Friday, 30 September 2011

Herbert Hoover: father of the new deal

The Cato Institute has released a new Briefing Paper, by Steven Horwitz, titled "Herbert Hoover: Father of the New Deal". The Executive Summary reads:
Politicians and pundits portray Herbert Hoover as a defender of laissez faire governance whose dogmatic commitment to small government led him to stand by and do nothing while the economy collapsed in the wake of the stock market crash in 1929. In fact, Hoover had long been a critic of laissez faire. As president, he doubled federal spending in real terms in four years. He also used government to prop up wages, restricted immigration, signed the Smoot-Hawley tariff, raised taxes, and created the Reconstruction Finance Corporation—all interventionist measures and not laissez faire. Unlike many Democrats today, President Franklin D. Roosevelt's advisers knew that Hoover had started the New Deal. One of them wrote, "When we all burst into Washington ... we found every essential idea [of the New Deal] enacted in the 100-day Congress in the Hoover administration itself."

Hoover's big-spending, interventionist policies prolonged the Great Depression, and similar policies today could do similar damage. Dismantling the mythical presentation of Hoover as a "do-nothing" president is crucial if we wish to have a proper understanding of what did and did not work in the Great Depression so that we do not repeat Hoover's mistakes today.
Worth a read.

Thursday, 29 September 2011

Kevin Dowd: the decapitalisation of the west

The Decapitalization of the West. A lecture delivered on the 12th of September 2011 at St Stephen's Club Westminster by Professor Kevin Dowd for the Adam Smith Institute.
A harsh dose of reality from the indispensible Kevin Dowd. The lecture above was given on Monday night. Dowd weaves together the strands of economic breakdown created by central banks, bailouts and high taxes into a tapestry of ruin. It's gripping and horrible, and essential viewing to anybody who thinks the worst is behind us. Dowd's message: you ain't seen nothing yet.

A failsafe way to end the Eurozone crisis (?)

That the Eurozone is in crisis comes as news to no one. But what to do about it? At Charles Wyplosz has come up with a 3 step plan which he claims will end the crisis.
Three steps to a solution

The first step deals with the existing stock of public debts.

  • The ECB should set a floor on public debt values by offering a guarantee.

The guarantee should be partial to allow defaults for countries unlikely to serve their debts. A guarantee could cover each country’s debt up to, say, 60% of GDP.

  • Markets would promptly re-price debts. Greece’s debt would likely trade at 60% of its GDP, about 50 cents to the euro;
  • Others would trade higher all the way to Germany’s, which would stay at par.

The market price would offer a clear guide for governments to negotiate a restructuring. The ECB – and German taxpayers – would suffer no loss. The crisis would be over, moving to the resolution phase.

The second step is designed to shift from fiscal austerity to growth-enhancing action.

  • To allow governments to borrow again, the ECB should guarantee all future public debts – excluding the rollover of non-guaranteed debts.

Without complementary policies, this would obviously create endless moral hazard (ie temptation for Eurozone governments to issue cheap debt irresponsibly on the back of the guarantee).

To eliminate the moral hazard created by both guarantees, two conditions are needed.

  • First, each country would have to adopt domestic institutional arrangements (fiscal rules, independent fiscal councils, etc.) that lock in lasting fiscal discipline as a matter of national law. (Just as US states avoid the problem with state constitutions that require balanced budgets.)

To be credible to the domestic body politic, each nation’s arrangements must fit local political institutions – but the proposed change would be subject to approval by the European Commission and the ECB.

  • The second condition for the ECB’s guarantee would be that each country strictly enforces its own arrangement.

Access to the ECB guarantee on new issues will start only once an arrangement has been validated. It would be suspended if and when particular nations failed to respect their approved arrangement. Such suspensions would immediately raise the cost of further borrowing by the delinquent country, but it would not affect the guarantee already given to debt issued previously– that guarantee would be meaningless if the ECB could renege.

Step three addresses banks' vulnerabilities arising from the fact that sovereign defaults are likely to result in bank failures.

  • Given that some countries will default, the EFSF will have to recapitalise failed banks.

Here the ECB would act as lender of last resort with the EFSF guaranteeing its interventions. Well-crafted recapitalisations do no need to be costly. For example, the Swiss National Bank is now making profits on its creative recapitalisation of UBS during the global crisis.

Importantly, these schemes would be voluntary. No country would be forced to accept the ECB guarantees but any country could ask for it at any time.

Could the ECB suffer losses? A crucial element of this solution is that the ECB would spend almost no money if the guarantees are well-specified enough to be credible.
The only question is, Would it really work?

Wednesday, 28 September 2011

EconTalk this week

Alex Rosenberg of Duke University talks with EconTalk host Russ Roberts about the scientific nature of economics. Rosenberg, a philosopher of science talks about whether economics is a science. He surveys the changes in economics over the last 25 years--the rise of experimental economics and behavioral economics--and argues that economics has become more scientific and that economists have become more aware of flaws in economic theory. But he also argues that economics is unable to make precise predictions about the effects of various changes in policy and behavior. The conversation closes with a discussion of the role the philosophy of science can play in the evolution of economics.

The impact of economics blogs

An issues so important that the World Bank has been researching it!

From the Bank comes a new Policy Research Working Paper on The Impact of Economics Blogs (pdf) by David McKenzie and Berk Özler. The abstract reads,
There is a proliferation of economics blogs, with increasing numbers of economists attracting large numbers of readers, yet little is known about the impact of this new medium. Using a variety of experimental and non-experimental techniques, this study quantifies some of their effects. First, links from blogs cause a striking increase in the number of abstract views and downloads of economics papers. Second, blogging raises the profile of the blogger (and his or her institution) and boosts their reputation above economists with similar publication records. Finally, a blog can transform attitudes about some of the topics it covers.
Can't say I have noticed any of these effects myself!

Wednesday, 21 September 2011

Economic freedom of the world: 2011

The index published in Economic Freedom of the World measures the degree to which the policies and institutions of countries are supportive of economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of privately owned property. Forty-two data points are used to construct a summary index and to measure the degree of economic freedom in five broad areas:
  1. Size of Government: Expenditures, Taxes, and Enterprises;
  2. Legal Structure and Security of Property Rights;
  3. Access to Sound Money;
  4. Freedom to Trade Internationally;
  5. Regulation of Credit, Labour, and Business.
The top ten countries in this year’s index are
  1. Hong Kong 9.01 out of 10;
  2. Singapore (8.68);
  3. New Zealand (8.20);
  4. Switzerland (8.03);
  5. Australia (7.98);
  6. Canada (7.81);
  7. Chile (7.77);
  8. United Kingdom (7.71);
  9. Mauritius (7.67);
  10. and the United States (7.60).
The bottom ten countries in this year’s index are
  1. Zimbabwe (4.08);
  2. Myanmar (4.16);
  3. Venezuela (4.28);
  4. Angola (4.76);
  5. Democratic Republic of Congo (4.84);
  6. Central African Republic (4.88);
  7. Guinea-Bissau (5.03);
  8. Republic of Congo (5.04);
  9. Burundi (5.12);
  10. and Chad (5.32).
I don't think there are any real surprises in either list. That Hong Kong is at the top and Zimbabwe is at the bottom is not great surprise, but perhaps the most interesting point is that the U.S. is down to 10th. Over the last 10 yeasrs, the United States, has suffered one of the largest declines in economic freedom. Much of this decline is a result of higher government spending and borrowing and lower scores for the legal structure and property rights components.

Tuesday, 20 September 2011

EconTalk this week

Garett Jones of George Mason University talks with EconTalk host Russ Roberts about the workers who were hired with money from the 2009 American Recovery and Re-investment Act--the stimulus package. Jones (with co-author Daniel Rothschild) recently completed two studies based on surveys and interviews with firms who received stimulus funds and workers who work at those firms. They found that 42% of workers hired had been unemployed. The remainder came from other jobs or from outside the labor force such as retirement or school. Is 42% a big number or a small number? Jones argues it is small and defends his conclusion. The conversation also includes a discussion of the labor market generally and why the stimulus spending may not have been effective.

Sunday, 18 September 2011

Innovation and foreign ownership

or why foreign ownership isn't bad. Studies have shown that foreign-owned firms are typically more productive. A new column from presents evidence from Spain that suggests this is mainly due to foreign firms buying the most productive domestic companies.

In their column Maria Guadalupe, Olga Kuzmina and Catherine Thomas ask whether foreign owned firms superior productivity is due to Improvement or selection? That is, they ask Does the observed productivity advantage of the subsidiaries of foreign owned firms reflect improvements due to the multinational companies (MNCs) or acquisition by MNCs of the most productive domestic performers? They write,
Data from Spanish manufacturing firms reveal that up to two-thirds of the performance premium associated with multinational control is due to the fact that multinational firms acquire domestic firms that were initially more productive. The remaining one-third is due to changes made within the subsidiary after acquisition. Specifically, we show that acquired firms undertake more process innovation – simultaneously investing in new machinery and adopting new organisational practices.

We ask why multinationals acquire the best firms, and why these firms subsequently undertake more innovation once they are under multinational control. We find that the optimal amount of innovation is larger when an acquired firm is more productive to start with, because the benefits associated with technology upgrading are proportional to initial firm productivity.

We then show how these benefits are further amplified when the acquired firm accesses export markets through its multinational parent. Empirically, we find evidence for this mechanism. The extent of technology upgrading is significant in firms that use the foreign parent to increase their exports. Taken together, these results suggest that the multinational advantage that results from acquisition is not necessarily due to a transfer of technology from a sophisticated parent firm with lower costs of innovating to a newly acquired subsidiary. It can come about because acquired firms that are part of multinationals gain access to integrated global product markets, even when all firms have the same costs of innovating.
But what is the mechanism explaining both acquisition patterns and technology upgrading.
The mechanism explaining both acquisition patterns and innovation after acquisition relies on the simple assumption that a firm chooses to invest to upgrade its technology as long as the marginal benefits to the firm – in terms of future production profits – exceed the marginal cost of technology investment. The key insight of our paper is that the ownership structure can lower the costs of investment in technology, for example, because a foreign parent firm has proprietary production processes, but can also affect the benefits of technology investment. If the parent firm has large-scale sales and marketing operations, perhaps in other countries, then this may increase the incremental profit from technology upgrading since it increases the average per-unit production profit for a larger volume of sales. In either case, a firm will make more profits from a given improvement in technology under foreign ownership, and will also choose to upgrade technology to a higher level. The additional value created by any technology upgrade is positively related to the initial productivity of the firm. This means that the value-added of foreign ownership relative to domestic control is increasing in initial productivity and, hence, multinationals will opt to acquire the best-performing domestic firms in an economy.
The implications of this?
What are the implications of the findings for the evolution of the distribution of productivity within industries? Our key result is that foreign firms are more likely to acquire the most productive firms within industries, and acquired firms start to innovate more on acquisition.

Taken together this implies that acquisition activity can lead to an increase in the dispersion of the productivity distribution.

Under this mechanism, foreign entry does not lead to productivity convergence, but, on the contrary, could lead to further divergence. Of course, there could be other reasons (such as spillover effects or other externalities) why multinational entry may improve less productive firms’ productivity, and their entry could drive out of business the least productive firms, thus increasing the minimum level of productivity in the industry. However, the direct effect of the foreign acquisition process is an increase in productivity heterogeneity.
A novel result in the paper is to show that an important underlying reason for this divergence in productivity in the Spanish data is not just that the newly acquired firms may have access to superior technologies, but that technology upgrading is also significantly related to firms’ differential access to new export markets.

One important policy implication of the findings, then, is that other channels that reduce the fixed cost of export-market access and open up markets for domestic-controlled firms could lead to some of the productivity improvements documented in foreign-acquired Spanish manufacturing firms.

Rationality, games and conflict

From comes this audio in which the Nobel laureate Robert Aumann of the Hebrew University of Jerusalem talks to Romesh Vaitilingam about his work on ‘rule rationality’, the development of game theory and its potential for understanding conflict – from the Pax Romana to the modern day Middle East.

Tuesday, 13 September 2011

EconTalk this week

Robert Frank of Cornell University and author of The Darwin Economy talks with EconTalk host Russ Roberts about competition, government and the relevance of Darwin for economics. In a lively and spirited discussion, Frank argues that because people care about their relative standing with their neighbors, standard conclusions about the virtues of competition are misleading. He argues that competition is often wasteful and he suggests directions for tax policy and other forms of government intervention to take these effects into accounts

Saturday, 10 September 2011

Incentives matter: the firm file

Antti Kauhanen, “The Perils of Altering Incentive Plans: A Case Study”, Managerial and Decision Economics, 32(6) September 2011: 371-384.
This paper studies a retail chain that introduced a sales incentive plan that rewarded for exceeding a sales target and subsequently cut the incentive intensity in addition to increasing the target. Utilizing monthly panel data for 54 months for all 53 units of the chain the paper shows that the introduction of the sales incentive plan increased sales and profitability, whereas the changes in the plan lead to a marked drop in sales and profitability. Thus, modifying the incentive plan proved costly for the firm. The results are consistent with the gift-exchange model of labor contracts.
(HT: Organisations and Markets)

Tuesday, 6 September 2011

EconTalk this week

Clifford Winston of the Brookings Institution talks with EconTalk host Russ Roberts about the market for lawyers and the role of lawyers in the political process. Drawing on a new co-authored book, First Thing We Do, Let's Deregulate All the Lawyers, Winston argues that restrictions on the supply of lawyers and increases in demand via government regulation artificially boost lawyers' salaries. Deregulation of the supply (by eliminating licensing) would lower price and encourage innovation.

In defence of Regime Uncertainty

Craig Pirrong at the Streetwise Professor blog argues that Regime Uncertainty can be seen in terms of a real options argument. Pirromg writes,
But this focus on expectation (itself flawed–more below) is to misstate completely the essence of the regime uncertainty argument, which, believe it or not, is about uncertainty–variation around the expectation. It can be conceived best as a real options argument. Hiring is like an investment: there is a cost of hiring–and firing–workers. This cost is not immaterial. This cost is like the strike price of an option on the right to hire a worker and receive a stream of benefits from employing her.

This stream of benefits is uncertain. Moreover, policy uncertainty is a major driver of the variability of this stream of benefits. Nobody knows how Obamacare is going to play out. Nobody knows what the actual costs of compliance are going to be. If the burden turns out to be very high, the stream of benefits from hiring a worker (or investing in a new machine or a new product) could be quite low, and even negative. If the burden turns out to be low, the stream will be commensurately higher.

Options pricing theory basically implies that in the face of such uncertainty, it is often optimal to defer paying a sunk cost (the strike price) until the uncertainty is resolved. This is why it is usually better to defer the exercise of an option as long as possible, unless there is a stream of benefits (e.g., dividends, interest on the strike price) that can be obtained only after the option is exercised. When to exercise the option–including exercising the option to hire somebody–depends on a trade-off between getting some benefits immediately, and waiting for the resolution of uncertainty about the value of those benefits in the future.

An immediate implication of this is that the greater the uncertainty about the future, the costlier it is to exercise an option early. In the present context, higher uncertainty about the future means that firms will hire less today, all else equal. Hiring a worker today (or investing in a machine or product) generates a stream of benefits for the employer in the short term, but if there is considerable uncertainty about the future value of that stream, it is often wise for potential employers to defer incurring the strike price (the cost of hiring) until some of that uncertainty is resolved.

In the investment literature, the option value of waiting for the resolution of uncertainty drives a wedge between the rate at which firms discount risky expected cash flows and the discount rate implied by something like the CAPM. It helps explain why firms frequently use very high hurdle rates in capital budgeting decisions–and high hurdle rates tend to discourage investment, relative to those that would be undertaken using CAPM. In other words, real optionality tends to reduce investment.

The same effect is at work here. The Burtless argument endorsed by Thoma focuses on expected future benefits. But since these future benefits are risky, and a cost must be sunk to achieve these benefits, there is a cost wedge–the option value of waiting–that is attributable to uncertainty. The more the uncertainty, the greater the wedge.

Saturday, 3 September 2011

Is fractional-reserve banking inflationary?

A question asked by George Selgin at the Free Banking blog. Some members of the Austrian School, with the larest group being followers of Murray Rothbard, see three reasons for opposing fractional reserve banking:
  1. They claim that banks resorting to it defraud people,
  2. that they bring about business cycles, and
  3. that their activities cause inflation.
Selgin's article addresses the last point. Selgin writes,
The “Rothbardians,” as I’ll refer to them, recognize two distinct meanings of the word “inflation.” One meaning—which they prefer—defines it as any increase in the nominal stock of money, including fractionally-backed bank deposits and notes (which they, following Ludwig von Mises, prefer to call “money substitutes”). The other, which is in common use today, defines it as any ongoing increase in the general level of prices, that is, as a positive rate of change in one or more broad price indexes, such as the CPI. In calling fractional reserve banking “inflationary” Rothbardians often seem to have the latter, more conventional definition of inflation in mind, and my arguments are mainly aimed at responding to their complaint so interpreted. However, in doing so, I also hope to clarify the extent to which fractional reserve banking does or doesn’t promote “inflation” in the less conventional and more strictly Rothbardian sense of encouraging growth in the (broad) money stock.

Perhaps the simplest way to assess the price-level consequences of fractional reserve banking is to first imagine an economy in which such banking is prohibited, as many Rothbardians insist it ought to be. Such an economy would admit 100-percent reserve or “warehouse” banks only. To simplify the comparison further, let’s assume that all exchanges are conducted using warehouse bank certificates: in other words, the reserve medium itself—let’s assume it’s gold—doesn’t circulate. The price level adjusts so as to equate the supply of and demand for gold, including bank reserves.

Assuming fixed levels of demand for both money and non-monetary gold, there can be no inflation in this system, in either sense of the term, so long as the gold stock also remains unchanged. That stock could increase, however, as a result of gold mining. For the sake of argument, though, let’s assume that available gold mines have all been exhausted, and that no new discoveries are forthcoming. By assuming that available gold is not consumed—in the sense of being gradually used up—by industry, we can rule out deflation as well.

Suppose next that fractional reserve banking is legalized and that, Rothbardian warnings notwithstanding, it becomes so popular that all the old warehouse banks embrace it. Will inflation result? Of course it will—but only for a time. As fractionally-backed notes (or deposit credits) take the place of their 100-percent reserve predecessors, the demand for monetary gold, and hence the demand for gold in general, declines, causing the value of gold to decline with it. Because prices are expressed in terms of an (unchanged) gold unit, the price level has to rise. But as the demand for gold doesn’t drop to zero—banks still hold some reserves, and there is still a non-monetary demand for gold—the price level eventually reaches a new equilibrium. All this assumes, by the way, that the switch to fractional reserves is worldwide: if the switch was limited to a single, small country, then banks in that country would export their unneeded gold reserves to the rest of the world, and worldwide price level changes would be negligible.

The overall extent of the increase in prices, and of the underlying expansion of fractionally-backed bank money, will depend on the reserve ratio banks settle on. The lower the ratio, the higher the rise in prices. But whatever the ratio turns out to be, the system will eventually reach a point at which inflation ceases. The move to fractional reserves results, in other words, in a permanent, once-and-for-all price level change, but not in any permanent change in the inflation rate.

What’s to keep the banks from further reducing their reserve ratios? The answer is that, so long as they all compete on an equal footing, as in a free banking system, each will be inclined to routinely return claims, such as checks or banknotes, received from rival banks. The uncertain flow of such interbank “clearings” generates a demand for reserves for settlement, which (in the presence of positive costs of default) will vary with the volume of outstanding bank liabilities, even if bank customers never bother to withdraw gold. Although optimal reserve ratios are unlikely to remain perfectly constant over time, and may decline gradually as more efficient settlement procedures are discovered, for the most part the rate of inflation under an established and mature fractional reserve arrangement is unlikely to differ substantially from the rate that would prevail under 100-percent reserves.

Admittedly this conclusion depends on the assumption of an unchanged real demand for money. If the demand for money grows over time, as it does in most healthy economies, that growth will in fact have different implications for inflation under the two regimes. Yet it still won’t promote inflation in either case. On the contrary: in the 100-percent reserve case, growth in money demand must cause prices to decline at a roughly corresponding rate (“roughly” because there may be some shifting of available gold from non-monetary employments to bank reserves). Under fractional-reserve banking, in contrast, there will be greater scope for monetary expansion, depending on how free banks are from legal impediments. Under free banking, for example, banks can “stretch” their reserves somewhat as the demand for money increases, provided that the increase takes the form of a fallen velocity of money. This happens because the fall in velocity translates, ceteris paribus, into a fall in both the volume of bank clearings and the demand for reserves. In other words, in the presence of economic growth, a free fractional-reserve banking system, although it won’t promote inflation, will be somewhat less deflationary than a 100-percent reserve system.
Selgin ends by saying,
So it’s time to dump the rhetoric linking inflation to fractional reserves. Fractional-reserve banking may have its drawbacks, but a tendency to fuel inflation isn’t one of them, and the chief beneficiaries of claims to the contrary are none other than the world’s central bankers and their apologists.

Friday, 2 September 2011

The (bad) politics of asset sales

Over at Kiwiblog David Farrar writes,
My NZ Herald column is on the politics of asset sales. I look at the risks to the Government, and ask and answer the question about why they are doing it , despite the political risk.
Well bugger the politics, lets worry about what really matters, the economics of asset sales. On this point, I would argue, David does very badly. In his Herald column David writes,
I believe two factors have reduced the intensity of feeling on the issue of asset sales. The first is the fact they are very different to the asset sales done so enthusiastically by Roger Douglas and Phil Goff in the 1980s and Ruth Richardson in the 1990s. Those sales were for 100 per cent of the asset, often went direct to a private buyer with no opportunity for "Mum and Dad" investors, and the private buyers were often foreign.

National's policy of retaining 51 per cent in state control, floating them on the stock exchange rather doing a trade sale, giving New Zealand institutions first preference for purchases, and now inserting a maximum 10 per cent cap on any private shareholding reduce the fear factor around the share sales.

It is literally impossible for a foreign company to take control. In fact it will be impossible for a foreign company to have a share-holding in excess of 10 per cent.
As to the point that buyers of assets in the past have been foreign, this is not an argument against asset sales, xenophobia is not any kind of economic argument at all, for anything. Also having foreign bidders just means that the price the government gets for its assets is higher than it otherwise would be. A higher price is also paid for a controlling share in a firm, selling a partial share in a firm will lower the price paid. 51% is worth a lot more than 49%! Also having "Mum and Dad" investors - and a New Zealand investor bias - is not necessarily a good thing, this will also lower the price received, as will use of a stock market float. All the evidence on privatisations via a float on the share market shows a large amount of under pricing. Also these studies show that "Mums and Dads" sell out to other larger buyers very quickly. Having "Mum and Dad" investors could also affect the efficiency gains that having private owners can bring about. A single large, albeit partial, owner is more likely to be able to force efficiently enhancing changes on the firm.

In more general terms we already have insight on how partial private ownership is likely to turn out; not well. The SOE Act states that SOEs, basically, have to be run like normal non-government owned firms. In effect this requirement is the same as you could get if private owners have a stake in a firm. The private owners would, we assume, wish to maximise profits, but the government may not. And you see this with SOEs. The government often wishes to intervene in the running of SOEs to get them to carry out not profit maximising activities, just as it would if it had a partial stake in a mixed ownership firm. This problem of having SOEs (or mixed ownership firms) trying to serve two masters was noted more than 10 years ago by Spicer, Emanuel and Powell in their book "Transforming Government Enterprises: Managing Radical Organisational Change in Deregulated Environments" (The Centre for Independent Studies, 1996). They warned that there are two pressures on SOE's: the first being towards privatisation since the productivity and efficiency gains achieved by SOE are in danger of being eroded over time. Privatisation is a way of both cementing in the commercial orientation of enterprises and wringing out further gains resulting from the high powered incentive and control mechanisms which can be bought to bear in privately owned and publicly traded companies. The second pressure on SOEs is towards being pulled back into the public sector where social and political objectives can be more readily be meet. What we saw under the Clark government was the second of these pressures being very strong. But not for socially useful reasons. Most interventions seem to be more politically motivated.

These pressures would also be there for a mixed ownership firms and help explain why they don't do as well as fully privately owned firms. For example, Aidan Vinning and Anthony Boardman in "Ownership and Performance in Competitive Environments: A Comparison of the Performance of Private, Mixed, and State-Owned Enterprises", Journal of Law and Economics vol. XXXII (April 1989) conclude 'The results provide evidence that after controlling for a wide variety of factors, large industrial MEs [mixed enterprises] and SOEs perform substantially worse than similar PCs [private corporations].' The basic problem is that full or partial government ownership politicises the firm.

Farrar also writes that,
Turning to the economic issues, there are a mixture of reasons why National is risking some of its popularity for this issue. The strongest reason is probably a genuine belief that a company which is not 100 per cent Government owned will perform better over time. Not every private company is better performing than every public company. But overall, the evidence is that private ownership does lead to better performing companies.
See above for arguments and evidence on the relative effectiveness of partial private ownership on firm performance. If the government really does want to improve the performance of state owned firms, then as Vinning and Boardman show, full privatisation is the better answer.

Demographic change, retirement and healthcare

From comes this audio in which Nobel laureate Peter Diamond of MIT talks to Romesh Vaitilingam about of the impact of improved longevity and the resulting demographic change on the retirement and healthcare systems of the advanced economies.

EconTalk for many weeks

Debra Satz, Professor of Philosophy at Stanford University, talks with EconTalk host Russ Roberts about her book, Why Some Things Should Not Be For Sale: The Moral Limits of the Market. Satz argues that some markets are noxious and should not be allowed to operate freely. Topics discussed include organ sales, price spikes after natural disasters, the economic concept of efficiency and utilitarianism. The conversation includes a discussion of the possible limits of political intervention and whether it would be good to allow voters to sell their votes.

David Brady of Stanford University talks with EconTalk host Russ Roberts about the lessons of the election of 2010 and what we might expect from the elections of 2012. Brady draws on political history as well as survey results from work with colleagues Doug Rivers and Morris Fiorina to speculate about the elections of 2012. Along the way he discusses the power of the independent vote, how ObamaCare affected the election of 2010, and the prospects for the Republican nominee in 2012. Taped a few days before the deal on the debt was reached, Brady gives his thoughts on the politics of the negotiations. The conversation concludes with a discussion of whether Obama will have a primary challenger.

Brendan O'Donohoe of Frito-Lay talks with EconTalk host Russ Roberts about how potato chips and other salty snacks get made, distributed, and marketed. The interview follows an hour-long tour of a local supermarket where O'Donohoe showed Roberts some of the ways that chips and snacks get displayed and marketed in a modern supermarket. The conversation is a window into a world that few of us experience or are even aware of--how modern producers and retailers make sure the shelves are stocked and their products get noticed..

Eric Hanushek of Stanford University's Hoover Institution talks with EconTalk host Russ Roberts about the importance of teacher quality in education. Hanushek argues that the standard measures of quality--experience and advanced degrees--are uncorrelated with student performance. But some teachers consistently cover dramatically more material and teach more than others, even within a school. Hanushek presents evidence that the impact of these differences on lifetime earnings for students can be quite large. The conversation closes with a discussion of school finance and the growth of administrators within school systems.

Thursday, 1 September 2011

Dying to be a manager?

This information is from Peter Klein at Organisations and Markets:
A somewhat disheartening report on US workplace safety: The Bureau of Labor Statistics has its fascinatingly morbid fatality census report out! Are you a manager of some sort? Watch your back, because the study says if you die on the job, there’s a 10% chance it’s murder. That’s correct. Out of the 4,547 workplace deaths in 2010, 10% of the kaput management was a direct result of homicide.
Should I point this out to the Head of Department?!