Topic: General

Are Economists Captured Too?

Economists have long worried about regulatory “capture,” the process whereby regulators become cozy with the businesses they regulate. This is one reason for caution about the value of regulation.

According to economist Luigi Zingales (Chicago), 

The very same forces that induce economists to conclude that regulators are captured should lead us to conclude that the economic profession is captured as well. As evidence of this capture, I show that papers whose conclusions are pro-management are more likely to be published in economic journals and more likely to be cited. I also show that business schools’ faculty write papers that are more pro management. I highlight possible remedies to reduce the extent of this capture: from a reform of the publication process, to an enhanced data disclosure, from a stronger theoretical foundation to a mechanism of peer pressure. Ultimately, the most important remedy, however, is awareness, an awareness most economists still do not have.

In other words, “Economist: heal thyself!”

Topics:

Remembrances of Prof. M.A. Adelman

As Peter noted, M.A. “Morry” Adelman—a great economist, mentor, and friend—passed away last month at the age of 96. The first paragraph of The New York Times obituary (June 8, 2014) had this to say of Professor Adelman’s passing.

Morris A. Adelman, an energy economist who marshaled free-market principles and hard data in arguing that the world’s oil supply was not running out, died May 8 at his home in Newton, Mass. He was 96. The Massachusetts Institute of Technology, where he taught and researched for 65 years, announced the death on May 15.

I first had the pleasure of meeting Morry in June of 1967, shortly after I had joined the faculty at the Colorado School of Mines. The Rocky Mountain Petroleum Economics Institute had convened a meeting at Mines; Morry was one of the speakers on a star-studded program. I had been invited to edit a book, Essays in Petroleum Economics, of the conference papers.

As a rookie facing what was, at the time, an array of the most notable petroleum economists in the world (Adelman, Richard Gonzalez, Minor Jameson, John Lichtblau, Milton Lipton, Wallace Lovejoy, Stephen McDonald, James McKie, and Frank Young), I was, to put it mildly, anxious. But, thanks to the likes of Adelman, that problem was quickly put to rest.

Morry knew how to mentor young rookies. He also knew more about the oil industry–even the institutional details–than most of the conference representatives from the industry. He was not only a master of applied economics and detailed, sharp pencil work, but was an economist with a personality–a very sharp wit, very sharp indeed. This wit and his personality come through loud and clear in his writings. So, Morry remains with us, fortunately.

As I reread “Trends in Cost of Finding and Developing Oil and Gas in the U.S.”, which was Adelman’s chapter in Essays in Petroleum Economics, I am struck by just how careful he was to protect his text–a master of rhetoric, too. He paid the most careful and anxious attention to stressing that he was not making predictions, but only presenting short-term projections. As for intermediate projections, beyond 1980, Adelman thought (in 1967) they “only were of minor interest.” And “projections past the year 2000 are funny because it is better to laugh than to weep in the vain presumption of thinking we can see that far ahead.”

That said, Adelman’s chapter does suggest that he had what turned out to be very clear ideas about the possible long-run scenarios:

Nobody can tell what will happen either to energy demand or supply. All we need mention are a decisive breakthrough on: shale oil extraction, or direct finding of conventional crude oil, or coal conversion to liquids, or nuclear power, particularly the fast breeder reactor, or the fuel cell and other methods of energy conversion, not to mention the electric automobile. A major change in any one of these would put altogether new perspectives on developments in oil supply and cost.

Is Obama Really the Most Frugal President of the Past 50 Years?!?

Two years ago, there was a flurry of excitement because MarketWatch journalist Rex Nutting crunched annual budget numbers and proclaimed that Barack Obama was the most fiscally conservative president since at least 1980.

I looked at the data and found a few mistakes, such as a failure to adjust the numbers for inflation, but Nutting’s overall premise was reasonably accurate.

As you can see from the tables I prepared back in 2012, Obama was the third most frugal president based on the growth of total inflation-adjusted spending.

And he was in first place if you looked at primary spending, which is total spending after removing net interest payments (a reasonable step since presidents can’t really be blamed for interest payments on the debt accrued by their predecessors).

So does this mean Obama is a closet conservative, as my old—but misguided—buddy Bruce Bartlett asserted?

North Korean Purge Opportunity for America to Extricate Itself from Potential Conflict

It doesn’t pay to be number two in North Korea.  In December the young dictator Kim Jong-un executed his uncle, Jang Song-taek, supposedly Kim’s top advisor.  Now Vice Marshal Choe Ryong-hae, who climbed atop Jang’s corpse, has been relieved of his important positions.

Choe’s fall is particularly important because, though he was an aide to Kim’s father, Kim Jong-il, he rose rapidly under the younger Kim.  Dumping Choe reshapes the political environment of Kim’s making.

While Kim’s dominance in Pyongyang does not guarantee the regime’s survival, it dampens hope for any change outside of Kim.  Today’s Korean Winter isn’t likely to give way to a Korean Spring. 

Moreover, nothing suggests that the North’s communist monarchy is about to give way.  Many observers have waited a long time for regime collapse in the North.  They probably will have to wait a lot longer.

So far Kim Jong-un doesn’t appear to be much interested in reform.  If anything, he is more committed to his government’s nuclear weapons program and confrontational foreign policy than were his predecessors.

North Korea’s policy toward the South has oscillated wildly, but has headed mostly downward.   The North also appears to be preparing a fourth nuclear test.  The DPRK recently test-fired two medium-range missiles, predicting “next-stage steps, which the enemy can hardly imagine.”

The Obama administration obviously is frustrated, and reportedly is considering easing preconditions for resuming the long-stalled Six Party Talks.  However, it’s unlikely that renewed negotiations would lead anywhere.  Which has left the major U.S. response to tie itself closer to its South Korean ally, loudly reaffirming that America will defend the Republic of Korea if necessary.

Washington needs to reflect first on why the North is such a problem for America.  A small, impoverished, and distant state, even with a handful of nuclear weapons (but no delivery capacity), obviously is no match for the globe’s superpower.  Ordinarily the former wouldn’t be interested in the latter.   

The Politics of Personal Destruction—Campaign Finance Version

The Washington Post’s Radley Balko had a great tweet this morning—“Rich progressives hold secret meeting to discuss how we can ban rich conservatives from holding secret meetings.” He linked to a long morning POLITICO piece by Kenneth P. Vogel, “Big donor secrecy: ‘Irony, but it’s not hypocrisy,’” about a gathering in Chicago this week of major Democratic Party donors that’s raised more than $30 million for liberal groups—a meeting that included a bit of strong-arming to keep unwanted reporters at bay, Vogel reports.

Secrecy aside, one of the issues I found most interesting among the many interesting things in Vogel’s piece was his discussion about what motivates big political donors—and the different perceptions liberals and conservatives have about that question. Both sides argue, he writes, that “their donations are animated by a desire to right a country headed down the wrong path.” But,

New Frontiers in Regulatory Overreach

In most cases, excessive regulation doesn’t surprise me all that much.  It usually focuses on familiar industries, such as automobiles.  So, for example, when the National Highway Traffic Safety Administration came up with a rule mandating that all cars and light trucks sold in the United States have rearview cameras, it wasn’t a great shock.

But every now and then, regulators do something that catches me off guard.  This is from the Economist:

Vancouver’s ban on doorknobs in all new buildings, which went into effect last month, … has provoked a strong reaction from the door-opening public and set off a chain reaction across the country as other jurisdictions ponder whether to follow Vancouver’s lead. 

Wait, what?? They are banning doorknobs? I confess that this threw me when I first read it. Were they going to require some sort of Star Trek-like eyeball scanning device, along with an automatic door?

Turns out it wasn’t anything quite so techonoligcally advanced. They just want “levered doorhandles” instead. Here’s their rationale:

The war on doorknobs is part of a broader campaign to make buildings more accessible to the elderly and disabled, many of whom find levered doorhandles easier to operate than fiddly knobs. Vancouver’s code adds private homes to rules already in place in most of Canada for large buildings, stipulating wider entry doors, lower thresholds and lever-operated taps in bathrooms and kitchens.

I would have thought doorknobs were pretty easy to deal with, but OK, maybe levers are easier. But I’m not sure how you go from “some people find levers easier” to “everyone must use levers!”

Furthermore, perhaps levers are too easy:

True, elderly and disabled people find it easier to operate doors with handles. But so do bears. In British Columbia, bears have been known to scavenge for food inside cars—whose doors have handles, knob advocates point out. Pitkin County, Colorado, in the United States, has banned door levers on buildings for this very reason. One newspaper columnist in the pro-knob camp has noted that the velociraptors in “Jurassic Park” were able to open doors by their handles.

Obviously, bears don’t vote (nor do velociraptors), so we probably can’t attribute these developments to regulatory capture by the bear lobby, which wants easier access to people food (are campers getting more careful with their “pic-a-nic” baskets these days?). Nevertheless, something seems a little off in the regulatory process in Vancouver.

The Common Core Walks into a Bar…

Defenders of the Common Core national curriculum standards have long employed ridiculing Core opponents as a primary tactic to keep their effort from crumbling. Unlike, say, a circus, the pro-Core assault hasn’t been very entertaining or funny, but it’s been there. Now, though, the humor tide may be turning, with actual funny people – professional comedians – taking on the Common Core.

A first big laugh attack was launched a few weeks ago, when David-Letterman-in-waiting Stephen Colbert ripped into bizarre math questions stemming from the Common Core:

Yesterday, another comedian went after the Core. Louis C.K., of the show Louie, tweeted what actually sounded like a kinda serious distress call about his children:

Now, nobody should make policy based on the jibes of comedians, professional or otherwise. But that pop culture is starting to mock the Core is yet another bad sign for the national standards effort, an effort proponents once thought in the bag when, under federal pressure, 45 states quietly signed on to the Core.

Funny thing is, Core stalwarts don’t seem to be laughing anymore.