economics

A “Bias Makes You Stupid” Classic: Duke’s Economically Ignorant Economics Prof.

/ Jack Marshall / 14 Comments

Duke University professor of economics William Darity wants $14 trillion in reparations to be paid to African Americans. That would roughly break down to $350,000 per recipient. True, he was blathering on the “Dr. Phil” show, and perhaps thought nobody with more than a GED would be watching. Nonetheless he said, for public consumption, that trillions in financial reparations should be handed out to “reduce the wealth gap” between white and black Americans. Where will all that money come from, the phony TV doctor asked? Oh, from the Federal government, which will apparently make it magically appear, replied the evidently phony economist. Will a $350,000 windfall be enough to do any lasting good for the vast majority of blacks who would receive it? Oh, probably not, but it will feel good.

Or something. California’s task force on imaginary reparations things they should be at least $5 million per eligible resident. Sure, why not? Why not $10 million?

In the past, the professor has estimated that reparations would cost between $10 and $12 trillion. Of course, those figures are also impossible and ridiculous, so we need not make too big a thing out of his latest demand.

The National Debt, even the most woke and irresponsible economists will admit if you back them against a wall, is getting, indeed is, dangerously large already at about $32 trillion. Increasing it by 40% in a short period of time is a recipe for economic disaster that would adversely affect all races and creeds.

One doesn’t even need to get into the absurd practical, social, political and legal impediments to such a mass transfer of wealth, which would be enough to make such Darity’s reparations plan madness even if it were affordable, which it is not now and never will be. The ethics question is: How can Duke responsibly employ a professor who advocates such reckless economic policy? What can students learn from this man, who places his race and political biases ahead of his scholarship?

Continue reading →

Comment Of The Day: “OK, I Give Up: What IS This?”

/ Jack Marshall / 2 Comments

Believe it or not, one of the main reasons I write Ethics Alarms is to learn things, and the things I learn sometimes come from researching an issue, and sometimes come from you.

Since a prime starting point for ethical analysis of an event or someone’s conduct is  answering the question, “What’s going on here?”, Joe Biden’s statement that if you believe Tara Reade, the ex-Biden staffer (who Joe says he doesn’t recall) now accusing him of sexual harassment, assault and indeed rape, you shouldn’t vote for him genuinely puzzled me, and I asked for assistance in figuring out what Joe was doing.

In a neat, concise, Comment of the Day, Rich in CT answered my question. I had never heard of the phenomenon he identified, being constitutionally resistant to economic theory from childhood. Above is a video that further elaborates on the topic, the Pareto Optimality or Pareto Efficiency, “a situation that cannot be modified so as to make any one individual or preference criterion better off without making at least one individual or preference criterion worse off.”

Got it. Now I know what that is. Thanks, Rich.

Here is Rich in Ct’s Comment of the Day on the post, “OK, I Give Up: What IS This?”: Continue reading →

Comment Of The Day: “Comment Of The Day: ‘Sunday Ethics Warm-Up, 1/12/2020′” (Economic Data Thread)

/ Jack Marshall / 12 Comments

This Comment Of The Day covers a wealth of ethics issues, including the ancient ethics debates over what is a fair share on societal wealth and who decides when someone has “enough” wealth. It also is an Ethics Alarms first: Chris Marschner’s Comment of the Day is on his own Comment of the Day!

And here it is, his Comment of the Day on his previous Comment of the Day on the post, “Sunday Ethics Warm-Up, 1/12/2020: Broken Ethics Alarms, An Ethics Conflict, And “Who Are You Going To Believe, Me Or Your Own Eyes?”

The point I was making was that people use economic data to illustrate all kinds of things. Typically they use charts and graphs to illustrate a point THEY want to make. The values within those charts and graphs need full examination before drawing a conclusion. For example, Reagan dropped the unemployment rate overnight by including the military in the labor force. In that case the number employed went up and the labor force went up as well. Given that the unemployment rate is the number unemployed/labor force if the denominator rises the UE rate falls.

Conversely, between 2008 and 2012 the unemployment rate showed a downward trend because the Labor force participation rate (LFPR) shrank and not because more people got jobs. People gave up looking for work so they were no longer treated as unemployed and the number of people working grew relative to the LFPR. Since 2016 the LFPR has been growing and the UE rate is dropping. That means that there are more people are working. That is a good thing because it puts upward pressure on wages.

For some, higher wages have overtaken what is known as an individual’s reservation wage. The reservation wage is the minimum amount needed to get a person to accept the offered job. Unfortunately, we have a great number of people whose true reservation wage has been distorted in both psychological and real terms. Reservation wages have been growing because of the growth in governmental income maintenance programs. Imagine how many will decide to live only on Yang’s guaranteed $12K a year. Couple that $1000 a month with housing assistance, food stamps, childcare, Medicare, and WIC you can live quite well on the dole. Oh I know, Yang says he would replace all those other programs to fund his guaranteed minimum income. Name a program that ever went away. We just layer one atop another.

These are not my opinions but well established facts and fundamental economic theory that is taught in first year Econ classes. I know because I taught those courses for 20 years. Continue reading →

Comment Of The Day: “Sunday Ethics Warm-Up, 1/12/2020: Broken Ethics Alarms, An Ethics Conflict, And ‘Who Are You Going To Believe, Me Or Your Own Eyes?”’

/ Jack Marshall / 21 Comments

For today’s “Economics for Dummies” lecture, and we can only hope those in thrall to the “income inequality” hucksters running for President will somehow hear it, we have Chris Marschner. What inspired his discourse was this chart,

from #3 in the 1/12 Warm-Up, regarding Michael Bloomberg’s deliberately dishonest statement, “The U.S. economy is working just fine for people like me. But it is badly broken for the vast majority of Americans.”

Here is Chris Marschner’s Comment of the Day on the post, “Sunday Ethics Warm-Up, 1/12/2020: Broken Ethics Alarms, An Ethics Conflict, And “Who Are You Going To Believe, Me Or Your Own Eyes?”

One of the great fictions of economics lies in how data is portrayed. Growth rates are one of my favorite methods of telling lies. The wage growth rate above requires a bit of basic math and economics understanding to fully capture its relevance.

The lowest quartile or quintile will have substantially higher rates of growth even if all incomes rise at exactly the same amount. For example if someone making the highest limit of the lowest quartile (say $25,000) gets a $5000 raise that earners wage growth is 20%. As we move up the line, if the highest limit of the second quartile is $50,000 and a  $5,000 raise, that rate of increase is a mere 10%. As we move up the ladder the basis or denominator gets progressively larger and if the numerator – the raise – remains constant, the rate of growth falls. Most people know this or should know this. Continue reading →

Google And The Bail Bonds: When Virtue-Signaling Goes Horribly Wrong

/ Jack Marshall / 18 Comments

..or, in the alternative, go ahead and BE evil, but make sure you’re pretending to be progressive while you’re doing it.

“With great power comes great responsibility not to be reckless and stupid.”

Google recently announced this policy change. See if you can spot what is wrong with it: I shouted, “What???” pretty much through the second paragraph.

At Google, we take seriously our responsibility to help create and sustain an advertising ecosystem that works for everyone. Our ads are meant to connect users with relevant businesses, products and services, and we have strict policies to keep misleading or harmful ads off of our platforms—in fact, we removed 3.2 billion bad ads last year alone. Today, we’re announcing a new policy to prohibit ads that promote bail bond services from our platforms. Studies show that for-profit bail bond providers make most of their revenue from communities of color and low income neighborhoods when they are at their most vulnerable, including through opaque financing offers that can keep people in debt for months or years. We made this decision based on our commitment to protect our users from deceptive or harmful products, but the issue of bail bond reform has drawn support from a wide range of groups and organizations who have shared their work and perspectives with us, including the Essie Justice Group, Koch Industries, Color of Change and many civil and human rights organizations who have worked on the reform of our criminal justice system for many years. According to Gina Clayton, executive director of the Essie Justice Group, “This is the largest step any corporation has taken on behalf of the millions of women who have loved ones in jails across this country. Google’s new policy is a call to action for all those in the private sector who profit off of mass incarceration. It is time to say ‘no more.’” Enforcement of this policy will begin in July 2018. This policy change is part of our ongoing efforts to protect users on our platforms.

Maybe this isn’t as stupid as it appears. Maybe Google is trying to protect its users by ensuring that potential predators accused of crime rot in jail while they are awaiting for trial because they don’t have access to bail.  Now that would be sinister and cruel, but not idiotic. Maybe? Perhaps?

No, this is just idiotic.

Prof. Alex Tabarrok, the Bartley J. Madden Chair in Economics at the Mercatus Center and a professor of economics at George Mason University, explains:

Bail bonds are a legal service. Indeed, they are a necessary service for the legal system to function. It’s not surprising that bail bonds are used in communities of color and low income neighborhoods because it is in those neighborhoods that people most need to raise bail. We need not debate whether that is due to greater rates of crime or greater discrimination or both. Whatever the cause, preventing advertising doesn’t reduce the need to pay bail it simply makes it harder to find a lender. Restrictions on advertising in the bail industry, as elsewhere, are also likely to reduce competition and raise prices. Both of these effects mean that more people will find themselves in jail for longer.

And may I add, with respect, “Duh.” You don’t begin reforming the bail system by making it harder for people who need bail to get it….that is, you don’t do that unless you have a cranial vacuum.  Moreover, Prof. Tabbarrak has the same message based on his experience with bail bond companies as I did when I had criminal defendants as clients—and when I have had to help family members and friend deal with the bail system: Continue reading →

Signature Significance: Bernie Sanders’ Ignorant Tweet

/ Jack Marshall / 26 Comments

Bernie tweet

Yesterday, the Democratic candidate for President of the United States, a long-time member of the United States Senate, tweeted this message to his “followers,” and also, given the nature of Twitter, the nation:

“You have families out there paying 6, 8, 10 percent on student debt but you can refinance your homes at 3 percent. What sense is that?”

Now, if you don’t instantly recognize why this is an astoundingly ignorant statement, especially for a Presidential candidate running on a platform of economic restructuring, that’s okay. Don’t feel badly. It’s a weekend, you’re probably groggy from all the holiday cheer, and most important of all, you aren’t presuming to hold yourself out as qualified to be President, or constantly lecturing about the evils of capitalism. Sanders is, however, and this cretinous statement is signature significance. Nobody who understands loans, interest, collateral, banking, or economics would say, write or publish such a fatuous statement, even once. This is signature significance: an informed, logical, attentive, competent individual will not make such a bone-headed mistake…never. Sanders, however, has said this at least twice; in October, he tweeted a variation on the same economically ignorant theme:

“It makes no sense that students and their parents pay higher interest rates for college than they pay for car loans or housing mortgages.”

Actually, it does, Senator; it makes perfect sense, unless you are twelve. The concept is called “collateral.” That is something of value that  a lender can take if a borrower defaults on the loan. The deal is interest, plus security, the collateral. A house or a car are tangible collateral, so the interest rate can be lower. When the loan is for college tuition, however, there is no collateral. If the borrower defaults on the loan, the bank can’t take the student’s diploma, or education, or download all of the alleged knowledge the loan paid for from brain to laptop. Of course the interest rate is higher. That is, “of course” if you know anything at all about finance.

The unavoidable and shocking conclusion: Sanders is holding himself out as the leader to revolutionize how the U.S. economy works, stimulate growth and jobs, and show the way to a fairer and more just financial system, yet he is stunningly uninformed about the basics of finance, hasn’t learned a thing in all his years in the Senate, and worse, lacks the diligence to learn what he has an obligation to understand in order to justify having a vote on economic matters in the U.S. Senate, never mind setting policy as President.

This is bad.

Is there any excuse or defense for that tweet? No. Should anyone trust an elected official this ignorant and so lazy and arrogant that he makes no effort to disabuse himself of financial illiteracy? No. Does such a bone-brained misunderstanding mean that no intelligent person should listen to or take seriously any of his pronouncements about the economy? Yes.

To be fair to the Senator, let’s try to find some explanation for this that doesn’t prove that he couldn’t pass Economics 101 at a community college: Continue reading →

Ethics Quiz: The Marriage Mark-Up

/ Jack Marshall / 36 Comments

Wedding reception

The New York Times published a feature in December exposing how hotels and wedding service vendors typically charge more to couples planning wedding festivities than they do to corporations seeking the same facilities and the same services. Is the result of  gauging, market forces, negotiation inexperience by the happy couple, or something else? Is it unethical?

The article seems to conclude that the vendors are simply taking advantage of purchasers who have no sensitivity to price, especially so-called “Bridezillas.” They want what they want for their perfect day, and will pay whatever it will cost to get it. Are the venders being unethical to take advantage of what is an emotional rather than a rational mindset? After considering whether more price transparency in the wedding industry would help (the author thinks not), the piece concludes,

“Strong consumer preferences — about the flower type, bridesmaid dress, cake decorations, music style, whatever — mean less price sensitivity (what economists refer to as greater demand inelasticity). If the cocktail napkins must be blue, the happy couple will be willing to pay more for blue. So if there are enough brides out there with strong and specific preferences, who want their weddings to be the special day they always dreamed of, that’s going to push equilibrium prices higher, no matter how transparently they are displayed. In other words, the Bridezillas keep prices high for the rest of us.” Continue reading →

Ethics, Porn, and the Creepy Professor

/ Jack Marshall / 5 Comments

The Ronald Ayers saga raises the intriguing, Weiner-esque ethical issue of whether a college professor being creepy is sufficient reason to fire him.

The former economics professor was fired by the University of Texas for viewing pornography on an office computer, which the University’s policies forbade. The chain of facts has the ring of Kafka: 1) a student claims he hears “sexual noises” emanating from Ayers’ office, which 2) is considered sufficient provocation (the professor denied the accusation that he was not “master of his domain” at work) for the school to search his computer, which 3) uncovers evidence that he looked at some pornographic sites, and 4) also that he searched for the term “teen,” which 5) the university deems sufficient to indicate that he was searching for child pornography, so 6) they fired him, after three decades and tenure on the faculty.

University records say Ayers at first denied the allegations that he viewed pornography, but when confronted with a printout of his computer records, admitted that it may have happened “at the end of a long work day.” Ayers later told administrators seeing the porn was for “academic research.”

Uh-huh… Continue reading →

Do Economists Need A Code of Conduct?

/ Jack Marshall / 2 Comments

We can learn a lot about the discipline of economics, the thinking of its practitioners and the limitations of ethics codes by reading the various reactions of economist to the question, “Do economists need a Code of Conduct?” The responses range from “yes” to “sure, but it won’t do any good” to “no.”

You can read all about it here.

Hypocrisy Prize

/ Jack Marshall / Leave a comment

I am usually reluctant to accuse anyone of hypocrisy, and similarly suspicious of those who do. True hypocrisy is relatively rare. A person who condemns bad conduct that he or she has engaged in at another time is not necessarily a hypocrite, for example, and the past conduct does not diminish the legitimacy of the condemnation. Hypocrisy is a form of dishonesty that implicates one’s integrity, as it involves taking a position of convenience that isn’t sincerely held, or holding others to standards that one still refuses to apply to oneself.

If there is an outrageous hypocrisy line, however, New York Times columnist Paul Krugman crossed it today with his op-ed belittling Sen. Jim Bunning and Republicans who opposed extending unemployment benefits. He wrote, in a piece entitled “Sen. Bunning’s Universe”: Continue reading →