Tuesday, October 31, 2006

Did Katrina Refugees Increase Crime in Houston & San Antonio?

The evidence is suggestive, but not totally conclusive. The city of San Antonio has not tried very hard to learn whether or not victims and perpetrators came from New Orleans. Houston did, and got federal money. Both cities saw a spike in crime after the refugees arrived. San Antonio's crime rate had been falling prior to their arrival. Here are the articles:

Katrina crime: Perceived or real?

S.A. killings show few ties to storm.

Remember, to prove cause and effect, you need ceteris paribus conditions. Does this analysis meet that criteria?

UPDATES. Ken Rodriguez, a columnist for the Express-News, thinks the answer is yes. Here is the link

Ken Rodriguez: Here's the unvarnished truth about Katrina crime: It happened

Here are two more articles from the Express-News

In one area with evacuees, robbery is routine

Complex with Katrina evacuees became a criminal haven

Sunday, October 29, 2006

Good Economics is Good Story Telling

I was at a symposium about a month ago and one thing we talked about was how the abstract thinking in economics can be hard for our students. Then some teachers said they tell stories. I think that a good abstraction will be a good story and vice-versa (maybe not a perfect correlation there but pretty strong). As Steven Landsburg put it one of his books, "there never was a hare and an tortoise who raced, but the story tells an important lesson that slow and steady wins the race." A great example of this is an article Paul Krugman wrote in Slate. I think he presents an abstract idea very well by telling a good story. He shows how increased productivity can reduce employment in one sector of the economy but increase it elsewhere while everyone gains. As Krugman says "A simple story is not the same as a simplistic one."

Thursday, October 26, 2006

Are We Running Out of Resources?

The WWF thinks so.. Saying that we are running out of resources is nothing new. It comes up fairly often. The Club of Rome long ago predicted this would happen.. There are really three issues here.

1. The Environment
2. Natural Resources
3. Species going extinct.

1. Pollution that causes damage to other human beings can be controlled by taxing the polluting activites. This reduces those activities and therefore the pollution. So the right taxes can control this (my students might recall the class discussion of negative externalities)

2. Natural Resources. The Club of Rome predicted we would run out some time ago. This has not happened. The reason is that as the price of resources go up due to increased demand, it creates incentives for alternative sources. People also switch to things like more fuel efficient cars. It takes alot less energy to produce $1 of GDP in the USA than it did in 1980. Higher resource prices cause people to act more efficiently. Even if supply decreased, then the price would rise which would encourage conservation. So we don't need to worry about running out of resources.

3. Should humans cut back on the production of some goods and services if that is the only way to keep some life forms from going extinct? This might be necessary if humans are destroying the habitats of some animals or our pollution is killing them.As an economist, I don't think I can offer any insights. I think that is a moral question and I don't think my opinion on this would be very insightful.

Richard Posner and Nobel Prize winning economist Gary Becker have some interestng views on whether or not we should worry about over population.

Tuesday, October 24, 2006

Can You Find Virtue by Investing in Vice?

A recent article by Will Deener of The Dallas Morning News called
Vice Fund: The wages of sin? reports on the "Vice Fund"

"which celebrated its fourth anniversary on Aug. 30, invests in casino stocks and in companies that make liquor, tobacco and bombs. It has beaten the Standard & Poor's 500 index in each of the past three years and is on track to do it again this year, with a 10 percent gallop so far in 2006, compared with a 5 percent gain for the S&P."

So, is it okay to get rich this way? There are some funds that intentionally invest in "socially responsible" companies that work to protect the environment, treat their workers well and avoid "vice."

Sunday, October 22, 2006

Are Nannies Doing Their Job?

The article on this begins with:

"Just as trucking companies put signs on their vehicles asking the public to report unsafe drivers, parents can now put license plates on their baby strollers to get feedback on the behavior of their nannies."

So if you see a nanny neglecting their duties, you can call it in and the parents login to a website with a password to find out if there are any problems. I don't know if there will be any checks and balances. What if a rival nanny calls in a phony charge of neglect (something like this happened with "rate my professor").

Will young people be less likely to become nannies if they get spied on? Will this scare away irresponsible nannies to the good of the children? What about nannies that care for kids who are out of the strollers and buggies? Will the nanny have to wear a t-shirt with the number?

Thursday, October 19, 2006

Are College Professors Liberal?

From today's Chronicle of Higher Education:

"The report, by the Institute for Jewish & Community Research, was based on an online, nationally representative survey of 1,259 professors at four-year colleges and universities in the spring of 2005. It found that, in general, professors are critical of American business and foreign policy and are skeptical of capitalism.

Among other findings, the report, "A Profile of American College Faculty: Volume 1: Political Beliefs & Behavior," says that:

Professors are three times as likely to call themselves "liberal" as "conservative." In the 2004 presidential election, 72 percent of those surveyed voted for John Kerry.

Almost one-third of professors cite the United States as among the top two greatest threats to international stability -- more than cited Iran, China, or Iraq.

Fifty-four percent of professors say U.S. foreign policy in the Middle East is partially responsible for the growth of Islamic militancy.

Sixty-four percent say the government's powers under the USA Patriot Act should be weakened."

A separate report showed that there are 2.5 Democrats for every 1 Republicn amongst economics professors (That means 71% are Democrats) Actually, it was 58% Democrat, 23% Republican, 2.66% Libertarian and 0.76% Green Party.

For more info go to:

Institute for Jewish & Community Research
A PDF File of Their Survey
The Economists Survey

Tuesday, October 17, 2006

How Should Economists Commemorate the Day of the Deadweight Loss?

Has another year gone by already? Today is "Day of the Deadweight Loss." On this day, economists mourn all the social welfare that has been lost in the last year. That social welfare is lost and we will never get it back. The important question is what is the best way to commemorate this day? I'm open to suggestions.

Deadweight loss is the loss of social welfare caused by that dreaded demon, inefficiency. Examples are monopoly and externalities. To learn more, go the following links (which are all different)


Sunday, October 15, 2006

What do Nobel Prize Winners Muhammad Yunus and Edmund Phelps Have in Common?

They may have alot in common but one thing might be the importance of entrepreneurship.

Economist Muhammad Yunus won the Nobel Peace Prize for giving micro loans to the poor so they can get businesses started. Read about it here. So it looks like he thinks entrepreneurship is important.

Edmund Phelps, who won the Nobel Prize in economics, wrote an article in the Wall Street Journal earlier this week that you can read it here. He makes a strong case for the mportance of entrepreneurship.

If you click on my first post or "Why this Blog is Called The Dangerous Economist" you will see why I agree with these two men.

On Oct 17, the Wall Street Journal printed a short letter I wrote pointing out this similarity.

Thursday, October 12, 2006

Is Nine Months Adrift in the Ocean Worth $3.8 Million? (or "Survivor" meets "Who Wants to be a Millionaire")

You may have heard the story about the Mexican fishermen who drifted for nine months in the ocean. You can read their story here. Here is a brief excerpt

"The men were feared lost when their 25-foot (8-meter) fiberglass boat ran into trouble off Mexico's Pacific coast last November. As their families gave them up for dead, they drifted more than 5,000 miles before being picked up in August by a Taiwanese tuna trawler near the remote Marshall Islands in the South Pacific. The three had survived by catching birds and fish to eat and drinking rainwater -- and occasionally their own urine."

They have been offered $3.8 million dollars to turn their story into a movie. There may be a book deal, too. Is going through that ordeal worth $3.8 million? Would anyone voluntarily make this trade? If it were a reality show it would be "Survivor" meets "Who Wants to be a Millionaire."

Tuesday, October 10, 2006

Edmund Phelps, Meet Harry Hopkins

Edmund Phelps, the 2006 winner of the Nobel Prize in economics has probably heard of Harry Hopkins (maybe he even quotes him in his book). But the similarities between things they both said are interesting. This hardly means that Phelps copied Hopkins. The fascinating thing is that similar issues were being discussed so long ago.

In a 1935 NY Times article, Harry Hopkins, Federal Emergency Relief Administrator was quoted:

"There are those who tell us that we should avoid relief. They say that straight relief is cheaper. No one will deny this contention. It costs money to put a man to work. Apparently, to the advocates of direct relief the primary object of relief is to save the government money. The ultimate humane cost to the government never occurs to them-of a continued situation through which its citizens lose their sense of independence and strength and their sense of individual destiny. Work preserves a man's morale. It saves his skill. It gives him a chance to do something socially useful."

(if you have access to Proquest or some data base like that, you can find this article-some information on it is below)

Below is a quote from the Chronicle of Higher Education (Monday, October 9, 2006-extra email edition)on Phelps winning the Nobel Prize:

"In a 1972 book, he suggested that large spikes in unemployment might have irreversible destructive consequences, as workers' skills and morale deteriorated while they sat at home. Just as inflation can have cancerous effects on business owners' long-term expectations, he suggested, unemployment can have poisonous effects on workers' long-term hopes.

More recently, Mr. Phelps has put forward an idiosyncratic public-policy proposal: He would like the federal government to provide tax subsidies to businesses that hire low-wage workers. His idea is to raise wages for low-skilled workers just high enough that many more of them will be interested in taking jobs.

In Rewarding Work: How to Restore Participation and Self-Support to Free Enterprise (Harvard University Press, 1997), he argued that his proposed subsidies would make labor markets tighter and would have wide-ranging social benefits, including reduced crime. "The subsidies would have the 'multiplier effect,'" he wrote, "of alleviating the pessimism and poor preparation that tend to spread like a contagion in poor communities."

In an interview with The Chronicle in 2003, Mr. Phelps explained one reason why he believes that the federal subsidies should be paid to employers, rather than being given directly to low-wage workers, as in the Earned Income Tax Credit. "It's better for the worker to see the total compensation coming from the firm," he said. "I think that adds to self-respect if the worker is not constantly reminded that you're in a special program -- that, look, you're a low-productivity guy and that's why your employer is only paying you nickels and dimes" (The Chronicle, January 16, 2004). "

Article information THE ROAD TO RECOVERY: SPENDING OR SAVING?; The Debate Is Renewed Between Those Who Advocate Large Expenditures for Public Works and Those Who Insist That Steps Should Be Taken to Balance the Budget and Encourage Private Business By HENRY HAZLITT.. New York Times (1857-Current. Jan 6, 1935. p. XX1 (1 page)

Monday, October 09, 2006

First Post

Why is this blog called The Dangerous Economist? Back in the early 1990s, I wrote a paper called "The Creative-Destroyers: Are Entrepreneurs Mythological Heroes?" It compares the entrepreneur in capitalism to the hero in mythology. I was never able to get it published in an academic journal. One referee even said the idea was dangerous. I doubt much harm would have befallen the U.S. economy had this paper been published. It is now online at

Creative Destroyers

A shorter version is at

Shorter Version

Happy reading