Ikeda on Urban Planning January 24, 2010

While reviewing the archives at Market Urbanism, I came across the following interview with Sandy Ikeda, Associate Professor of Economics at Purchase College and contributor at ThinkMarkets. Please take a moment to see what he has to say:

Much to Learn: Links on Haiti January 23, 2010

1. Bret Stephens: To Help Haiti, End Foreign Aid

2. Lessons from the Tsunami: Too Much of a Good Thing?

3. Peter Foster: What Haiti Needs Is Adam Smith

4. Lessons from Katrina for Haiti

5. Why Haiti Is So Vulnerable

6. The Underlying Tragedy

7. Andy Kershaw: Stop Treating These People Like Savages

8. Haiti and the Broken-Window Fallacy

Pirates, Too, Respond to Incentives January 12, 2010

The Economist reports:

Plainly there is no purely naval way to stop the pirates. Somalia’s coast is more than 3,000km long. They seem unafraid of the warships. If accosted, the pirates usually dump their guns and grapple-hooks in the sea. The patrolling navies are reluctant to arrest them because of the legal complexities. On the rare occasions when pirates are taken aboard, they are usually given medicine, water and enough fuel to go back to Somalia. Within days they will set off again to seek their prey.

You’ll Shoot Your Eye Out, Kid December 25, 2009

Absent a sentimental story line, the US Treasury Department has chosen to give Fannie Mae and Freddie Mac the gift likely at the top of their Christmas lists — one which will prove far more harmful than an official Red Ryder Carbine-Action Two-Hundred-Shot Range Model Air Rifle. Bloomberg discloses:

The U.S. Treasury Department will remove the caps on aid to Fannie Mae and Freddie Mac for the next three years, to allay investor concerns that the companies will exhaust the available government assistance.

The two companies, the largest sources of mortgage financing in the U.S., are currently under government conservatorship and have caps of $200 billion each on backstop capital from the Treasury. Under the new agreement announced today, these limits can rise as needed to cover net worth losses through 2012.

Cap removal will accompany the eligibility of Fannie Mae Chief Executive Officer Michael Williams and Freddie Mac CEO Charles Haldeman Jr. for individual compensations of as much as $6 million this year, although an apposite, incentive-based stipulation would involve compelling the mortgage financiers’ CEOs to wear pink bunny pajamas.

Toward Trial & Error December 18, 2009

Arnold Kling and Nick Schulz have compiled conversations with top economic thinkers in their new work, From Poverty to Prosperity. The book includes an introduction to Economics 2.0, a concept which Kling and Schulz explain in the exchange below.

While my expectations are high, thus far I have only read interviews with Paul Romer and Douglass North. Hence, rather than offer a premature assessment, I want to direct readers to Mike Gibson’s review of the book at Let A Thousand Nations Bloom. Also, Reason.tv’s interview with the authors follows:

(For extended discussion, Econtalk has an interview with Arnold Kling.)

One More Time with Feeling December 18, 2009

At The Austrian Economists blog, Peter Boettke continues to stress a much neglected truth:

Let me state this one more time with feeling — while there may be macroeconomic problems, there are only microeconomic explanations and solutions. Aggregate variables do not interact with one another independent of the choices of individuals. And those choices are guided by the incentives actors face, and the informational signals they receive. In short, economics is about exchange and the institutions within which exchanges take place. It is all about property rights, relative prices, the lure of profit and the penalty of loss.

Trading Business Suits for Lawsuits December 16, 2009

The Economist concludes its report on the recent resolve between Microsoft and the European Commission with a revealing statement on further abuse of antitrust:

Microsoft wants to stop Google, which already rules much of online advertising, from dominating mobile advertising too. Microsoft, after being on the receiving end of antitrust action for a long time, has now taken up the weapon to use against its rivals.

Presumably, such a comment likewise references the Microsoft lobby against Oracle’s proposed acquisition of Sun Microsystems — a purchase which Geoffrey Manne opines is “procompetitive.”

Perhaps it’s fitting to remind readers of Bastiat’s assertion:

When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it & a moral code that glorifies it.

Do competition authorities have any concern for the precedent they establish? Are they aware of the perverse incentives which their initiatives so frequently warrant?

History Defies What Logic Dictates December 15, 2009

Boettke and Roberts exchange wonderful insights in this Econtalk podcast on Boettke’s new book, co-authored with Paul Dragos Aligica: Challenging Institutional Analysis and Development: The Bloomington School.

Of particular interest will be their Hayekian critique of mechanism design and other attempts at engineering optimal outcomes through institutions such as contracts. Boettke cautions that, in efforts to orchestrate the “perfect” institutional environments, we may actually thwart otherwise emergent, desirable solutions.

Life Lessons & Moral Hazard December 1, 2009

JW Verret shares his father’s wisdom:

When I was growing up my father told me that a man only needs three things in life: a good bartender, a good priest, and a good tailor. I think Dad intended that different people wear those three hats, otherwise it just doesn’t work. But wearing conflicting hats is the unfortunate mission we have given to the Fed at this point. Some regulatory re-gearing, and an enhanced audit capability for non-monetary policy activities at the discount window, could be what we need to get the Fed on the right track.

Antitrust & the Austrian Paradigm December 1, 2009

In 1982, Israel Kirzner penned an essay concomitant the release of his extraordinary critique of modern price theory. My hopes are that the following excerpt will invite others to read the piece in its entirety:

The case against the regulation of the market (even by well-meaning and conscientious public servants), rests upon insights into this corrective process and into its socially benign character. Long before this corrective process can possibly lead to even approximate coordination, changes in the basic data of the market (individual preferences, the endowments of resources, and available technology) will have rendered the hypothesized state of full equilibrium (defined with respect to the initial state of the data) utterly irrelevant. But the discrepancies continually stimulate, in turn, changes in these existing patterns of resource allocation.

The truth is that, as Hayek explained four decades ago, the economic problem faced by society consists of the need to ensure that, as far as possible, the available bits of scattered knowledge of separate individuals be somehow mobilized to contribute to relevant decisions that affect the societal pattern of resource allocation. To try to measure the success with which a society addresses its economic problem, with a yardstick reflecting a pattern appropriate to hypothesized centralized omniscience, is akin to an attempt to assess the efficiency of an allocation pattern for scarce resources by comparing its results with those that might be imagined for a world in which scarcity is absent: The whole problem is how best to cope with scarcity (emphasis added). Similarly the socio-economic problem is how best to cope with the inescapable decentralization of knowledge.

We may put the matter quite succinctly: For reasonably successful coordination within a decentralized decision-making system, the discovery process constituted by competitive-entrepreneurial alertness to profit opportunities is crucial. Attempts at improvement by direct regulation are likely to be based on erroneous information (because the regulators cannot utilize the discovery process of profit pursuit) and are likely to block or distort the market’s own delicate discovery process.