Economics: What is more important data or theory?

A professor once explained to me that those who come up with the best theories are those that are remembered well after they are dead. The problem is, is that they aren’t found until they are dead. If in Economics, you want to be famous in the short-term, then do a well researched paper full of date. This begins the question of which is better?

People like Milton Friedman do both and maybe a hybrid version is best. F.A. Hayek and Adam Smith are mostly theory as far as I can tell. Current books with famous economists like Steven Levitt give great paper with data. But will we remember the abortion vs. crime debate or the more police = more crime?

So as I hopefully continue my career in Economics after this semester should I focus on theory or data? I am naturally better at coming up with fun theories and learning new ones. Those are my thoughts so far this weekend.

~PCCapitalist

Obama Nation

Why you shouldn’t listen to the government:

I was just watching the news and it is being reported that no tomatoes were infected with salmonella. That only Jalapeno peppers were. This from Reuters:

” An outbreak of an unusual strain of Salmonella that put 286 people into the hospital appears to be over in the United States, federal health officials said on Thursday.

They said jalapeno and serrano peppers from Mexico were the main source and said the outbreak shows there is more need for monitoring fresh fruits and vegetables.”

The rest can be found here.

This from the Patent Report:

“Tomatoes are again safe to eat, the Food and Drug Administration said Thursday, weeks after the food was blamed as a source of a salmonella outbreak in the United States and Canada.The federal agency lifted its warning about tomatoes but left in place a warning about raw jalapeño and serrano peppers, having previously said those foods also may be linked to the outbreak.”

There you have it, do not let the government tell you what to eat! There were a bunch of people eating peppers thinking they were okay and not eating tomatoes which were safe. We should have more faith in the free market. Surely there will be errors and some people will get sick but we should allow businesses to have their own private food inspections.

~PCCapitalist

Slap what all over the floor?

Body parts are often the object of a song in some way. Currently, the Rap industry is being scrutinized for its verbose usage of words that describe mostly female body parts. The picture above is from the Wired Blog network. Here is what they had to say:

“So, what do the results tell us? Across all of the categories, the eyes are most frequently mentioned body part (Hall & Oates, “Private Eyes”), with the exceptions of hip hop, which places a firm emphasis on the posterior (Sir Mix a Lot, “Baby Got Back”) and blues (Louisiana Red, “Keep Your Hands Off My Woman“) and gospel music (The Gospel, “Put Your Hands Together”), which are respectively focused on the keeping off of one’s hands and the clapping or raising of one’s hands.”

My thought is, what are the economics of using these words? Is there an incentive for those people to use bad body parts compared to normal clean body parts? Of course, those who use them will probably not be a forever classic. I would imagine it would sell records in the short-term. With the exception of “Baby Got Back” but this would be considered PG in the Rap age today.

There is also the thought about how the rap songs come out with edited versions and then have even worse versions on the album.

Well anyways, enjoy.

HT: To Marginal Revolution and the rest of the Wired article is here.

~PCCapitalist

Ways men will die in 2008 and optimal organ failure….

This chart illustrates how men will die in 2008. Will you be one of them? You are probably wondering what does this have to do with Economics. This has to do with the Economics of Death and how you should strive for optimal organ failure. This was put in my brain by Dr. Peter Leeson and now it is coming to you.

First, if you are committing risky behaviors then you should pick up other risky behaviors, assuming you enjoy them. For example, if you smoke and drink lots of alcohol but try to eat as healthy as possible, you might as well eat cheese fries full of fat everyday. This is because when you die with your burnt lungs and destroyed liver, it will not matter if your stomach and colon are cancer free along with a healthy heart.

The incentive for someone like above to become healthy is near zero. Of course this does mean if you eat healthy, do not drink, and just smoke there may be an incentive to stop smoking. But what is optimal organ failure? Say you are the first case and you decide to eat badly also. The optimal outcome is for your heart to fail, followed by your lungs, stomach, liver, colon, etc. 1 second after. There is no incentive for you to have rosy pink lungs, if you die at age 45 with a heart attack.

Unless of course they, legalize the selling of organs. Which in case would allow you to leave money to your family to help pay debt and funeral services, while saving a life. Instead, of course, we have people dying everyday with perfectly good organs. That is for a different post.

~PCCapitalist

Tequila: It’s more expensive to hug your toliet!

Unless you have been dead for the past 12 months, the price of foods keep going up. Corn has risen even more than anything else. Some people blame the ethanol subsidies and others blame other things. When things like this happens, we often see shock waves throughout the economy of the world. In this case, it is the Mexican drink Tequila. This from the USA Today:

“But behind the fence, the blue agave plants, the raw ingredient of Mexico’s famous tequila, are getting harder to spot. They are being replaced by row after row of leafy cornstalks.

That switch to abandon slow-growing agave plants to cash in on corn, beans and other food crops selling for record prices worldwide could limit the supply of tequila and drive up the cost of a shot or a margarita.”

So like many other farmers the high prices of corn and the higher demand for Ethanol have made people want to switch to corn. The Ethanol drive lately has been government grown. That is for another post but the idea is still the same. If the government raises the demand artificially for something and farmers switch to it, then we are using taxpayers money to raise prices on goods.

The rest of the article here.

~PCCapitalist

The case of the disappearing drug money…

As with any major funding in government it is hard to know how much is the right amount. Even if you give the right amount, you do not know if the group that you are sending it to are using it wisely. This story from The Economist:

“In 2005 the Montgomery County district attorney’s office held a party at the county fair in east Texas/ They had beer, liquor and a margarita machine. The district attorney, Mike McDougal, at first denied that this had been paid for by drug money. He acknowledged that his office had a margarita machine at the fair. In fact, he said, they won first prize for best margarita. But he insisted they came by it fair and square. In any case, he pointed out the county’s drug fund was at his discretion. Under Texas forfeiture law, counties can keep most of the money and property they rustle up.”

This in itself can create perverse incentives for those who are police officers and know they can keep property. Where are the checks and balances? When will the drug war not be full of corrupt officials? What should we do? Milton Friedman among many others believe that the drug war would be easier if drugs were legalized. It is unlikely that this will ever happen. So what should we do in the meantime?

~PCCapitalist

What is Imperialism?

There is a course at my university called Imperialism, Ancient and Modern. This seems like an interesting class offered by the history department and I do not think it has been offered yet. The first assignment is to look over definitions of what imperialism is? The Economist in me came up with this definition:

“Imperialism is the use of coercion instead of trade to acquire goods and resources.”

Which made me think, is Imperialism a smart economic decision? Was there something different about the times of major colonies that caused Europe to be more Imperialistic?

I would imagine that people did it because they were rational but it could have been a major error and that is why we do not see colonies as much as we did. Each country could have gotten into prisoners dilemma of well if we trade with country A, country B will take it and use it all for itself. So let’s take it!

I would imagine moving and paying people to live in colonies costs a lot more than allowing managers of home countries manage themselves.

Here is some other definitions of imperialism:

“If it were necessary to give the briefest possible definition of imperialism we should have to say that imperialism is the monopoly stage of capitalism.” ~ Lenin, Imperialism, The Highest Stage of Capitalism (1916).

“Imperialism is the object-less disposition of state to expansion by force without assigned limits.” ~ Joseph A. Schumpeter, The Sociology of Imperialism (1918 )

“Imperialism and imperialistic are indiscriminately applied to any foreign policy, regardless of its actual character, to which the user happens to be opposed.” ~ Hans J. Morgenthaus, Politics Among Nations, 3rd ed. (New York 1960) p.45

This can be somewhat worrisome for Anarcho-Capitalist because the world is in anarchy. This just means that there is no world government. It functions well until there are wars. Wars are what Anarcho-Capitalism has to convince those who have lived under government and cannot see a world without it that war will not happen.

Well, I am very much looking forward to the class.

~PCCapitalist

Marxist of the Week:Rep. Steny Hoyer (D-Md.)

First, let me put this up from the Communist Party of the USA. This is part of their platform:

“Capitalism uses technological improvements to further exploit the working class; socialism uses technological improvements and increases in productivity to fund social programs, to shorten the workweek, and to provide free health and education. Socialism is not a utopian system, but bases social programs on the achievements of social production.”

Now this from the Washington Post:

“House Majority Leader Steny H. Hoyer (D-Md.) is pushing a work week of four, 10-hour days for federal employees.

In a letter, released this week, to the Office of Personnel Management, he asked the agency to “undertake comprehensive analysis of the transitioning to a 4-day work week for all possible federal employees and inform me by August 31, of any additional actions Congress would need to take to implement such a policy by the end of fiscal year 2008.”

These two do not seem like a far cry from each other. Rep. Hoyer uses fuel prices as his reasoning and is using that to push the Communist agenda of shorter work weeks and shorter hours. Of course everyone enjoys less time at work and I am sure government employees do not mind this. The thing is the government with its’ departments is here to serve us. Every “Department of…” is suppose to help us. If we only get four days to get in contact with them, nothing will get done. Nothing might be okay but we will probably pay them the same.

You want to cut fuel prices because you believe the federal employees consume to much. Stop hiring so many!

The rest of the WaPO article is here and the Communist Party of USA is here.

~PCCapitalist

Inflation Can Haunt You, Pun Intended…

This is a great story from Asia. It helps us remember what Milton Friedman worked so hard for. That was for governments to lower inflation. People often think that any rise in price is inflation. Inflation is nothing but a monetary phenomenon and to normal citizens, it means that it is just the amount of money that the government prints. Most try to print as much as they grow, if they print more than they grow the more we have inflation. Now to the story:

“August is the month when Buddhists provide the hungry ghosts of the dead with food and wine and cigarettes and paper offerings that represent the good things in life – cars, houses, motorbikes, stereo sets, fancy suits of clothes.

But like everything else in Vietnam, these brightly colored offerings have risen steeply in price and shopkeepers say people are buying fewer gifts to burn for the dead than ever before.

With inflation rising to 27 percent last month – the highest in Asia – and food prices rising to 74 percent above those a year earlier, Vietnam is suffering its first serious downturn since it moved from a command economy to an open market nearly two decades ago.”

The only thing that can cure inflation is to stop printing money. This is hard for governments because they can use the money to buy things to help themselves or their people and not feel the effects immediately of throwing that money in.

The rest of the story is here.

~PCCapitalist