on the journalism of Karl Marx, written for the left-leaning Guardian, he puts an elbow in the ribs of his old socialist friends: “If you are looking for an irony of history, you will find it . . . in the fact that he and Engels considered Russia the great bastion of reaction and America the great potential nurse of liberty and equality. This is not the sort of thing they teach you in school (in either country).”
“There is currently much easy talk about the ‘decline’ of my adopted country, both in confidence and in resources,” he writes in his introduction. “I don’t choose to join this denigration.”
Christopher Hitchens: American patriot. We’ve done a lot worse.
If there is a God, and he lacks a sense of irony, he will send Hitchens to the hottest precinct of hell. If God does have a sense of irony, Hitchens will spend eternity in a town that serves no liquor and has no library. Either way, heaven will be a less interesting place.

For the full review, see:
BILL KELLER. “Christopher Hitchens, a Man of His Words.” The New York Times Book Review (Sun., September 11, 2011): 8-9.
(Note: ellipsis between paragraphs was added; ellipsis internal to a Hitchens quote was in the original.)
(Note: the online version of the article is dated September 9, 2011.)

The full reference for Arguably, is:
Hitchens, Christopher. Arguably: Essays. New York: Twelve, 2012.

“Christopher Hitchens.” Source of caption and photo: online version of the NYT article quoted and cited above.

Catherine the Great as Benevolent Despot

Source of book image: http://online.wsj.com/article/SB10001424052970204644504576653083743832432.html?KEYWORDS=Catherine+Great

(p. C3) Bereft of husband and child, a lonely Catherine began to read the histories, philosophy and literature of Greece and Rome and of the Enlightenment. Montesquieu’s “The Spirit of Laws,” which analyzed the strengths and weaknesses of despotic rule, had a powerful impact on her. She was particularly interested in his thesis that the conduct of a specific despot could partially redeem that form of rule. Thereafter, she attributed to herself a “republican soul” of the kind advocated by Montesquieu.

Voltaire, the venerated patriarch of the Enlightenment, had concluded that a despotic government might well be the best possible form of government–if it were reasonable. But to be reasonable, he said, it must be enlightened; if enlightened, it could be both efficient and benevolent. Soon after ascending to the throne, Catherine began a correspondence with Voltaire that eventually extended to hundreds of letters over more than 20 years.
. . .
Near the end of her reign Catherine was asked how she understood the “blind obedience with which her orders were obeyed.” Catherine smiled and answered, “It is not as easy as you think…. I examine the circumstances, I take advice, I consult the enlightened part of the people, and so in this way I find out what sort of effect my laws will have. And when I am already convinced in advance of good approval, then I issue my orders and have the pleasure of observing what you call blind obedience.”
Catherine died in 1796, when George Washington was finishing his second term in office. Since then, the temptations of absolute power have remained great; despots have continued to appear, afflicting people everywhere. We have learned, at enormous cost, the difficulty of combining despotism with benevolence. Few rulers have even tried. Catherine tried.

For the full commentary, see:
ROBERT K. MASSIE. “Catherine the Great’s Lessons for Despots; Russia’s erudite empress tried to redeem absolute rule; her failures highlight dangers still present today.” The Wall Street Journal (Sat., November 12, 2011): C3.
(Note: ellipsis added.)

For Massie’s full biography of Catherine the Great, see:
Massie, Robert K. Catherine the Great: Portrait of a Woman. New York: Random House, 2011.

“If Apple Is a Fruit on a Tree, Its Branches Are the Freedom to Think and Create”

(p. B3) Millions of Chinese flooded the popular micro blogging site Sina Weibo to tweet their condolences on the death of Steve Jobs over the past two days. They also raised the question: Why isn’t there a Steve Jobs in China?
. . .
One of the most popular postings on Mr. Jobs’ legacy came from scholar Wu Jiaxiang. “If Apple is a fruit on a tree, its branches are the freedom to think and create, and its root is constitutional democracy,” he wrote. “An authoritarian nation may be able to build huge projects collectively but will never be able to produce science and technology giants.” On that, Wang Ran, founder of a boutique investment bank China eCapital Corp., added, “And its trunk is a society whose legal system acknowledges the value of intellectual property.”

For the full story, see:
Li Yuan. “China Frets: Innovators Stymied Here.” The Wall Street Journal (Sat., October 8, 2011): B3.
(Note: ellipsis added.)

Dems Take Taxpayers’ Earnings to Spend on Senator Reid’s Cowboy Poets

“Charlie Seemann at the Western Folklife Center in Elko, Nev., home to an annual festival that draws thousands of cowboy poets and their fans.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A15) ELKO, Nev. — This isolated town in the northeast Nevada mountains is known for gold mines, ranches, casinos, bordellos and J. M. Capriola, a destination store with two floors of saddles, boots, spurs and chaps. It is also the birthplace of the annual Cowboy Poetry Gathering, a celebration of range song and poetry that draws thousands of cowboys and their fans every January and receives some money from the federal government.
. . .
Senator Harry Reid of Nevada, a Democrat and the majority leader, invoked the event in arguing against Republican cuts in arts financing in the budget debate, setting off a conflagration of conservative scorn.
. . .
“He was trying to defend the National Endowment for the Humanities and the N.E.A., and he thought, this is something that he was familiar with and he’s always liked, and he was holding this up as an example,” said Charlie Seemann, the executive director of the Western Folklife Center, a converted 98-year-old hotel on Railroad Street. “And, whoops! In this political climate it was too good a target: ‘Cowboy poetry, say what? We’re paying for that?’
. . .
“Given where we are with our financial situation — and some people would argue regardless of that — this is not something that the federal government should be doing,” said Thomas A. Schatz, the president of Citizens Against Government Waste. “If people want to support a certain amount of activity in the arts or humanities, they should be paying for it. And the fact that Senator Reid for some reason picked this as an example of how extreme the Republican budget was — he might have picked something else.”
Inevitably, some of the argument, as it were, is taking place in verse. Representative Jeff Flake, a conservative Republican from Arizona, posted this on his Twitter account:

Way out in the prairie

To a rustler named Harry
Being broke ain’t no reason to sweat
Just sit in yer barn
Spin a rhythmic yarn
And you’ll pay down the national debt!

For the full story, see:
ADAM NAGOURNEY. “For Cowboy Poets, Unwelcome Spotlight in Battle Over Spending.” The New York Times (Mon., April 11, 2011): A15 & A17.
(Note: ellipses added; italics and indents in original print version.)
(Note: the date of the online version of the article is April 10, 2011.)

“Planning Fallacy”: Overly Optimistic Forecasting of Project Outcomes

(p. 250) This should not come as a surprise: overly optimistic forecasts of the outcome of projects are found everywhere. Amos and I coined the term planning fallacy to describe plans and forecasts that

are unrealistically close to best-case scenarios

could be improved by consulting the statistics of similar cases

. . .
The optimism of planners and decision makers is not the only cause of overruns. Contractors of kitchen renovations and of weapon systems readily admit (though not to their clients) that they routinely make most of their profit on additions to the original plan. The failures of forecasting in these cases reflect the customers’ inability to imagine how much their wishes will escalate over time. They end up paying much more than they would if they had made a realistic plan and stuck to it.
Errors in the initial budget are not always innocent. The authors of unrealistic plans are often driven by the desire to get the plan approved–(p. 251)whether by their superiors or by a client–supported by the knowledge that projects are rarely abandoned unfinished merely because of overruns in costs or completion times. In such cases, the greatest responsibility for avoiding the planning fallacy lies with the decision makers who approve the plan. If they do not recognize the need for an outside view, they commit a planning fallacy.

Source:
Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011.
(Note: ellipsis added; italics in original.)