Here is one survey from last night that casts doubt on the Median Voter Model, although I admit there may be others with better wording or better samples (please, post them in the comments if you know of any). And while the views of the public may be less libertarian than economists, the survey also indicates that the public has libertarian sympathies. Main findings of the survey:

1. 45% opposed and 30% supported this specific modified rescue plan (rather than a hypothetical modified plan as in earlier surveys).

2. Crucially, 47% were worried that the federal government would do too much in reacting to the current crisis (as opposed to 36% saying "too little").

3. In fairness (and confusion, considering the above), the same survey indicates that 44% of Americans think the rescue plan will help the economy, compared with 23% thinking it will hurt the economy (though if you add in the "no impact" group of 19% the two sides are roughly equal).

Yesterday I blogged about a recent Rasmussen survey on the financial market bailouts, in which only 7% of voters supported using tax dollars to keep firms like Lehman Brothers solvent, with 65% of voters favoring bankruptcy. That's an over 9:1 ratio against bailouts. That survey was from early last week.

Of course, there are many different surveys on this issue. Pew has a poll from this week, which apparently the White House is touting, which shows 57% of Americans favor the government "investing billions to try and keep financial institutions and markets secure," with 30% opposed. Or, an almost 2:1 support of bailouts.

An L.A. Times/Bloomberg poll from this week shows 55% of Americans oppose the government using "taxpayers' dollars to rescue ailing private financial firms" and 31% supporting, or slightly less than 2:1 opposing bailouts. The L.A. Times article emphasizes that the wording of the question means the surveys are measuring different things, and this is certainly true. Framing is very important for survey research. But the Mueller Test rests on constraining the mental options for funding a given proposal.

"Investing billions" can be done in any number of ways, such as by raising taxes, shifting funding from other projects, or by deficit finance. "Using taxpayers' dollars" constrains the choice set slightly, but even here we see a big effect. My prediction is that if the choice set is contrained further, e.g., by asking "if your tax bill went up by $2,500 per person in your family," the effect would be larger.

Which level of constraint in question-asking is appropriate? I have attempted to address this issue before, but in the end it is a normative question. My normative answer is that if we really want an accurate reading of public opinion, the actual tradeoffs (as best we can predict them) should be accurately portrayed and constrained in the survey questions.

Only seven percent (7%) of voters think the federal government should use taxpayer funds to keep a large financial institution solvent. Sixty-five percent (65%) say let the company file for bankruptcy.

This paper reports estimates of consumers' preferences for plans to improve food safety. The plans are distinguished based on whether they address the ex ante risk of food borne illness or the ex post effects of the illness. They are also distinguished based on whether they focus on a public good -- reducing risk of illness for all consumers or allowing individual households to reduce their private risks of contracting a food borne pathogen. Based on a National Survey conducted in 2007 using the Knowledge Network internet panel our findings indicate consumers favor ex ante risk reductions and are willing to pay approximately $250 annually to reduce the risk of food borne illness. Moreover, they prefer private to public approaches and would not support efforts to reduce the severity of cases of illness over risk reductions.

In the negative part of Professor Hayek's thesis there is a great deal of truth. It cannot be said too often -- at any rate, it is not being said often enough -- that collectivism is not inherently democratic, but, on the contrary, gives to a tyrannical minority such powers as the Spanish Inquisitors never dreamed of.

Orwell went on to criticize Hayek's favored system, capitalism:

But he does not see, or will not admit, that a return to "free" competition means for the great mass of people a tyranny probably worse, because more irresponsible, than that of the State. The trouble with competitions is that somebody wins them.

The last sentence indicates that Orwell has missed the most important insight about the market: mutually beneficial exchange. In most economic competitions, there are not winners and losers. The game is not zero sum. Hayek was not much help on this point referring to "the game of catallaxy" as "the best way to understand" the benefits of the market system. He tries to reassure us that the game is not zero-sum, but even a great mind like Orwell was trained to think otherwise when the words "game" and "competition" are used.

(Thanks CLR for the pointer)

Actually we are borrowing money from Japan to buy oil from Canada. Doesn't make for as scary a soundbite.

True, China is the number 2 holder of U.S. Government debt, but non-scary countries the U.K., Brazil, and Luxembourg also rank high on the list. Also true, Saudi Arabia is the number 2 exporter of oil to the U.S. (Mexico is a very close third), but we import more oil from Canada than from all Persian Gulf countries combined. Canada, Mexico, and the U.S. Virgin Islands alone account for around 32% of oil imports.

The letter is signed not only by the CEO of Northwest, but also 11 other major airlines. The letter can be read here. CNN is reporting the story, so I assume it is legit, but it is just so illogical (at least, without a public choice angle). Here is the main piece of evidence offered:

Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known.

Well that solves it, speculation has gone up from 21 percent to 66 percent of oil contracts. Speculators must be the culprit!

Just a few quick questions: twenty years ago, who was buying the other 79 percent of contracts? Why aren't they classified as "speculators"? Are they simply saying that in 1988 spot contracts were the majority of transactions, and now futures contracts are? It's unclear from the letter, and it is also unclear that this trend would be unique to oil markets. I suspect similar trends could be observed for commodities where the real price has fallen in the last 20 years.

The following statement by Krugman got me thinking:

One amazing decision [by the USDA] came in 2004, when a Kansas producer asked for permission to test its own cows [for mad cow disease], so that it could resume exports to Japan. You might have expected the Bush administration to applaud this example of self-regulation. But permission was denied, because other beef producers feared consumer demands that they follow suit. 

Several things are curious about this piece of evidence cited by Krugman. Above all, it seems quite odd to use this as a counter to Milton Friedman's claim that "private companies would avoid taking risks with public health to safeguard their reputations and to avoid damaging class-action lawsuits." It seems they were trying to self-regulate. What stopped them? Not the free market, but, as Krugman accurately notes, the USDA itself, which was headed by "a former food-industry lobbyist." This is market failure? Is that the best you got? If this is evidence that the Bush administration is more about corporatism than capitalism, I'm all for it, but Krugman doesn't quite pitch it that way.

There are interesting historical parallels a century before, also related to testing of cattle. Salmonella poisoning in tomatoes on my cheeseburger was not the concern, but rather a much more deadly disease: tuberculosis. The year is 1908, and Chicago (a major cattle-processing center) has just enacted an ordinance to limit the spread of tuberculosis, requiring testing of cattle and pasteurization of milk. As reported by Olmstead and Rhode, competitors in the nearby

Elgin area used their influence to capture the Illinois legislature. Their main ally was long-time Speaker of the House, Edward Shurtleff. ... After helping these interests capture the committee investigating milk health measures, Shurtleff spearheaded the passage of the 1911 state law prohibiting cities from requiring tuberculin testing. [My emphasis]

But again, oddly, Olmstead and Rhode use this as a piece of evidence in support of market failure. Their argument is actually more sophisticated than Krugman's: differing regulatory regimes across localities and states increased information asymmetry problems, allowing unscrupulous cattle owners to profit while endangering consumer and cattle health. The asymmetry problems would seem to be even larger with more localized regulation, that is, at the level of the individual cattle owner. But this still seems like a better example of regulatory capture than market failure. How this information problem was eventually solved is quite interesting, but I will save the full story for another day. Here is a brief preview.

Olmstead and Rhode provide an account in a companion article to the one linked above, and they emphasize a cooperative federal-state program to test cattle for bovine tuberculosis. It is interesting to note though, the absence of any mandatory federal regulations, either for testing of cattle or pasteurization of milk. The testing program they describe was voluntary, and, believe it or not, there was never a federal regulation mandating pasteurization of milk, even to this day (yes, really, I mean it). The U.S. Public Health Service has long issued model legislation for states, but it was never mandated (recall the claim above that state and local regulations could not work). I have a radically different explanation for the historically important process of eliminating tuberculosis, but am still in the process of collecting all the relevant facts, so you will just have to wait.

Update: Dr. Tabarrok passes along a post of his from 2004 regarding the mad cow self-regulation ban that Krugman referenced. He had the regulatory capture angle nailed as the story broke, and correctly notes that USDA has had the "power to decide minimum and maximum testing" since 1913. I should further note that my above summary of his position as "Tabarrok disagrees [that we are 'back in The Jungle']" is not precisely correct. He stated that there is "no evidence whatsoever" for making such a claim, a less sweeping claim than Krugman's (and the correct one, in my judgment).

Earlier this week I saw a similar poll on CNN, but it was actually presented as a tradeoff (see the story and the actual questions). The results are similar to the survey Caplan points to: people are more worried about long lines than high prices. But, as the Gallup poll shows, when you don't present it as a tradeoff, you get huge majorities in favor of dumb policies. We happened to be discussing Caplan's work in class on Tuesday, and I mentioned this CNN poll to the students as evidence that the public is not really that irrational, just subject to some framing effects.

Of course, if the second question about rationing had not been asked, it's possible that some politician could trumpet this survey as a reason for imposing price controls. Maybe someone will anyway, but at least in this case it probably won't get put into effect. But in many cases, the majority's response to non-tradeoff questions are often enacted as policy (and used as support for the policy, and then later social scientists claim that democracies "give the people what they want"). 

I also note that this is already being called "the Mueller Effect" in the comments at Caplan's blog (well, by one commenter so far). If Stigler's Law holds though, this may be known to history at "the Horpedahl Effect" (ugh).

Frightening historical note: support for price controls is much higher today than immediately pre-Nixon price controls (at least when questions are asked in a non-tradeoff manner). I need to head to the library and check the Gallup archives, but this JEH article claims that in June 1971 (two months before price controls), 50% of Americans favored wage-and-price freezes, compared with 53% today! Caveat: those were for general controls, not just gasoline prices. It is also fascinating to witness the dramatic spike in support among Republican elites following Nixon's announcement of the policy. What were their "real" preferences?

First, a few sentences on methodology in economics. While I think Milton Friedman went too far in his influential writings on positive economics, I also believe that the radical Austrian critique is incorrect (at least, the naive one that we can't use any data or models in our writings). So I don't really have a dog in the methodolgy fight, or if I do it is of mixed breed with uncertain pedigree.

However, the purpose of this post is to point out to economists that our methods are not really that much worse than those in supposedly "harder" sciences. And I can take a shot at journalism, always a fun thing to do. (Enough throat clearing.)

The fourth most popular story on Reuters.com from this Tuesday is titled "Heavy marijuana use shrinks brain parts: study." First sentence "Long-term heavy use of marijuana may cause two important brain structures to shrink." See that, "may cause," sounds scientific. Apparently these parts of the brain are related to memory, emotion, fear, and aggression. Queue clichés about "loss of short term memory" and "reefer madness."

And we can't accuse the journalists of misinterpreting scientific studies (in one sense), because we have the lead researcher from the study quoted as saying "These findings challenge the widespread perception of cannabis as having limited or no harmful effects." Snap! But we can possibly accuse journalists of something else (read on).

Of course, if you flip to the second page of the article (the print edition equivalent of "turn to page A18" -- how many people do this?), we find that "researchers acknowledged that the study did not prove it was the marijuana and not some other factor that triggered these brain differences." Wow, really? So what is this study about? Well, apparently 15 marijuana users and 16 non-users had their heads measured, and the ones of marijuana users were somewhat smaller (31 is a very small N, if you didn't know). And from this you get the blaring headline noted above (how many people read past the headline or first paragraph?).

The researchers, to their credit, do admit that the study proves nothing -- but only after making sweeping statements about their results. The journalists, to their credit, do print this admission and give three sentences to a pro-Marijuana group -- but only on page 2, and only after the highly misleading headline and page 1. This, of course, is a familiar pattern: see two other marijuana studies in just the last month.

So, dear economist, the next time some tells you that your theory and/or data don't "prove" anything you should admit that they are right, but take heart in the fact that proving something is very difficult in any science (and be sure to point this out as well). 

http://jeremy.horpedahl.googlepages.com/Econ410-Syllabus.pdf

For the first half of the class, we will be going over the basics of Public Choice, which of course focuses on democratic political systems. In the second half, I am covering some newer and somewhat unorthodox areas, such as the work of Caplan and Wittman, non-democratic political systems, and economic history that falls within the general Public Choice line. I'm looking forward to a fun and interesting class!

I understand Caplan's response as consisting of two parts. Part one: even when framed in terms of paying more taxes, the American public still supports bigger government (or at least the status quo). Part two: question variations involve information effects, which can have significant but ambiguous (from a policy interpretation standpoint) results. I see the two parts as intimately linked, and I still maintain that support for libertarian policy changes exists.

Dr. Caplan directs us to the GSS. Yes, the question Caplan refers us to (variable TAXSPEND, for those that want to check) indicates that the public prefers bigger government, but I don't think the implications are what he infers. First, this is not "overall government spending" as Caplan indicates, but social spending (which is perhaps less than half of spending, depending on who you ask). More importantly, the question is very unconstrained. It asks about three categories of spending, in an open-ended way, as well as three (plus) categories of taxes. (I use "open-ended" to refer to interpretation of the question, rather than "fill in the blank" as many surveys do.)

One could just as easily point to the GSS result (variable CUTGOVT) that the median position is "in favor" of cutting government spending as something "the government might do for the economy" (the result is very strong, almost 9:1, if we group favorable vs. non-favorable responses). There appears to be a social intransitivity, with the public favoring both more spending and fewer taxes. But I would direct your attention to the unconstrained nature of Caplan's favored GSS question, especially on the taxation side. As the Mueller article indicates, merely asking individuals to reevaluate their response "if the government had to raise taxes to finance the additional expenditures" achieves a noticeable decline in expressed preference for policies.

To me, this is a huge issue. Can the respondent simply "make up" the method of finance or is she constrained, to some degree, by the question? Dr. Caplan doubts that "the public is that stupid" to not realize that more spending requires more taxes. I agree. But taxes can take many, many forms. I would suspect decreasing support (this is empirically testable) among survey respondents over the following three taxation options for increased government spending: 1. unspecificied (possibly "free" or taxation of the others); 2. taxes (in general) increase; and, 3. your taxes increase. Mueller tests option 1 vs. 2, but alludes to the importance of option 3 (p. 216 fn. 6). Furthermore, I would suspect decreasing support on option 3 for increasing dollar amounts of taxation (probably the same for option 2).

Which option is the accurate one, in terms of what the public (or more simply, an individual) "really" prefers? Is it number 1, 2, 3, or one of the various subsets (2a, 2b, 3a, 3b, ...)? I honestly do not know, but in my very junior estimation, no one knows the correct answer (my hunch is that the most constrained and accurate wording, in terms of actual tax policy, may be best). And how the question is framed can significantly affect the median voter result. Many, many others factors must be considered (preference falsification comes immediately to mind, in a major way), but the question is far from being resolved. I eagerly anticipate the future debate, as to my young mind this (the post title) is the central question of public choice and political science.

(Caplan's suggestion of a dissertation on this topic is absolutely awesome, but unfortunately I will not pursue it. I have now locked-in to my dissertation topic: an economic analysis of the origins and consequences of voting rights expansions, with an historical application to the early 19th century U.S. [much, much more to come, I promise!]. However, this is a great topic which I intend to further research and eventually write about. Someone should definitely claim as their own for a dissertation).

Using geographic variation in local and state smoke-free bar laws in the US, we observe an increase in fatal accidents involving alcohol following bans on smoking in bars that is not observed in places without bans. Although an increased accident risk might seem surprising at first, two strands of literature on consumer behavior suggest potential explanations — smokers driving longer distances to a bordering jurisdiction that allows smoking in bars and smokers driving longer distances within their jurisdiction to bars that still allow smoking, perhaps through non-compliance or outdoor seating. We find evidence consistent with both explanations. The increased miles driven by drivers wishing to smoke and drink offsets any reduction in driving from smokers choosing to stay home following a ban, resulting in increased alcohol-related accidents. This result proves durable, as we subject it to an extensive battery of robustness checks.

No doubt there may be follow-up studies countering the claim, but I'm sure there will also be armchair dismissals by journalists and bloggers. I'll buy a beer for the first person to spot someone claiming that the authors didn't consider the effect of people staying at home following a ban, even though they mention this fact right in the abstract. In fact, the same authors have another paper showing that smoking bans do reduce bar patronage (people stay home to drink), but this newer paper shows that the effect is weaker than the "drive to other jurisdictions" effect.

In any event, Cowen and Sutter (2005) have elsewhere used the NCAA as a foil against the possibility of anarcho-capitalism (yes, really!). Cowen and Sutter use the more appropriate term "cartel" to describe the NCAA, and they do not explicitly call it a "private" institution. But no one doubts that governments can cartelize industries, the relevant question is whether private agencies (specifically defense, police, and courts) could cartelize their respective industries.

The NCAA, as an effective cartel, restricts the behavior of its members. The primary restrictions are on paying student-athletes, and on related matters such as recruitment. Does the NCAA actually act as a "private monopolist" or a "private cartel"? I will make the bold claim that the answer is "no," although I do not yet have all the relevant bases covered to make such a claim. My first line of defense is that the NCAA is in no way a "private" institution. How can this claim be sustained when most of the "members" are state-funded universities (and the "private" universities also receive a good deal of government funding)?

But my first line of defense is perhaps too clever. That is why I am investigating the matter further and hope to report back in a respectable amount of time, hopefully in a more scholarly forum. My hunch is that the NCAA's power to prohibit member schools from compensating student-athletes is backed by state-granted power, though the laws probably are not so explicit as "schools are forbidden from paying student-athletes." Here is some evidence pointing in that direction: as of 1996, 22 states had enacted laws regulating sports agents , an issue with direct bearing on paying student-athletes (if the number has changed since then, my guess is that the number is greater than 22).

As I said, I will report back eventually. Any input would, as always, be appreciated. 

Owners of Gold: the metal is now over $900, up over $100 (over 15 percent) in the last month (same goes for most other metals and commodities).

Tourism Industry: after the post-9/11 hit, the tourism industry, especially in areas such as NY, is certainly enjoying the weak dollar.

American Exporters: basically as standard economic analysis of international trade would predict.

There are, of course, many others. But a weak dollar just doesn't sound very tough, so I don't imagine the gold times will roll forever.

Consider, say, a fireman on an old train.  His job involved setting fire to a bunch of coal, thus soiling the skies.  Did people blame him for this air pollution?   Or did they think:  "Hey, that's just his job.  It's the result of the choices of many people that we have trains."

In these examples and others I can think of, we tend to hold individuals less accountable for actions that are inextricably bound up with the successful completion of job-related tasks.  Perhaps the most classic example is that of the soldier following orders; yes, we often tend to think a soldier should listen to his conscience, but we also often leave way for the explanation that the soldier accepts the moral authority of his superiors.

GMU economics professor Don Boudreaux has recently inveighed against politicians -- practically all of them -- on moral grounds:

I challenge anyone to argue that the behavior of any of the major candidates (with the exceptions of Ron Paul and Dennis Kucinich) is admirable.  Everyone knows that each serious candidate trims, waffles, is duplicitous, has his or her finger in the winds blown by polls, and wants to be President not because of any burning itch to help fellow human beings but because the job comes with all the trappings, and much of the power, of royalty.

I see two distinct complaints here:  (1) politicians play games with words, and (2) politicians act from self-interest.  I feel that any self-respecting economist should dismiss the latter complaint out of hand; there's nothing wrong with acting primarily out of self-interest.  That leaves us with the first complaint, that politicians are tricksters.

What if it is the case that we live in a world where there are some serious interpersonal conflicts that cannot be resolved via honest back-and-forth discussion to mutual agreement?  For the means to bring about the necessary resolutions, then, we are left with second-best choices such as violence and duplicity.  I would venture to guess that many of us would choose duplicity over violence as a means of resolving a dispute.  And if these sorts of conflicts are unavoidable, and if "politician" is the occupation held by those who resolve these conflicts under a division of labor, then I find it unacceptable for those of us in other professions to consider ourselves morally superior to politicians.  Can we call on them to minimize their duplicity to the extent possible?  Without a doubt.  Can we also recognize that it is an intrinsic part of their work?  I would like to say, "Yes, we can."

Now I know what that bottle of sparkling wine in the fridge is for.