AEIdeas » Mark J. Perry The public policy blog of the American Enterprise Institute Tue, 02 Sep 2014 16:18:24 +0000 en-US hourly 1 Monday afternoon linkage Tue, 02 Sep 2014 16:18:24 +0000 read more >]]> 1. Mark Mills: “The Data Are Clear: Robots Do Not Create Unemployment.”

2. Richard Rahn: “Hong Kong’s miraculous progress: Economic freedom has made a tiny seaport into an economic and financial giant.

3. Christina Sommers in TIME: “Five Feminist Myths that Will Not Die” — Women’s advocates need to take back the truth.

4. California’s Consensual Sex Contract/Checklist. “Per California Senate Bill 967, all sexual encounters on college campuses must be regulated and approved by college administration and/or State regulatory agencies.” /satire

5. Expect More Reshoring as American companies are falling out of love with China.

6. From today’s August 2014 Manufacturing ISM Report On Business — “The average PMI for January through August (55%) corresponds to a 3.9% increase in real GDP on an annualized basis. In addition, if the PMI for August (59%) is annualized, it corresponds to a 5.2% increase in real GDP annually.”

7. Creative Destruction. North American film industry had worst summer since at least 1997, after adjusting for inflation.

8. America, Here’s Your Senseless, Cruel and Expensive Drug War: a) Missouri inmate Jeff Mizanskey will likely die in maximum security prison for weed-only offenses, while rapists and murderers come and go and b) in 2008 a 9-Member SWAT team in CT broke down the door and shot and killed a man as he watched TV with his friend – no drugs were found and no arrests were made. The police shooter was named “Officer of the Year.”

9. Immunity. Cop Won’t Be Charged For Killing Napster Exec While Texting & Driving, Because It’s Apparently OK For Cops To Do That

10. Markets in Everything: Southern New Hampshire University introduces a $10,000 Bachelor of Arts degree.

11. Rampant Grade Inflation on College Campuses. In the 1960s, only 15% of college grades were As; today, 43% of all college grades are As. 

12. Cartoon of the Day


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Dallas Morning News editorial writer William Ruggles coined the term “right to work” on Labor Day in 1941 Mon, 01 Sep 2014 21:56:30 +0000 read more >]]>

Dallas Morning News editorial writer William Ruggles (pictured above) “thought every American had a right to work. He used those words in an editorial on September 1, 1941 (Labor Day) asking for a 22nd amendment to the U.S. Constitutional guaranteeing the right to work with or without union membership. In so doing, he coined a phrase and sparked a movement that would change the labor landscape in America,” according to a story in the Dallas Morning News in 2010 as part of its 125th anniversary celebration. Here are some excerpts from that article:

“The answer seemed to me to be an amendment to the federal Constitution that would be so clear and unequivocal that no jurist could argue against its meaning,” Ruggles said later. Texas passed its right-to-work law in 1947.

Although that constitutional guarantee never materialized, 22 states [now 24] enacted legislation patterned after the editorial. These laws prohibit agreements between trade unions and employers that make membership and payment of union dues or fees a requirement of employment even if the company is operating under union-negotiated bargaining agreements.

Love them or hate them, economists, historians and lawyers agree that right-to-work laws were the leading factor in the Sun Belt’s success. “Economic growth in places like Georgia and Texas was driven by the combination of the right to work and the cost of labor,” says Al Niemi, dean of the Cox School of Business at Southern Methodist University. “Since the right to work dictated the cost of labor, right to work was the single most important driver.”


Exhibit A: Since 2007, employment in the state of Texas has increased by more than 1.3 million jobs (and by 12%), compared to a net deficit of more than 1.2 million jobs over that same period in the rest of the country, see chart below.


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Past 6 years have been a laboratory experiment in Keynesian economic theory. Result? It failed and is now officially dead Sun, 31 Aug 2014 16:11:12 +0000 read more >]]> At his Calafia Beach Pundit blog, Scott Grannis recently posted a pretty devastating critique of Keynesian economic theory and the abject failure of Keynesian fiscal stimulus in the period following the Great Recession (“the most expensive such failure in the history of the world”), here’s an excerpt below and I encourage you to read the entire post (with charts) here – “What Happened to the Profits?“:

Despite assurances from politicians and most economists of Keynesian persuasion, not only did the biggest and most rapid increase in our federal debt burden [in the six years ending June 2014] since WW II fail to boost the economy, it coincided with the weakest recovery in history—growth of only 2.2% per year on average. This is not a problem of not spending enough, it is a failure of ideology, and arguably the most expensive such failure in the history of the world.

Here’s the failure in a nutshell: The government can’t stimulate the economy by borrowing from Peter and sending a check to Paul, because that doesn’t create any new demand—it’s like taking a bucket of water from one end of the pool and pouring it into the other end; the level of the water doesn’t change. And the government can’t stimulate the economy by spending more, because the government is notoriously inefficient (not to mention the fraud, waste, and incompetence that surround most major public initiatives); the private sector is far more likely to spend its money wisely and productively than the government is. Growth only happens when an economy produces more from a given amount of resources—when productivity rises. And productivity only rises when people work more, smarter, and more efficiently, and that takes hard work and risk. You can’t just dial up productivity, you have to work for it. We can’t “spend our way to prosperity,” as the late and great Jude Wanniski told us.

Here’s my interpretation of what really happened in a nutshell: the private sector generated $8.9 trillion of profits in the past six years, and the federal government borrowed 83% of those profits to fund a massive increase in transfer payments, income redistribution, bailouts, subsidies, and a modest increase in infrastructure spending (only 8% of the 2009 American Recovery and Reinvestment Act went to transportation and infrastructure).

What happened to all the profits? Almost all of the most incredible surge in profits in modern times was squandered by our government, flushed down the Keynesian drain.

The past six years in effect have been a laboratory experiment to determine whether Keynesian economic theory is valid. The result? Keynesian economic theory is (or should be) officially dead. It doesn’t work. Government can’t boost the economy by borrowing or spending more money. Politicians will be unhappy to hear this, of course, since they would prefer that we think they can dispense growth and prosperity on demand. Those who insist in perpetrating this myth should be voted out of office.

HT: Dwight Oglesby

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Restaurant economics – why don’t popular ones raise prices? Sat, 30 Aug 2014 21:17:16 +0000 read more >]]> It’s often a puzzle to economists why the most popular restaurants – the ones with long lines and long waits to get a table or a reservation – don’t raise their prices or charge for reservations? The Priceonomics blog addresses this apparent “economic mystery” in an article titled “Why Don’t Restaurants Charge for Reservations” by looking at the super-popular “State Bird Provisions” restaurant in San Francisco, here’s an excerpt:

If you want to dine at State Bird Provisions, you’ll have to get in line. The small restaurant, winner of the James Beard Award for Best New Restaurant (2013) and a Michelin Star, only accepts a few reservations that are snapped up as soon as they are released — at midnight, sixty days in advance. So nearly every day, people line up on Fillmore Street in San Francisco an hour or more before State Bird’s 5:30pm opening time to score a table.

It may seem silly to line up for State Bird Provisions in a city full of renowned restaurants and good food. But as anyone who has eaten brunch in the city knows, San Franciscans view long restaurant lines as social proof more than as a deterrent. Besides, State Bird offers determined diners a relative bargain. While its offerings are not cheap — even without indulging on wine, bills can reach $50 per person — State Bird’s prices are more modest than almost any other local Michelin Star restaurant.

This makes State Bird something of an economic mystery. If economists owned popular restaurants like State Bird, they would take one look at the long lines and raise prices. After all, the overwhelming demand is pretty clear. Or at the very least, given how reservations disappear like Coachella tickets, they would start charging for them. In fact, since restaurants do not do this, a number of startups in San Francisco and New York City have started to sell reservations to users, often by reserving tables and scalping them.

In contrast to the executives who run large restaurant chains, the restaurateurs behind celebrated restaurants and local favorites are often chefs first rather than professional managers. This raises the question: Are restaurants like State Bird Provisions, which seems to resist simple economic analysis, the exception or the norm? And if they are the norm, is that because it is somehow self-defeating to raise prices even at booming restaurants? Or are chef proprietors a unique breed in the business world, immune to supply and demand and content to leave money on the table?

Read more here and find some answers to those provocative questions.

Update: In response to the post, Robyn makes the following comment that warrants this update to the post:

“If economists owned popular restaurants like State Bird, they would take one look at the long lines and raise prices. ”

That’s because most economists are number crunchers, and don’t have a clue as to the customer psychology of a service oriented business, where yes, reputation and the cachet associated with being a customer is extremely important, but you don’t want to limit your customer base with unnecessarily high prices. That amounts to “negative advertising”. Suddenly raising prices just because you can is one of the fastest ways there is to trash your reputation.

Here’s an alternative, edited version of Robyn’s comment:

That’s because most economists are number crunchers, and don’t have a clue as to the customer psychology of a service oriented business, where yes, reputation and the cachet associated with being a customer is extremely important, but you don’t want to limit your customer base with unnecessarily high prices long, excessive waiting times of several hours. That time wasted waiting in line amounts to “negative advertising”. Suddenly raising prices waiting times with below-market prices just because you can is one of the fastest ways there is to trash your reputation.

In other words, there is an opportunity cost to waiting in line for an hour, and that cost should be considered in the full cost of the meal at popular restaurants: Time Cost + Money Cost = Full Cost. By keeping the money cost low, restaurants like State Bird Provisions are raising the time cost of eating there, and thus raising the full cost of the dining experience – why shouldn’t that be a form of “negative advertising”? Perhaps those restaurants are appealing to those consumers who place a low value on their time and are more cost conscious, and are losing business from those diners who have a higher time cost and are less price sensitive. By raising monetary prices, wouldn’t at least some popular restaurants be better off by appealing to a different group of consumers with more inelastic demand curves and with a higher opportunity cost? With higher menu costs and shorter wait times, wouldn’t some restaurants generate higher overall sales revenues, along with higher tips for the wait staff from higher menus prices?

Economists might not “have a clue as to the customer psychology of service oriented business,” but we understand “opportunity cost” pretty well, and it is only by ignoring the fact that time is a precious, non-renewable resource that we could make the statement that high monetary prices might limit your customer base while ignoring the equally plausible assumption that high wait times would also limit your customer base. After all, “time is money,” and excessively high wait times for a table at a popular restaurant unnecessarily raises the full cost of the dining experience.

Here’s my solution so that restaurants can appeal to both groups of customers (elastic demand and low opportunity cost, and inelastic demand and high opportunity cost): Allocate half of the tables in the restaurant on a first-come, first-served basis that might require waiting for one or two hours, and allocate the other half of the tables by reservations in advance, with a premium reservation charge of $10-$20-$30-$40 per table?

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Markets in everything: Anti-Obamacare practice booms, along with a growing network of market-based providers Sat, 30 Aug 2014 15:30:12 +0000 read more >]]>

Skyrocketing health insurance premiums are pushing patients and Obamacare enrollees to The Surgery Center of Oklahoma (the “Free market-loving, price-displaying, state-of-the-art, AAAHC accredited, doctor owned, multispecialty surgical facility in central OK), explains the center’s director Dr. Keith Smith in the CNBC video above.

Dr. Smith and his clinic are members of a growing network of market-based medical providers that belong to the Free Market Medical Association, a national group “dedicated to bringing together physicians, surgeons, providers, facilities, and support businesses; providing necessary resources to promote a successful industry; and defending the practice of free market medicine without the intervention of government or other third parties. The association’s website provides the interactive “Free Market Map” below with the following statement: “Our members represent a new movement in healthcare. Price competition works to increase quality and lower cost in every market, and our members are competing to lower the cost of health care. We are all working together to drive down the cost of healthcare and increase the quality of care accessible by everyone.” Each symbol on the map represents a clinic, hospital or medical practice that offers market-based medicine with transparent pricing.


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Friday evening linkage Fri, 29 Aug 2014 22:46:39 +0000 read more >]]> oil1. Chart of the Day. Daily US oil production surged above 8.6 million barrels last week for the first time since October 1986, almost 28 years ago.

parking2. Map of the Day. Unpaid NYC parking tickets per UN diplomat by country, 1997-2002. Source: Forbes article “The World’s Most Corrupt Diplomats, As Told Through Parking Tickets.”

3. Who’d a-Thunk It? 40% of UK managers avoid hiring younger women to get around maternity leave? The costs of maternity leave are too high and women ‘aren’t as good at their jobs’ when they return, according to a survey of 500 managers.

4. The Beloit College Mindset List for the College Class of 2014, e.g. #1 “During their initial weeks of kindergarten, they were upset by endlessly repeated images of planes blasting into the World Trade Center, see full list here.

5. The criminalization of American business: The US legal system has become an extortion racket, according to The Economist:

Who runs the world’s most lucrative shakedown operation? The Sicilian mafia? The People’s Liberation Army in China? The kleptocracy in the Kremlin? If you are a big business, all these are less grasping than America’s regulatory system. The formula is simple: find a large company that may (or may not) have done something wrong; threaten its managers with commercial ruin, preferably with criminal charges; force them to use their shareholders’ money to pay an enormous fine to drop the charges in a secret settlement (so nobody can check the details). Then repeat with another large company.

6. Nanny Statism. California college students engaging in sexual activity will now first need “affirmative consent” from both parties?

7. Creative Destruction: Music Album Sales Fall to A New Historic Low.

8. Food Fact: Vs. a McDonald’s Big Mac, a Chipotle burrito has 3.3% more fat, 31% more cholesterol and 157% more sodium, and twice as many carbs.

9. One Word: Bearings: The Achilles Heel of Wind Turbines

10. Good News. Despite income differences, Americans of all backgrounds have never enjoyed such equality in length of life as today.

Bonus Quotation of the Day.



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Quotation of the day on State power vs. social power… Fri, 29 Aug 2014 16:07:54 +0000 read more >]]> ….. is from Albert Jay Nock’s article “The Progressive Conversion of Social Power into State Power“:

It is unfortunately none too well understood that, just as the State has no money of its own, so it has no power of its own. All the power it has is what society gives it, plus what it confiscates from time to time on one pretext or another; there is no other source from which State power can be drawn. Therefore every assumption of State power, whether by gift or seizure, leaves society with so much less power. There is never, nor can there be, any strengthening of State power without a corresponding and roughly equivalent depletion of social power.

HT: Dennis Gartman in today’s The Gartman Letter

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Markets in everything: Market-based alternatives to Obamacare Fri, 29 Aug 2014 15:59:34 +0000 read more >]]> 1. Concierge Medicine (as reported by WAAY-TV in Decatur, AL):

With the Affordable Care Act in full swing, there’s a growing trend across the nation that’s changing the way patients get treatment. And now concierge medicine is being offered at The Heartbeat Away Clinic in Decatur, Alabama. “What I’m doing is unprecedented” said Nurse Practitioner Kimberly Samuel. “I’m not accepting any insurance whatsoever.”

“I’m doing a concierge type medicine where people pay a monthly amount. It’s a very minimum amount and I’ll see them as often as they would like to be seen” said Samuel. Samuel charges a monthly or yearly membership fee that starts at $50 for an individual and $100 for a family of 4. The fee includes appointments or walk-ins for reduced wait times, 24 hour access by phone or email, and 45 minutes for each visit. The fee also includes a wellness panel with blood work.

Two weeks ago, Samuel opened the clinic to cater to those who don’t have insurance after researching the growing trend of concierge medicine in larger cities. By eliminating the cost of billing insurance companies, Samuel can cut overhead expenses up to 40 percent and transfer the savings to her patients.
A growing number of doctors are going the concierge route due to what some call a costly amount of insurance regulations and red tape in Obamacare. Samuel said cutting out the middleman allows her to focus more on her patients.

2. Oklahoma Doctor Making a Run Around Obamacare (as reported by

About a year before the birth of Obamacare, Dr. Keith Smith, director of the Surgery Center of Oklahoma, posted all the prices for his center’s surgeries online. Today, he’s in expansion mode, looking to build two more operating rooms. His fastest-growing group of patients? Obamacare enrollees.

Though armed with Obamacare health insurance plans, the patients are saddled with high deductibles. Looking for alternatives, some of them fly from around the country to the Surgery Center of Oklahoma, where the cost of care and travel together amounts to less than their deductibles under their Affordable Care Act plans.

The Surgery Center of Oklahoma is a physician-owned operation that does not take Medicare or Medicaid and only selectively works with private insurance plans. Patients pay in cash or with cashier’s checks.

“Even if someone has this (Obamacare) insurance card in their pocket, they are soon going to find out that it’s worthless,” Smith said, citing both higher prices and doctor shortages under Obamacare. “Coverage doesn’t mean care.” As proof, he points to the fact that among his first waves of patients to the center were Canadians, who though covered under their country’s socialized health care system, found themselves in the back of a long line of patients in desperate need of care.

Smith and others argue Obamacare is moving America even farther away from the real solution to its health care woes. What’s needed, they say, is a free-market model in which Americans are not just patients, but health care consumers.

MP: Look for more of these types of market-based health care solutions as patients look for alternatives to government-managed Obamacare.

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Markets in everything: Uber will now deliver your lunch Tue, 26 Aug 2014 23:17:26 +0000 read more >]]> Following several other recent innovative additions to the services offered by the ride-sharing, taxi-alternative leader Uber (UberPool that allows customers to share a ride and split the cost, Uber for Business that allows employees who use Uber to bill their trips directly to their company and UberFamily — a car seat option for parents on the go), it now uses its fleet of cars and drivers to deliver food with its new UberFresh service.

Here are more details from

The service starts today, and, as advertised, you’ll swipe to the “UberFresh” section of your Uber app and a driver will bring you lunch. No, you don’t get in the car and go somewhere; think of it like app-based food delivery. For the service’s initial launch, your lunch options are limited to a single item per day (there’s a menu on Uber’s site right here). Admittedly, the options for the first week look pretty delicious, and the Yelp rankings for each restaurant back up Uber’s choices as at least somewhat legit.

MP: What’s next from Uber? Who knows, but it certainly won’t be a service that any taxi cartel has thought to offer, and will be another reason that Uber represents the future of innovative transportation services, while traditional taxi cartels might soon be relics of a past era when the interests of producers were more important than the interest of consumers.

HT: Hitssquad

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Who-d a-thunk it? Total tax costs in Canada are 46.4% lower than in the US, and Burger King wants to move there? Mon, 25 Aug 2014 17:30:39 +0000 read more >]]> taxtableIn a post titled at Business Insider (“Canada Has The Most Business-Friendly Tax Policy In The World“) Myles Udland points to a recent KMPG special tax report “Competitive Alternatives” that measures the Total Tax Index for the ten countries in the table above. KMPG’s Total Tax Index measures all taxes levied on corporations including income taxes, property taxes, capital taxes, sales taxes, miscellaneous local business taxes, and statutory labor costs (statutory plan costs and other payroll-based taxes). According to KMPG:

Among the countries studied, Canada has the lowest Total Tax Index (TTI) at 53.6. In other words, total tax costs in Canada are 46.4 percent lower than in the United States, which has a TTI of 100.0 and represents the benchmark against which all locations are scored.

Should it be any surprise then that Canada may be the new home of Burger King? From the New York Times:

The restaurant operator said on Sunday that it was in talks to buy Tim Hortons, the Canadian doughnut-and-coffee chain, in a potential deal that would create one of the world’s biggest fast-food businesses.

If completed, the deal would mean Burger King’s corporate headquarters would move to Canada, raising the specter of yet another American company switching its national citizenship to lower its tax bill.

HT: Bill Greenway

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