Eugene A. Birnbaum

I have learned from his daughter that economist Eugene A. Birnbaum died of cancer on May 16th, 2008. I wrote about him a year and a half ago here.



His daughter wrote,

My father had a lust for life and a thirst for conversation and debate about economics, politics, and finances. A couple of years ago when I asked him if he was afraid of dying, he told me, “I’m not afraid of dying, I just want to live.” It really was his love of his work that kept him going, even in the days just before cancer took his life.

Missing the Inflation Targets

Romanian monetary policy seems to have messed up after having done so well for awhile. From the RGE Monitor,

# Plojhar (via Bloomberg): More rate increases will be needed, up to 11% this year, in face of overheating, high inflation, and a potential renewed currency weakness

# March inflation came in higher-than-expected at 8.63% yoy

# Danske: Inflation likely to remain well above NBR official inflation forecast in both 2008 and 2009. Expects key policy rate to be hiked to 11.0% over next 12 months

# NBR Governor Isarescu: Inflation rate will remain ‘relatively high’ in coming months, creating a risk of a price/wage spiral

Commenting on these points, Gabriel Mihalache has written,

For what it’s forth, inflation in Romania went from dizzying 14% in January 2004 to 4% throughout the first half of 2007 and then, after July 2007, it spiked into 8-9% territory.

This graph (courtesy of Economic Investigations) shows just how far Romanian monetary policy has gone astray over the past few years:

The dots are the end of year inflation targets, the dashed lines are the +/- 1% target band and the red line is actual inflation.

Wow! Look how that red line has taken off! As Milton Friedman used to say, and as my colleague David Laidler has often reminded us,

Persistent inflation is always and everywhere a monetary phenomenon.

More Hateful Anti-Semitism from the UK’s University and College Union

On Wednesday,

The University and College Union (UCU) … passed a motion that would allow for the reintroduction of a boycott of Israeli academia.

At its annual congress in Manchester, the motion was passed without debate and by a show of hands.

The motion follows last year’s attempts by the union to implement a similar boycott motion, but was withdrawn by the Union following undisclosed legal advice.

This year’s motion was debated … despite legal advice which clearly states that any boycott of Israeli academia would be in breach of the unions own anti-discrimination policies and British anti-discrimination laws.

As regular readers know, I oppose this boycott on two distinct grounds.

• I favour academic freedom and think we should not ban association with scholars from any country simply because of that country’s policies or abuses of human rights.
• I see no reason (other than anti-Semitism) to single out Israel when there are so many countries that are truly horrible.

Update: Here is more from Engage, a site well-worth visiting:

UCU Congress passed a motion which incites members to discriminate against Israeli academics on the grounds of their nationality. …

There was a short debate, dominated by procedural wrangling which was curtailed suddenly and quickly when somebody moved “that the motion be now put”. The chair called for a final speech for the motion, didn’t allow one against, and 90% of the delegates voted for the motion.

Although the boycott campaign has always demanded the right to have a proper debate, when it came to it there wasn’t any serious debate. A couple of demagogic “as a Jew” speeches from Michael Cushman and Haim Bresheeth and it was all over.

There was no debate on whether “criticism of Israel as such is antisemitic”. There was no debate about what it means to claim that Israeli academia is “apparently complicit” in Israeli human rights abuses. There was no debate about the significance of UCU’s official encouragement to members “to discuss the occupation with individuals and institutions concerned, including Israeli colleagues with whom they are collaborating.”

UCU, again has an antisemitic policy, one which violates its own constitutional commitment to equality and which also violates the Race Relations Act 1976. It was passed after only trivial debate and consideration.

Congress rejected an amendment which would have stipulated that there could be no call to boycott Israelis without a ballot of the UCU membership. Congress doesn’t want to ballot the membership. It wants to dictate policy to the membership.

Update: For more, see Michelle Malkin and her references, especially to Melanie Phillips.

More Hateful Anti-Semitism from the UK’s University and College Union

On Wednesday,

The University and College Union (UCU) … passed a motion that would allow for the reintroduction of a boycott of Israeli academia.

At its annual congress in Manchester, the motion was passed without debate and by a show of hands.

The motion follows last year’s attempts by the union to implement a similar boycott motion, but was withdrawn by the Union following undisclosed legal advice.

This year’s motion was debated … despite legal advice which clearly states that any boycott of Israeli academia would be in breach of the unions own anti-discrimination policies and British anti-discrimination laws.

As regular readers know, I oppose this boycott on two distinct grounds.

• I favour academic freedom and think we should not ban association with scholars from any country simply because of that country’s policies or abuses of human rights.
• I see no reason (other than anti-Semitism) to single out Israel when there are so many countries that are truly horrible.

Update: Here is more from Engage, a site well-worth visiting:

UCU Congress passed a motion which incites members to discriminate against Israeli academics on the grounds of their nationality. …

There was a short debate, dominated by procedural wrangling which was curtailed suddenly and quickly when somebody moved “that the motion be now put”. The chair called for a final speech for the motion, didn’t allow one against, and 90% of the delegates voted for the motion.

Although the boycott campaign has always demanded the right to have a proper debate, when it came to it there wasn’t any serious debate. A couple of demagogic “as a Jew” speeches from Michael Cushman and Haim Bresheeth and it was all over.

There was no debate on whether “criticism of Israel as such is antisemitic”. There was no debate about what it means to claim that Israeli academia is “apparently complicit” in Israeli human rights abuses. There was no debate about the significance of UCU’s official encouragement to members “to discuss the occupation with individuals and institutions concerned, including Israeli colleagues with whom they are collaborating.”

UCU, again has an antisemitic policy, one which violates its own constitutional commitment to equality and which also violates the Race Relations Act 1976. It was passed after only trivial debate and consideration.

Congress rejected an amendment which would have stipulated that there could be no call to boycott Israelis without a ballot of the UCU membership. Congress doesn’t want to ballot the membership. It wants to dictate policy to the membership.

Update: For more, see Michelle Malkin and her references, especially to Melanie Phillips.

Substitution, Gasoline Prices, and Small Cars

It makes sense: As the price of gasoline rises, many people switch from buying large cars (and trucks and SUVs) to buying smaller cars. The result is that the price of small cars rises and the price of large cars plummets. This effect was first presented systematically by Ake Blomqvist and Walter Haessel in the Canadian Jl of Economics back in 1978 in “Small Cars, Large Cars, and the Price of Gasoline”.



Now, thirty years later, we are seeing the same thing. From the Associated Press [h/t to Brian Ferguson],

“The small cars are very hard to get right now. The cars that were $5,000 are now $7,000,” [said used-car dealer, Mike Haile].



In the past year, the average used small car price has gone up 2 percent, from $9,278 to $9,470, according to wholesale auto auction data collected by the National Automobile Dealers Association [NADA]. There’s evidence that the prices are accelerating, according to recent data from J.D. Power and Associates.

Okay, so their numbers differ considerably, but they’re in the same direction. And meanwhile,

The increases are in contrast to used full-size sport utility vehicles, whose prices have dropped $1,600 to $2,000 in the past year, said Paul Taylor, the NADA’s chief economist. The average sale price of all used vehicles in the U.S. dropped 2.5 percent in the past year, the NADA reported.

If you don’t drive much, and if you really want a big gas-guzzler, now might be a fun time to go shopping!

Substitution, Gasoline Prices, and Small Cars

It makes sense: As the price of gasoline rises, many people switch from buying large cars (and trucks and SUVs) to buying smaller cars. The result is that the price of small cars rises and the price of large cars plummets. This effect was first presented systematically by Ake Blomqvist and Walter Haessel in the Canadian Jl of Economics back in 1978 in “Small Cars, Large Cars, and the Price of Gasoline”.



Now, thirty years later, we are seeing the same thing. From the Associated Press [h/t to Brian Ferguson],

“The small cars are very hard to get right now. The cars that were $5,000 are now $7,000,” [said used-car dealer, Mike Haile].



In the past year, the average used small car price has gone up 2 percent, from $9,278 to $9,470, according to wholesale auto auction data collected by the National Automobile Dealers Association [NADA]. There’s evidence that the prices are accelerating, according to recent data from J.D. Power and Associates.

Okay, so their numbers differ considerably, but they’re in the same direction. And meanwhile,

The increases are in contrast to used full-size sport utility vehicles, whose prices have dropped $1,600 to $2,000 in the past year, said Paul Taylor, the NADA’s chief economist. The average sale price of all used vehicles in the U.S. dropped 2.5 percent in the past year, the NADA reported.

If you don’t drive much, and if you really want a big gas-guzzler, now might be a fun time to go shopping!

Lara’s Theme

Somewhere, My Love….



Granddaughter #5. I claim she came out smiling.

Lara’s Theme

Somewhere, My Love….

Granddaughter #5. I claim she came out smiling.

Can the Solow Growth Model Explain This?

Several months ago, I questioned the usefulness of Solow-type growth models. Here, courtesy of Stephen Gordon, is an example of why I think the study of political economy is so much more important (The graph shows real GDP per capita from 1870 – 2000, with Canada in red and Argentina in turquoise).





Stephen points out that the economies were very similar up until the mid-1930s:

Up until the 1930’s, the two countries followed very similar paths: foreign investment financing the development of resource-based economies. But then the 1930’s happened, and Canada and Argentina parted ways.



This is the best graphical demonstration that starting points are not destiny…

Hiring and Firing: Reducing Employee Search Costs

No matter how much time and money an employer might spend on screening potential employees, they cannot always get it right. Furthermore, screening and sifting and rehiring when mistakes are made can be expensive.Zappos, an internet shoe seller, has a unique approach:

Here’s how it works. All new hires spend their first four weeks in a training program that “immerses them in the company’s strategy, culture, and obsession with customers.” New hires receive their full salary during this training period. Then, after the four weeks are up, Zappos offers each of them $1,000 on top of the money they’ve already earned to quit. Now.



“Why? Because if you’re willing to take the company up on the offer, you obviously don’t have the sense of commitment they are looking for,” Taylor writes. “It’s hard to describe the level of energy in the Zappos culture—which means, by definition, it’s not for everybody. Zappos wants to learn if there’s a bad fit between what makes the organization tick and what makes individual employees tick—and it’s willing to pay to learn sooner rather than later.”

I guess this will work if the offer provides a good, incentive-compatible screen. However it is not always a good screening device.



Many years ago, the University of Western Ontario paid a tenured faculty member two and a half times his annual salary to resign. Immediately a number of us tendered offers to resign in exchange for the same buy-out. The administration’s response,

That’s the problem, John. Only the people we want to keep would be the ones who leave.

And as one commenter on the Zappos piece implied, for $1000 upfront now, I will promise not to apply for a job at Zappos, save Zappos the training costs, and we will both come out ahead.