tag:www.invisibleheart.com,2008://1 2008-03-26T21:21:01Z Movable Type 3.34 tag:www.invisibleheart.com,2008://1.88 2008-03-26T16:02:31Z 2008-03-26T21:21:01Z

This commentary aired on National Public Radio's All Things Considered on March 25, 2008. Audio is here. Wall Street is all about profit. All about the bottom line. And profit does play a major role in making our world go...

Russ Roberts This commentary aired on National Public Radio's All Things Considered on March 25, 2008. Audio is here. Wall Street is all about profit. All about the bottom line. And profit does play a major role in making our world go round. Without profit, there's no point in taking risks. Without risk-taking, there's no investment. Without investment, there's no growth. Profits are the cornerstone of our economy and our way of life. But as Milton Friedman liked to point out, our economic system isn't just based on profit. It's a profit and loss system. It's the combination that sustains and enhances our standard of living. Yes, the potential for profit encourages people to take risks. But without the potential for loss, you have reckless risk-taking. You have risk-taking without prudence. Without the potential for loss, irresponsibility goes unpunished. The Federal Reserve and the Treasury Department have orchestrated the rescue of Bear Stearns. The defenders of that maneuver argue that if Bear Stearns had failed it would have created a lot of collateral damage, so much collateral damage, that you and I, normal folk who don't know anything about high-falutin' financial instruments like "collateralized debt obligations" would have been engulfed as well. If Bear Stearns had gone bankrupt, Lehman Brothers might have been next. Some say that if Bear Stearns had failed, the entire banking system was at risk. Maybe. It seems awfully hard to know for sure. But what I do know for sure is that by subsidizing the marriage of Bear Stearns and JP Morgan, the government has removed some of the loss from the profit and loss system. Oh, they tried to make Bear Stearns suffer by demanding a price of $2 a share. But now the deal has been renegotiated—ta-da!—to $10 a share, a mere five-fold readjustment. What's going on here? What's going on here is that we're in uncharted territory, a world where the Fed and the Treasury are making up the rules as they go along, where accountability is being ignored and a world where the government bails out Bear Stearns and its creditors rather than letting those who have been reckless learn a lesson for the next time. Yes, letting Bear Stearns go under would have been dangerous. But helping JP Morgan devour Bear Stearns is dangerous, too. Where does the government stop in protecting people from irresponsibility? Home owners and lenders are next. The political pressure is inexorable for some sort of bail out. And then comes more regulation of investment banks. In a world where people who make bad decisions are spared the full consequences, only one thing is certain. We've encouraged more people to make more bad decisions in the future. The real price to be paid isn't the dollar costs of any bail out, but the encouragement of recklessness and irresponsibility. That will make all of us poorer down the road. ]]> tag:www.invisibleheart.com,2008://1.87 2008-02-21T02:51:52Z 2008-02-21T02:56:12Z

This commentary aired on National Public Radio's All Things Considered on February 20, 2008. Audio is here. A friend of mine told me the other day he’s planning to vote for John McCain. Why? Because McCain promises to keep the...

Russ Roberts This commentary aired on National Public Radio's All Things Considered on February 20, 2008. Audio is here. A friend of mine told me the other day he’s planning to vote for John McCain. Why? Because McCain promises to keep the Bush tax cuts and my friend thinks that a good idea. Why would my friend think that John McCain will keep the cuts—after all, he voted against them as a Senator. My friend said, well, McCain said he’d keep the cuts. I know. It seems pretty absurd doesn’t it? Ridiculous, really. Who actually believes what politicians say? But my friend who likes McCain is no fool. He’s probably read more history books than a lot of history professors. I’d never call him naïve. But he wants to like one of the candidates and McCain is his best shot. So he’s managed to convince himself that McCain is going to keep the tax cuts. I have to conclude that my friend is living in something of a fantasy world. But he’s not alone. Any one who’s passionate about a candidate is doing the same thing. Hillary is promising universal health care. And why should we believe she’ll keep that promise? Because she says so. Where’s the evidence she’ll succeed the second time around? Outside of politics, we’re usually a little more down to earth when it comes to rhetoric and promises. Suppose you see an ad for anchovy ice cream. The ad promises "It’s delicious!” Convinced? Probably not. You take that word “delicious” with a grain of salt. Actually more than a grain. More like a pound. You realize that the seller of the ice cream is self-interested and just trying to make a sale. I treat the rhetoric of politicians like ads for anchovy ice cream. Call me a cynic, but I assume they’re trying to make a sale. So when Obama says on his web site that he’s tired of “divisive ideological politics,” I wonder: what other kind of politics is there? Promising politics without “divisive ideology” is like selling a sure fire way to be a millionaire , working from home using the Internet. Most of us know it’s too good to be true. But Obama is selling like hotcakes even though his promise is just as unrealistic. We have such a yearning for a candidate with principles and ideals. We like to think our candidate is the good one, it’s the other guy’s favorite who’s the evil opportunist. But they always break our hearts, don’t they? Too many of us, I fear, are living in a fantasy world. Once in office, they all want to be popular. They like power more than principle. They respond to the political winds, rather than the rhetoric that got them elected. And when they break their promises because it’s politically expedient, they always have a justification. The good news? That evil candidate from the other party that you hate, isn’t nearly as dangerous as you think. Once in office, he or she will listen to the public rather than to principles. It happens every time. ]]> tag:www.invisibleheart.com,2008://1.86 2008-01-17T17:38:35Z 2008-01-17T18:13:54Z

This commentary aired on National Public Radio's All Things Considered on January 16, 2008 in response to much talk about the the need to create a stimulus package to avert a recession. Audio is here. Love that word—stimulus. It sounds...

Russ Roberts This commentary aired on National Public Radio's All Things Considered on January 16, 2008 in response to much talk about the the need to create a stimulus package to avert a recession. Audio is here. Love that word—stimulus. It sounds so scientific. With the right stimulus, you can even make the leg of a dead frog twitch. A heart attack victim gets the stimulus from those chest paddles and bam. Back to life. My online dictionary defines stimulus as something that "rouses or incites to activity." Sounds like the perfect prescription for an ailing economy. But if politicians know how to stimulate the economy, why wait for a recession? If you can make the economy grow, why wait for bad times?]]> One answer is that a healthy patient doesn't need medicine. But the other possibility is that it's all hot air. Maybe we don't know how to make a $14 trillion economy move very quickly. And if we did, it would take a lot more than an injection of even 125 billion dollars. There's that scientific language again—an injection. The politicians are always going to inject some amount of money into the hands of consumers and into the economy, like a doctor giving a lifesaving blood transfusion. But where does the economic injection come from? It has to come from inside the system. It's not an outside stimulus like the chest paddles or the transfusion. It means taking money from someone or somewhere inside the system and giving it to someone else. The standard stimulus package doesn't change incentives. It's a check from the government. The hope is that the receiver will spend it. But when you just send out checks from the government, whoever gets stimulated is likely to be offset by someone who gets unstimulated. The money has to come from somewhere. If you raise taxes to fund the plan, the people who are taxed are poorer and they'll spend less. If you borrow money to fund the plan, the people who buy the government bonds have less money to spend and that offsets the stimulus. It's like taking a bucket of water from the deep end of a pool and dumping it into the shallow end. Funny thing—the water in the shallow end doesn't get any deeper. And even the people who get the money often save more of it than they spend. That's why stimulus schemes based on giving people money have a poor track record of energizing the economy. Usually, the only thing that gets stimulated is a politician's approval rating. I'm not saying that economy policy is irrelevant. Economic policy matters because it affects the long-run growth of the economy. I'm all for policies that make us more productive or innovative by changing incentives. But those policies take time. There's little any economic doctor can do to move our $14 trillion organism of an economy in the next few months. Politicians who work in the Oval Office—or those who seek to work there—would be wise to remember that patience is a virtue. Focus on the policies that lead to growth over time. Expecting results overnight is bound to lead to disappointment. tag:lautrec.hmdnsgroup.com,2007:/~invisibl//1.77 2007-12-26T14:13:28Z 2008-01-14T17:01:52Z

This commentary aired on National Public Radio's All Things Considered on December 26, 2007. You can listen to it here. I know the economic news doesn’t seem very cheerful these days. But a lot of it is blown out of...

Russ Roberts This commentary aired on National Public Radio's All Things Considered on December 26, 2007. You can listen to it here. I know the economic news doesn’t seem very cheerful these days. But a lot of it is blown out of proportion, stories and subplots designed to scare us, told by politicians and people with their own agenda. Let’s not let them push us around whether they’re on the right or the left, Republican or Democrat. They always tell us the sky is falling. That’s the minimum standard for getting our attention in a busy news cycle. But remember that the sky usually doesn’t fall. We just move on to the next scare. So my New Year’s wish for America is that we be skeptical of falling sky stories and that as a result we all sleep better. ]]> Immigrants aren’t going to ruin America. Our culture is stronger than you think. It’s a culture born of immigrants. They’ve always been part of the great American stew of language, food, music and hard work. And the kids do better than their parents. The subprime mortgage crisis isn’t going to ruin the economy. After years of appreciation, falling housing prices aren’t a disaster. Home ownership will remain near or at an all-time high. China isn’t going to steal our prosperity or our jobs. They can’t. If they keep selling us toys with lead paint, we’ll stop buying them. Meanwhile, they play Santa Clause and the American economy keeps creating more jobs. The middle class isn’t dying out. Real median family income has been growing steadily for the last 30 years. Unemployment is still below 5% and has been that way for a while. The falling dollar means very little. It certainly doesn’t threaten the economic vitality of the United States. None of this is meant to defend the economic status quo. Or a Republican President. Or a Democratic Congress. I slept just as well in the ‘90s when we had a Democratic President and a Republican Congress. We just had different scare stories back then that didn’t turn out to be true. And there are a lot of things that could be better. Our schools. A tax system even the IRS doesn’t understand. How the federal government spends the money. I know. You’re still mad. Surely I’ve mentioned something that does keep you up late at night. But maybe, just maybe, working yourself up over China is just as silly as worrying about immigration. Maybe they’re both grossly overblown as threats to our prosperity and way of life. Chill out. Read more arguments on the other side. The optimists usually have some decent arguments. Maybe they’re right. Learn some economics. It’s working for me. Unless you’re one of those people who likes to get steamed over the state of the world just for the sake of steaming. Then I can’t help you. But the rest of really should sleep better. It’s going to be OK. Really. Sweet dreams. tag:lautrec.hmdnsgroup.com,2008:/~invisibl//1.76 2007-11-01T14:00:00Z 2008-01-10T23:05:17Z

from Foreign Policy, November 2007 To hear most politicians talk, you’d think that exports are the key to a country’s prosperity and that imports are a threat to its way of life. Trade deficits—importing more than we export—are portrayed as...

Russ Roberts Foreign Policy, November 2007 To hear most politicians talk, you’d think that exports are the key to a country’s prosperity and that imports are a threat to its way of life. Trade deficits—importing more than we export—are portrayed as the road to ruin. U.S. presidential hopefuls Hillary Clinton and Barack Obama want to get tough with China because of “unfair” trading practices that help China sell products cheaply. Republican candidate Mitt Romney argues that trade is good because exports benefit the average American. Politicians are always talking about the necessity of other countries’ opening their markets to American products. They never mention the virtues of opening U.S. markets to foreign products. This perspective on imports and exports is called mercantilism. It goes back to the 14th century and has about as much intellectual rigor as alchemy, another landmark of the pre-Enlightenment era. ]]> Russell Roberts is professor of economics at George Mason University and a research fellow at Stanford University’s Hoover Institution. He is the host of the weekly podcast EconTalk at EconTalk.org and the author of The Choice: A Fable of Free Trade and Protectionism (Upper Saddle River, NJ: Prentice Hall, 2006), a primer on trade issues written in the form of a novel. ]]> tag:www.invisbleheart.com,2007://1.78 2007-09-13T16:24:31Z 2008-01-14T17:00:50Z

This commentary aired on NPR's All Things Considered on September 13, 2007. You can listen to it here. At the age of 20, Rick Ankiel was a starting pitcher on a playoff-bound St. Louis Cardinals team. Then it fell apart....

Russ Roberts This commentary aired on NPR's All Things Considered on September 13, 2007. You can listen to it here. At the age of 20, Rick Ankiel was a starting pitcher on a playoff-bound St. Louis Cardinals team. Then it fell apart. I was there. I saw him throw five wild pitches and walk four against the Braves in a single inning. He never got over that. He tried the minors to find the lost magic in his arm. Then surgery. Nothing helped. The dream died. But Ankiel wouldn’t let it die. It took him almost seven years, but he made it back to the major leagues as an outfielder. That was heartening enough. But he did more than make the team. He played with flair. With grace. With excellence. Suddenly, he was leading the Cardinals toward first place. Then came the news that Ankiel had ordered human growth hormone, or HGH, in 2004. Suddenly, the golden boy was tarnished. Sports writers called it a tragedy. My nine year old son’s face fell when I told him. Why are you sad, I asked. All those things he did, he said. It wasn’t him.]]> I think that’s what most people thought. It wasn’t him. We thought it was Rick Ankiel who was playing The Natural in real life. But it wasn’t him. It was the Unnatural. The enhanced Ankiel. Ankiel with an asterisk. But I don’t see the tragedy. He hit the homers. HGH doesn’t let other people hit the home runs for you. It doesn’t move the fences closer for your at bat then move them back. It makes you stronger. So does weight-lifting. Should we call all the weight lifters cheaters? How about the ones who lift longer than the average? Human growth hormone wasn’t banned in baseball until 2005. But suppose Ankiel found a way to order HGH after 2004. Ooooohhh. Maybe he’s taking it now. But we now he wasn’t alone in 2004. We know lots of major leaguers took steroids and HGH and who knows what else to try and improve their performance. I think what we really dislike about the Ankiel story is that it shatters the illusion of what sports is about. Sports is about people in intense competition with a lot of money at stake. That money is at stake only because we care so much about who wins and loses. We call it a game and blame the owners for treating it like a business. But we’re surprised and disappointed when the players act that way, too. They’re supposed to do what they do for the same reason we throw a baseball around with our kids—for the love of the game. We don’t want to be reminded of what people will do for money and fame and adulation. They’ll do a lot. Actors and actresses enhance their performance with surgery. We understand it’s not about vanity. It’s the competition. We don’t judge the Academy Award winner who had surgery to stay in the game. There’s no tragedy that people are always looking for an edge. Why should we be surprised or disappointed when athletes do the same thing? tag:www.invisibleheart.com,2007://1.79 2007-06-07T17:15:26Z 2008-01-14T21:20:33Z

This commentary aired on National Public Radio's All Things Considered on June 7, 2007. You can listen to it here. According to the White House, the new immigration bill will "Help Keep The U.S. Competitive In The Global Economy By...

Russ Roberts This commentary aired on National Public Radio's All Things Considered on June 7, 2007. You can listen to it here. According to the White House, the new immigration bill will "Help Keep The U.S. Competitive In The Global Economy By Establishing A New Merit-Based System For Immigration That Is Similar To Those Used By Other Countries." And how is it going to do that? There's going to be a point system to determine who gets one of the precious 380,000 visas that are up for grabs. Highly educated people get points. People with skills that are in high demand, whatever that means, get points. Young but not too young? Points. Speak English well? More points for you. Speak it badly, fewer points. Don't speak it at all? No points. People with the highest point totals get the visas. Some people complain that the Bush Administration is too free market. But the idea that Washington bureaucrats can figure out which skills are in high demand is an idea straight out of the old Soviet Union. It would be great if we could get some old communists from the politburo to administer it, but we won't be able to. They won't score high enough on the point system to get a visa. The whole thing's pretty inspiring isn't it? We once believed in a lady in the harbor with a lamp beside the golden door. ]]> She said "send me your tired huddled masses yearning to breathe free." She welcomed the wretched and the homeless. Now it's "send me your tired huddled masses as long as they're software developers, 25-39 years old and can already speak English." So modern. So utilitarian. So ugly. Here's an idea. If we care so much about keeping the US competitive in the global economy, we can do more than just keep the wrong people out. Let's make existing residents prove they're worthy of staying here. Surely some of us aren't pulling our economic weight. Surely some of us are a burden on the school system and the health care system and the law enforcement community. Surely some of us are not contributing to that elusive, uplifting goal of a competitive work force competing in the global economy. We need a point system. Get one of the top 380,000 scores and we're sending you back to where you or your ancestors came from-where you can drag down our so-called economic competitors. Speak English with an accent? Five points. Make less than the median income? Twenty points. About to go on social security? Twenty five points. Watch more than ten hours of television a week? Ten points. English major in college? Five points. Obese? Ten points. And if you're a Senator or President who thinks we should micromanage immigration to sustain our global competitiveness, whatever that means? One hundred points. A perfect score. Go get a real job where you contribute to the richness of American life instead of trying to tear it down. tag:www.invisibleheart.com,2007://1.83 2007-03-18T20:40:54Z 2008-01-14T20:45:28Z

This commentary appeared in the Los Angeles Times on March 18, 2007 along with pieces by philosopher Peter Singer, and Sam Webb the head of the Communist Party, USA. ECONOMISTS can tell you, using publicly available data, that income inequality...

Russ Roberts This commentary appeared in the Los Angeles Times on March 18, 2007 along with pieces by philosopher Peter Singer, and Sam Webb the head of the Communist Party, USA. ECONOMISTS can tell you, using publicly available data, that income inequality is growing in the United States. But if the data weren't collected, you'd never know. If anything, the differences between the rich and the rest of us are less intrusive and noticeable than in the past. In the early part of the 20th century, rich people ate better than the rest of us, had nicer clothes and a few even had cars. Rich people had servants and lived one family to a house. By those measures, the masses fell into the have-not category. No servants. Cramped quarters. Coarser food and clothing. A longer and more physical working day. If you were in the bottom half of income distribution and you encountered someone in the upper half, you knew it. But steady economic growth over the years has eliminated most of the tangible differences between us.]]> Today, almost every family owns a car. Most own their own home. Most of us have dishwashers and cellphones and computers and air conditioning, comforts only the richest of the rich had 40 years ago. Rich people work longer hours than poor people today. Neither is likely to encounter much danger on the job. A poor person having a heart attack gets the same treatment as a rich person, and both get better treatment than the richest fat cat received 25 or 50 years ago. Yes, the rich get richer in America. But so does everyone else. So why should we care that inequality is climbing if we're only aware of it when we read the government data? Deep down, we assume that if the distribution of income is getting less equal, someone must be manipulating it to make it so — evil politicians, maybe, or greedy multinational corporations. But no one is. The measured level of inequality is, in fact, the result of the choices that millions of us make individually, decisions to go to school or drop out, decisions to marry or divorce, decisions to emigrate to America or stay in one's home country. What most of us really care about isn't inequality but opportunity. We're less concerned with getting ahead of the Joneses than with simply getting ahead. Stay in school, finish high school and go on to college and you get ahead in America. Spend less than you earn and you can end up wealthy. The data are easily manipulated to scare us. We should worry less about inequality and more about opportunity. tag:www.invisibleheart.com,2007://1.84 2007-03-12T20:49:35Z 2008-01-14T20:52:45Z

This commentary appeared in the Wall Street Journal on March 12, 2007 I'm thinking of a country. America's trade deficit with this country just reached an all-time high. This country holds more U.S. Treasuries than any other foreign country. It's...

Russ Roberts This commentary appeared in the Wall Street Journal on March 12, 2007 I'm thinking of a country. America's trade deficit with this country just reached an all-time high. This country holds more U.S. Treasuries than any other foreign country. It's one of the world's largest economies. And the name of that country is? Japan. Japan? Yes. Remember when Japan was a big threat to the American economy? You have to go back to the late 1980s. Back then, every politician in the mood for pandering to economic ignorance could scare a bunch of folks with worries about how the Japanese were stealing our jobs. How our trade deficit with Japan was going to destroy the American economy. How the Japanese economy was soon going to pass America's. How the Japanese auto industry was part of a sinister strategy to destroy our core competencies.]]> You'd think Japan would still make good political fodder. The story of the baseball off-season is the Red Sox spending $100 million to bring Daisuke Matsuzaka from Japan to the United States. Dice-K, as he's known, is the ultimate import. He takes away a job from an American pitcher. And the Japanese baseball teams discriminate against American players with strict quotas. But even though America's trade deficit with Japan just hit that all-time high, no one uses Dice-K as a symbol of unfair Japanese trade policy. Why not? Instead, it's China all the time. We're told that China cheats on its currency, stealing America's manufacturing capacity and destroying American jobs. China's holdings of U.S Treasuries threaten our sovereignty, according to Hillary Clinton, even though Japanese holdings are almost twice as big. Why isn't Japan just as scary as China? One answer is that Matsuzaka smiles too much. He's only scary if you're 60 feet 6 inches away from him, trying to hit his famous gyroball with a wooden stick in your hand. And unlike other imports, it's easy to see how he doesn't just help his relatives in Japan with all that money he's getting from the Red Sox. He helps the Red Sox. Trade makes both parties to the trade better off. But still. Why isn't Japan scary? One answer is that the doom-and-gloomers already tried, but nothing happened. They told us that Japan was going to destroy our economy. They told us we needed a plan to cope with brilliant Japanese economic strategies. But then the Japanese economy hiccupped and played Rip Van Winkle for a decade, while America kept growing. The real reason Japan isn't scary is because it wasn't and isn't a threat to our standard of living. Trade makes both parties better off, remember? But when Japan slumps and the U.S. surges, it's too hard to fool people with bad economics. So when the sky didn't fall, a new candidate had to be found. Mexico and Nafta fit the bill. Not Canada, even though Canada was part of Nafta. Evidently, politicians and some voters find Mexicans more scary than Canadians. So it was Mexico. When that great "sucking sound" was never heard, a new sinister foreign nation had to be found. And so it's the turn of the Chinese. Yes, China holds a lot of our bonds. But Japan holds more. Yes, we run a big trade deficit with China. But that lets us buy lots of inexpensive stuff instead of having to make it for ourselves. Yes, there are more than a billion Chinese. I guess that means they can take all of our jobs four times! But our economy keeps growing. We have more jobs than ever before. And contrary to popular belief, the American standard of living and the American middle class are thriving. We were told that at a minimum China (and India with its own billion-strong population) would take all our high-tech jobs. But the high-tech sector bounced back from its downturn (a downturn that had nothing to do with outsourcing) and is growing again, partly because we can get some of the simplest database and programming tasks done so cheaply by Indians and Chinese. So why can politicians still make China scary? Why didn't Americans learn from the previous sky-is-falling episodes? The simple answer is that if you don't understand economics, you might be convinced by a politician who says that trade with China is bad for America. The next time you find yourself losing sleep over China, remember that you were worried about Japan and Mexico and everything turned out OK. Then ask yourself if America would be a richer country if China cut itself off from the rest of the world. tag:www.invisibleheart.com,2007://1.82 2007-02-17T20:33:36Z 2008-01-14T20:47:55Z

This commentary appeared in the Los Angeles Times, February 17, 2007. LABOR UNIONS' importance in the workplace has fallen steadily since 1950, when roughly a third of American workers were unionized. Today, that number is well below 10% in the...

Russ Roberts This commentary appeared in the Los Angeles Times, February 17, 2007. LABOR UNIONS' importance in the workplace has fallen steadily since 1950, when roughly a third of American workers were unionized. Today, that number is well below 10% in the private sector. The Employee Free Choice Act, now before Congress, aims to reverse that trend by making it easier for unions to gain certification and stiffening penalties for interfering with a unionization drive. After all, supporters argue, without union representation, how can individual workers have the bargaining power needed to get their fair share of the economic pie? But maybe unions aren't so crucial to worker well-being. When more than 90% of the private-sector labor force isn't unionized, why do 97% of us earn above the minimum wage? If our bargaining power is so pitiful, why don't greedy employers exploit us and drive wages down to the legal minimum?]]> The simple answer is that bargaining power comes from having alternatives. Even in the absence of unions, employers have to treat workers well to attract and keep them. In a workplace as dynamic as that of the United States, where millions of jobs are destroyed and created every quarter, a company's ability to exploit workers is greatly limited by how easy it is to find another job. Ultimately, it is competition among employers that protects us from exploitation. Even those who would seem to be the most vulnerable — immigrants who struggle to speak English, for example — can earn much more than the minimum wage simply because of competition for their skills. Cleaning people routinely earn $20 an hour, more than most cities' so-called living wage. Look at workers' share of the nation's income. In 1950, employee compensation was 53% of gross domestic income. In 2005, that number was 57%. Somehow, as unions' strength dwindled over the decades, employees' share actually grew. And it's a share of a dramatically larger pie, the result of the incredible economic boom of the last half a century. The source of such economic growth is better-educated workers and technology that makes them even more productive. Those with more skills are more attractive to employers. But aren't those gains mainly going to those at the top? Don't we need unions to preserve the middle class? That's the rhetoric that union leaders use. Yet real median family income has risen steadily since 1950. Some of that increase is because more families have two earners. But gains have been steady even for families in which only one person is working. The middle class isn't shrinking; it's getting richer. What used to be wealthy is now middle class. Not every American worker shares equally in prosperity. But skipping a secret-ballot vote — as the Employee Free Choice Act would — is an odd way to help the disadvantaged. The argument is that if workers can simply sign a card in support of the union, they'll avoid employer intimidation. But eliminating the ratifying vote replaces the threat of employer intimidation with the threat of union intimidation. That will probably increase union representation. But will it help workers? Unions help those they represent by trying to raise wages above what they would otherwise be. To the extent they succeed, they reduce the demand for labor in unionized shops. That means more workers have to find employment in non-unionized shops, pushing down wages there. That's especially tough on workers with limited skills and education. The sad irony of unions is that they can only improve the lot of their members at the expense of other workers. A better way to increase wages is to make workers more productive. That lifts everyone's standard of living. Rather than trying to revitalize unions, we ought to be looking for ways to revitalize our moribund public education system. That is the road to true, long-term prosperity. tag:www.invisibleheart.com,2007://1.81 2007-02-07T17:40:06Z 2008-01-14T17:47:19Z

This commentary was published in the Boston Globe on February 7, 2007 WE CALL FOOTBALL a game. But Super Bowl Sunday reminds us that the National Football League is big business. A minute of advertising time goes for more than...

Russ Roberts This commentary was published in the Boston Globe on February 7, 2007 WE CALL FOOTBALL a game. But Super Bowl Sunday reminds us that the National Football League is big business. A minute of advertising time goes for more than $4 million. Winning the game means big dollars and enormously lucrative opportunities for coaches and players. In contrast, college sports seem a more pristine opportunity for student-athletes to clash on the playing fields just next to the ivy-covered halls we studied in years ago. There is an inevitable romance about college sports that comes from this nostalgia, a romance that the NCAA -- the governing organization of college sports -- works to preserve and enhance. The NCAA roots out the most trivial of recruiting violations to maintain the amateur image of college athletes. Why they're just like the rest of the student body, they just happen to be on the football or basketball team! Never mind that they have to practice nearly year-round or they'll lose their scholarships. And the NCAA makes sure that all those student-athletes earn their scholarships by maintaining a minimum grade point average. But the rest of college sports looks pretty professional. The bowl games have sponsors. So we get the Tostitos Fiesta Bowl and the FedEx Orange Bowl. College football stadiums and basketball arenas are multi-million-dollar facilities with professional-quality weight-training and conditioning equipment and trainers. Ticket sales for basketball and football generate millions of dollars. Alumni donate millions to athletic departments. College sports is a big business. Then there are the coaches. No amateurs or volunteers there. The latest example is Nick Saban, the new football coach at the University of Alabama. Saban will get about $4 million to coach the Crimson Tide. That's a lifetime of income for some of us. But for Nick Saban, that's the annual figure. ]]> Saban's story outraged pundits, citizens, and taxpayers. How can a mere football coach be rewarded so handsomely? How can the university president and the head of the athletic department be such irresponsible stewards for their institution? By what justice does the football coach who makes people happy 11 or 12 days a year make more than the best professor in the medical school or the governor of the state? These complaints don't just come from the English department, where you'd expect some griping. The complaints come from the fans of college football who are having trouble feeling romantic about a team led by a $4 million man. But if those fans want to find someone to blame they should look in the mirror. They are the source of that salary they find so exorbitant. Their desire to revel in victory is what drives the university to pay not an exorbitant salary but merely the going wage, what it takes to attract a talented coach away from other universities and the professional ranks. At Alabama, that fan is tired of losing to Auburn. At Oklahoma where Bob Stoops makes more than $3 million to coach the football team , alums from Oklahoma want to revel in victories over Texas. Now and then, they expect a national championship. At Ohio State, Jim Tressel makes a few million to ensure that the Buckeyes stay competitive with Michigan. And those expectations and the thrill of possibility are what make that $4 million salary feasible. That $4 million is what the market will bear because the rewards for victory have become so great. The television contracts are bigger than ever. The same is true of the bowl game payouts to both winners and losers. When prizes get bigger, people will spend more to get a crack at those prizes. And what drives that increase in prices? The fans. The fans who care more than ever, who watch those bowl games in greater numbers, who generate the ad revenue that creates those television packages and ticket revenue. The fans create the incentive that drives university presidents and athletic directors to give people like Nick Saban a salary 100 times what the average fan in the stands is earning. If you don't like it, stop watching, stop caring, and stop contributing to the athletic department. tag:www.invisibleheart.com,2006://1.85 2006-12-06T21:01:47Z 2008-01-14T21:12:55Z

This article appeared in TCS Daily on December 6, 2006 and was reprinted in a tribute to Milton Friedman in the Hoover Digest I last saw Milton Friedman a few days shy of his 94th birthday, just a few months...

Russ Roberts This article appeared in TCS Daily on December 6, 2006 and was reprinted in a tribute to Milton Friedman in the Hoover Digest I last saw Milton Friedman a few days shy of his 94th birthday, just a few months ago. I was interviewing Milton for my podcast series, EconTalk. I hadn’t seen him in over a year and I worried whether the finest economic communicator of our era would still be Milton Friedman or just a shadow of his former self. I planned to talk to him about what I considered his greatest scholarly work, The Monetary History of the United States, and his first great work as a public intellectual, Capitalism and Freedom. Both books were heretical in their day, and the ideas in both books, in varying degrees, have since become part of the mainstream. When the Monetary History was published in 1963, the money supply was on the fringe of economic policy conversation, even when considering the causes of inflation. Today, the role of the money supply and central banks is front and center in creating economic stability and setting the stage for growth, and everyone, from central bankers to academics, agrees that inflation is everywhere and always, a monetary phenomenon. ]]> The impact of Capitalism and Freedom is a little more complicated. Its defense of individual liberty and limited government is more intellectually acceptable than it was in 1962 when the book was first published. Many of the policy proposals in the book have been adopted (the volunteer army, educational vouchers, flexible exchange rates), while others that were once unimaginable are now taken seriously (privatized Social Security, eliminating farm subsidies). I needn’t have worried about Milton’s faculties. His mind was clear and lucid and as relentlessly logical as ever. At 93, he wasn’t as quick as he was in his youth. But who can match that standard? I recently found an interview from 1975 on YouTube when he was in his prime. What a prime it was! Articulate, razor-sharp logic, and always a smile on his face even when his opponent fails to give him the benefit of the doubt as to his motives. What an inner fire he must have had to sustain him through all that ridicule and disdain with his sense of humor intact and his dignity unwavering. We talked for about an hour—about his books, his ideas, the state of the world, and the prospects for liberty. At one point in our conversation, we talked about how a bad idea—the government’s championing of ethanol—is sustained by the political power of its prime beneficiary, Archer Daniels Midland. At first, neither of us could remember the company’s name. We stumbled for a few seconds and then he started laughing. He had an excuse, he explained—he was 93. But he thought it delightful that his interviewer, a lad of only 51, had the same difficulty. We should all find that our biggest challenge after we’ve passed 90 is pulling the name of a company from our mental hard drives. In the course of our discussion about the money supply and its role in creating the incredible economic performance of the last 25 years, Milton made a claim about the smoothness of the growth in the money supply over that time. A week or so later, I e-mailed him, asking him which measure of the money supply he had in mind. By then, he had celebrated his 94th birthday. He responded with an e-mail of explanation, attaching two spreadsheets with the data he thought most relevant. At 94, Milton was sending me spreadsheets. Unbelievable. At the end of our time together, standing in the doorway of his San Francisco home, I thanked him for his time and then I paused. How many more chances would I have to see him in person down the road? So I thanked him again, this time for everything, for all that he had done for me and for all of us who saw him as a guide and mentor and for all of us whose lives had been touched by his ideas—the people in America and around the world who live under freedom, with all that that conveys and allows. I felt a little foolish. The words were so inadequate. But now that he is gone, I’m glad to have at least said something to let him know how much he meant to us who toil in the vineyards he planted. We shall not look upon his like again. tag:www.invisibleheart.com,2006://1.80 2006-11-06T17:33:58Z 2008-01-14T17:38:19Z

This commentary was published in the Boston Globe on November 6, 2006 THE SAGAMORE ROTARY is gone, and the rejoicing is near universal. Killing a bottleneck that delayed traffic to and from the beaches of Cape Cod certainly seems worthwhile,...

Russ Roberts This commentary was published in the Boston Globe on November 6, 2006 THE SAGAMORE ROTARY is gone, and the rejoicing is near universal. Killing a bottleneck that delayed traffic to and from the beaches of Cape Cod certainly seems worthwhile, even if the execution required $33 million. The engineers have triumphed. Nothing could be more straightforward: When you see a bottleneck, open it up. Visions of convertibles dance through our heads -- top down, Truro here I come! Alas, I cannot join the cheering chorus, even though I have spent hours sitting in traffic on Route 6 trying to get home. ]]> Getting rid of the rotary won't eliminate the traffic problem any more than skipping dinner every night will make you skinny. You have to ask the economist's favorite question: And then what? If you skip dinner, you're probably going to end up eating more at breakfast and lunch. As for the rotary, getting rid of it encourages a lot more people to go to the Cape who didn't go before. Yogi Berra once said of a restaurant, "Nobody goes there anymore; it's too crowded." Same with the Cape. It's the traffic that deters even more people from going there on any given Sunday. Get rid of the traffic, and more people suddenly find it attractive. Think of my dad. He hates traffic. Growing up in Lexington, we never went to the Cape on a summer Sunday. My dad didn't want to sit in traffic getting there or coming home. We went to Revere. Piece of cake. Not as nice as the Cape. But when you considered the hassle, the ease of Revere outweighed the elegance of the Cape for my dad. Getting rid of that rotary makes Cape Cod more attractive to my dad and thousands like him. As those folks make the trek to the suddenly more convenient Cape Cod, the roads into and out of the Cape -- and on the Cape as well -- are going to get more crowded. They have to get more crowded. Until they do, someone else will go to the Cape who previously went to Revere or Gloucester or the Jersey Shore because getting to the Cape was too inconvenient relative to its rewards. Getting rid of the rotary can't solve the traffic problem because it doesn't change the underlying cause of the congestion: the relative scarcity of sand and surf next to magnificent dunes. A lot of wonderful scarce things are expensive. Think box seats at Fenway on a perfect night in June, Van Gogh's paintings, or a condo overlooking Central Park. But sitting on the beach at Cape Cod is wonderful and scarce and relatively cheap -- cheap measured by the out-of-pocket costs of a day trip. So more people want to enjoy the Cape than there is room for them on the Cape's roads and beaches. Removing a rotary makes that problem worse, not better. It removes one of the costs of enjoying those beaches. So other costs emerge in response, though no one wants it that way. Next July or August, there will be a new bottleneck. I'm not sure where it will be, but I'm confident it will be there. The only question is how bad it will be. It's a Catch-22. One possibility is that the new bottleneck will be just as bad as the Sagamore Rotary. In that case, the project accomplishes nothing. The second possibility is that it won't be quite as bad. But that means more people on the Cape. That's nice for the newcomers. But it also means more congestion on Route 6 when it rains and thousands of people are trying to find something to do with the kids. It means more traffic on the side streets. It means parking will be even worse in Provincetown. It means less space at the beach on a cloudless Sunday in July. All that for the bargain price of $33 million. I'll see you next summer. We won't be alone. tag:lautrec.hmdnsgroup.com,2006:/~invisibl//1.31 2006-11-01T18:42:46Z 2008-01-06T18:43:23Z

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Towards the end of the 18th century, England began sending convicts to Australia. The transportation was privately provided but publicly funded. A lot of convicts died along the way, from disease due to overcrowding, poor nutrition and little or no...

Russ Roberts Towards the end of the 18th century, England began sending convicts to Australia. The transportation was privately provided but publicly funded. A lot of convicts died along the way, from disease due to overcrowding, poor nutrition and little or no medical treatment. Between 1790 and 1792, 12% of the convicts died, to the dismay of many good-hearted English men and women who thought that banishment to Australia shouldn't be a death sentence. On one ship 37% perished. "The government decided to pay the captains a bonus for each convict that walked off the boat in Australia alive." How might captains be convinced to take better care of their human cargo? The Library of Economics and Liberty]]>