PA in the WSJ

This is a list of articles regarding Pennsylvania in this week's Wall Street Journal. Chances are I missed something, but these are the articles that caught my eye.

It should be noted that I routinely do not read the editorials in the WSJ. So any discussions of the state, its elected officials, businesses, or citizens, in editorials will not be mentioned here.


PA Politicians

The only mentions I saw were of last month's presidential primary, all in passing, and I didn't include those.

PA Businesses

"Pay gap fuels worker woes," by Carol Hymowitz (4/28) quotes Peter Cattelli of the Wharton School and cites Analytical Graphics of Exton as a example of compensation and bonuses tied to performance targets.

The Matrix Laboratories division of Mylan, Inc. of Canonsburg are mentioned in "Clinton foundation, Unitaid strike deals on price cuts for AIDS drugs," by Marilyn Chase (4/29)

Hershey mentioned in "More sweet deals in the candy aisle?" by Julie Jargon and Aaron O. Patrick (4/29). On the same day Hershey is mentioned in "Mars's takeover of Wrigley creates global powerhouse," by Janet Adamy, Matthew Karnitschnig and Julie Jargon. Trivia: M&Ms introduced in 1941.

The Comcast tower is described in "Comcast's surprise," by Vishesh Kumar, Kris Hudson, and Jonathan Karp (4/30). Comcast again in "Comcast's phone, web gains salve TV woes," by Shira Ovide (5/02)

Other PA

Abington Memorial Hospital, Jefferson Medical College, and Albert Einstein Healthcare Network, all in the Philadelphia area, are mentioned and officials from there are quoted in "As doctors get a life, strains show," by Jacob Goldstein (4/29)

The American Lung Association has named Pittsburgh as the country's sootiest city, see "U.S. Watch," (5/02)

Carnegie Mellon professor Randy Pausch is the subject of "A final farewell," by Jeffrey Zaslow (5/03)

Jebby Potter, some time resident of Sewickley is profiled in "Profiles in retirement," by Kristi Essick (5/03).

Other Interesting Tidbits

A distressing trend is highlighted in "Hospitals demand cash upfront from patients," by Barbara Martinez (4/28):

Hospitals are adopting a policy to improve their finances: making medical care contingent on upfront payments. Typically, hospitals have billed people after they receive care. But now, pointing to their burgeoning bad-debt and charity-care costs, hospitals are asking patients for money before they get treated.

Take note, Gov. Rendell, "Utilities, plug-in cars: near collision?" by Rebecca Smith (5/02) discusses the role of smart meters in electrical use.

Striking out (by Russell Roberts)

Sometimes I get depressed about the quality of statistical work in economics. Then I read something from another social science. Here is a recent study where psychologists find that having the initial "K" increases your chance of striking out when playing professional baseball. Why? Well, it's obvious isn't it? The letter "K" is used when keeping score in baseball to represent striking out. So it's obvious now isn't it? Still don't get it? Neither do I. But hey, it's in the data. Between 1913 and 2006, players with first or last initial "K" struck out 18.8% of the time compared to 17.2% for the fortunate players unhandicapped by their initials. Here is the "explanation" of the authors:

Despite a universal desire to avoid striking out, K-initialed players strike out more often.  For those players, we argue that the explicitly negative performance outcome may feel implicitly  positive. Even Karl "Koley" Kolseth would find a strikeout aversive, but on the whole, he might  find it a little less aversive than players who do not share his initials, and avoid it less  enthusiastically.

But why? Why would having the initial "K" make striking out more pleasant? I just don't get it. The authors go on to "test" their theory by looking at grades of a sample of MBA students:

The MBA students in our sample are well aware of a direct connection between academic  performance and successful job placement. Nevertheless, despite the pervasive desire to achieve  high grades, students with an unconsciously-driven fondness for C's and D's were slightly less  successful at achieving their conscious goal.

That is, Charles Darwin received poorer grades than Alan Alda. But it turns out that Alan Alda didn't do better than the non-ABCD initialed:

Interestingly, A- or B-initialed students did not perform better than students whose  initials were grade-irrelevant. There are two possible explanations for this. First, students with  grade-irrelevant initials may already be maximally motivated to succeed. Second, because  performance is determined by motivation and ability, any increased motivation to succeed that  arises from having initials that match positive performance outcomes may not necessarily  translate into increased performance.

There is, of course, a third explanation: there is no real relationship and the authors have been fooled by randomness. Yes, their results are statistically significant. But how many relationships did they explore before finding the ones that were statistically significant. And ho many relationships are there to explore? To really test the theory, you'd have to look at baseball players with the initial "E" and see if they commit more errors than others. You'd have to look at guards in the NBA to see if those with initials "A" have more assists. Centers whose initials include an "R" should be better rebounders. You'd have to look and see whether students with the initials IC were more likely to take an "incomplete" in a class.

I guess Rabbi Jonathan Sacks, the Chief Rabbi of England should have been a football player. Or maybe he just gets fired more often than the average Briton because it doesn't bother him as much as someone with a different last name.

Did Kafka know baseball scoring? Does this explain why he found success in life so difficult? Is this why he named a character "K"?

Do players whose initials are a backwards "K" strike out looking more than the average?

Iraq and Germany (by Russell Roberts)

As the aftermath of the Iraq war continues to be chaotic, there is a tendency to hope that this is just a passing phase and that time and action, such as the surge, will lead to better outcomes in the future. This article by David Stafford in the Washington Post, looks at the parallels between post-war Iraq and post-World War II Germany. In both cases, there was looting, anarchy, and disappointment at the pace of progress. There was also a political struggle over how to deal with those who had been involved in an evil government before the war.

But as Chris Coyne points out in this week's EconTalk (and as Stafford mentions briefly in his article), there are crucial differences between Germany and Iraq. And between Iraq and Japan, the other successful result of US attempts to export democracy after war. Coyne also examines numerous other failures of US efforts to export democracy--Cuba, Somalia, and Haiti, just to name three, that failed miserably because the basic institutional infrastructure for democracy could not be created from scratch.

Coyne argues that most interventions hoping to create democracy don't just fail, they make things worse. He argues for non-intervention and free trade as the best hope of helping people living under miserable conditions.

The Pessimistic Bias (by Don Boudreaux)

Reading the comments on this post (which in many ways are very much like the comments on many other posts, both here at the Cafe and on other blogs) prompts me to make a couple of points that I've put off making for too long now.

In his indispensable book, The Myth of the Rational Voter, my GMU colleague (and EconLog's) Bryan Caplan finds powerful evidence that non-economists suffer from the "pessimistic bias," which Bryan defines (on page 45 of his book) as

a tendency to overestimate the severity of economic problems and underestimate the (recent) past, present, and future performance of the economy.

Russ and myself (because we're economists?) and many of the commentors here at the Cafe are not pessimistic about the long-run.  Problems come; problems are solved.  Inability to see the details of the future scare many people; this inability doesn't scare me.  As long as individuals have a sufficient quantum of freedom, their self-interest and creativity and inevitable competition will "solve" almost any problem over the long-haul.  It's a pattern repeated countless times over the past two-hundred years in capitalist countries.  (Please, please don't trot out the Great Depression as a counter-example.  First, it was clearly worsened by the Federal Reserve's catastrophically bad monetary policy, and by the worldwide spread of protectionism -- helped along by the Smoot-Hawley tariff.  More importantly, there's compelling evidence that the risks of full-throttle socialization of the economy were then real enough to scare investors away until the mid-1940s.  And even this greatest of all of America's depressions lasted only ten or fifteen years, depending on how you define the end of the Depression.)

Being optimistic doesn't mean being blindly insistent that the future will always be better than today.  Take away enough freedom and, kaboom!, the economy implodes.  (Or should I instead say "moobak!"?)  Fortunately, though, the capitalist economy is so remarkably robust that it can take lots of beatings -- lots of interventions -- lots of unnecessary taxation -- lots of foolish dissing -- and keep on keeping on at raising living standards.

I'm more optimistic today than I was ten or twenty years ago about just how much counterproductive regulation and taxation the capitalist economy can take before it really starts to fail.  But my sense is that the American economy still retains enough freedom -- that property rights remain sufficiently secure -- to ensure continued economic growth over the long run.

I remain bullish over the long run.  Very bullish indeed.
....
My second point is that it is a curious phenomenon that those who want more government control over the economy tend to be those who insist that the American economy has performed poorly over the past thirty-five years.  Again, as regular patrons of the Cafe know, Russ and I are quite sure that the economy has done very well during these years, even for poor and middle-class workers.

But if I were a pro-regulation and high-tax kinda guy, why would I dispute the claim that America's economy has performed remarkably well for everyone even since 1973?  Why would I not say "See, the government programs enacted from the New Deal forward are working!"  At no time during the past 35 years has Uncle Sam's budget been severely reduced.  During those years, some welfare programs have been scaled back, while others have been expanded and even newly created.  Trade is freer today, but the post-WWII trend toward freer trade began in the 1940s, long before those allegedly blissful years of the early 1970s.  Since the early 1970s, some regulations have been repealed, while others have been created at both the state and national levels. 

In short, despite what some pundits mysteriously assert, America during the past twenty-five to thirty-five years has emphatically not been a laissez-faire society.  Not even close.  So why do so many persons on the political left see in the economic data of the past three decades a compelling case for even greater government control over our lives and pocketbooks?  And why don't more of these same persons on the left respond to those of us who advocate less government by pointing to the evidence of continued and widespread growth in prosperity by saying proudly "See!  We're right and you're wrong: government intervention does work well!"

I believe that I know the answer to my (non-rhetorical) question, but this post is long enough, so I'll end it here.

Unintended Lesson (by Russell Roberts)

Last night, Hillary Clinton was on the Tonight Show and she gave a phenomenal example of the power of economics. Unfortunately, she did not appear to understand the example. At the 3:23 mark of this video, she tells a story (HT: Jim Colburn):

I was in Indianapolis the other day and I was shaking hands after I spoke. And there was this young boy about eleven years old and he's trying to tell me something—you know the crowd was yelling—so I leaned over and he said, "You know, my mom makes minimum wage and even though it went up, her hours were cut. So we're not making any more money. Can you help her?" You know,  when somebody says something like that to you, it really does kind of energize me.  I think, yeah, I can, I'm going to really try to help you, because this is wrong. And everywhere I go I hear stories like that about veterans who don't get health care, about people, who are, you know,  losing their jobs, and I think we can do so much better. So for me it's just get up every day and  fight on because this country's worth fighting for.

She then launched into a litany of economic disaster ("we're borrowing money from the Chinese to pay for oil from the Saudis") and finished up talking about the "deteriorating middle class."

I don't believe the story. What eleven year-old boy whispers into the ear of a big shot the details of his mother's wage/hours mix? And I like how she had to lean over--no one--not even Bill Richardson or Sinbad--can contradict her.

But let's give Hillary the benefit of the doubt. Suppose the story really did happen. She clearly thinks the story is emblematic of something important that needs to get fixed. What is it? Just when you help someone by passing a minimum wage, greedy employers ruin everything by lowering the hours. Well, we need to "fight" and fix that, too.

I wish Jay Leno had pointed out that the cut in hours was the result of passing the minimum wage--that it was as inevitable as gravity. I wish he'd said that the story showed how the minimum wage is a false promise of prosperity. I wish he'd pointed out that fighting isn't enough, caring isn't enough, that prosperity can't be legislated any more than self-interest can be made illegal. I wish Jay Leno had said that when you find yourself in a hole, the first thing to do is to stop digging.

And if that little boy really exists, I'd like to tell him that a Senator fighting for you is a losing proposition. You have to fight for yourself. If your Mom wants more money, she needs to go back to school or work a second job. And as for you, stay in school. It's the best way to avoid earning the minimum wage.

Falling Housing Prices and Labor Mobility (by Don Boudreaux)

Do falling home prices distort the labor market, as Louis Uchitelle argues in today's New York Times?  That is, are workers really generally unwilling to sell their homes -- because home prices have fallen -- even if failure to do so keeps these workers from moving to locations where employment prospects are brighter?  My initial instinct is to doubt the severity of this problem -- as this first of two letters that I sent today to the NYT explains:

Louis Uchitelle reports that falling home prices keep workers stuck in their homes, unwilling to sell and, hence, unwilling to move in order to take better jobs in different locations ("Unsold Homes Tie Down Would-Be Transplants," April 3).  Perhaps; but I have my doubts.

While it's true that people prefer to sell their homes at high prices, it's also true that people prefer to buy their homes at low prices.  So why should people's disappointment at being unable to sell their homes at prices as high as they once thought possible not be offset by their happiness at being able to buy new homes at prices lower than they once thought possible?

But my respect for many of the findings of behavioral economists is sufficiently high to cause me to grant the possibility that this phenomenon is real.  The endowment effect and loss-aversion might well make workers unusually resistant to sell their homes at prices lower than they've become accustomed to suppose that they could fetch for their homes.  So perhaps the phenomenon identified by Uchitelle is real.

When I sent the above letter to my list of letter-recipients that I keep, I prefaced the letter with the following remark:

Even if this phenomenon is real (perhaps it's one of the anomalies identified by behavioral economics), what does it say about the prosperity of America's workers if such considerations stymie their willingness to move in order to get better jobs?

A few minutes after I sent this letter to my list, NYT science writer John Tierney wrote me back expressing his agreement with this prefatory comment.  John's e-mail prompted me to write and send this second letter:

Louis Uchitelle reports that falling home prices keep workers stuck in their homes, unwilling to sell and, hence, unwilling to move in order to take jobs in different locations ("Unsold Homes Tie Down Would-Be Transplants," April 3).

But far from being evidence in support of your incessantly expressed belief that American workers today are in desperate shape economically, this phenomenon instead suggests that American workers are doing very well indeed.  Persons in miserable economic straits would not allow loss-aversion on their real-estate holdings to prevent them from taking better jobs.

Sincerely,
Donald J. Boudreaux

Making Americans Poorer (by Don Boudreaux)

"Clinton Proposes Plan to Make Firms Inefficient" would have been a more accurate headline to this report at Newsweek.com.  I sent this letter in response:

Courting blue-collar votes, Hillary Clinton promises to use "tax incentives to persuade companies to 'insource' jobs in the United States" ("Clinton proposes plan to keep jobs in US," April 2).  Because firms 'outsource' jobs only when doing so lowers firms' costs of production, Mrs. Clinton's proposal amounts to bribing American firms not to lower production costs whenever possible.  She wants to encourage American firms to produce inefficiently, which is to say wastefully.  In short, she wants us to be poorer than we would otherwise be.

Mrs. Clinton's proposal is further evidence that good politics typically is bad economics.

Sincerely,
Donald J. Boudreaux

I [Heart] America's Trade Deficit! (by Don Boudreaux)

In his brilliant book, The Myth of the Rational Voter, my colleague (and EconLog's) Bryan Caplan identifies the "anti-foreign bias" as a major impediment to economic enlightenment.  That bias is real and ubiquitous -- see, for example, this recent essay by Peter Morici at Forbes.com.

I sent the following letter in response to Mr. Morici's essay:

Peter Morici unloads a riotous barrage of accusations against free trade: Free trade caused, among other misfortunes, the collapse of the market for adjustable-rate mortgages, excessively high CEO compensation, inflationary monetary policy, and Uncle Sam's inexcusable bailout of Bear Stearns ("It's Time To Cut The Trade Deficit," March 26).  Mr. Morici, however, doesn't explain how allowing consumers to take advantage of bargains from abroad caused these calamities.  He simply assumes it to be self-evident that America's growing trade deficit proves that free trade triggers countless system-wide maladies.

Alas, Mr. Morici doesn't know what he's talking about.  America's trade deficit represents capital flowing into the U.S.  True, some of this inflow finances Uncle Sam's Eliot-Spitzer-party-like spending.  But that spending is caused by reckless politicians, not consumers.  Nearly all the rest of the trade deficit represents positive investments in America - investments that not only signal continued investor confidence in the U.S. economy but, more importantly, investments that finance R&D, product development, worker training, new firms, factory modernization, and other activities that promote economic growth.  Does Mr. Morici really think that such investments harm Americans?

Sincerely,
Donald J. Boudreaux

Nothing Unbalanced About So-called "Trade Deficits" (by Don Boudreaux)

In this recent Wall Street Journal op-ed, Dartmouth economist Matthew Slaughter describes some of the benefits of foreign direct investment (FDI).  Here's an important part of his essay:

Foreign direct investment (FDI) has long been a source of strength for the American economy. In 2005, insourcing companies employed nearly 5.1 million Americans, 4.4% of the private-sector labor force. Beyond their employment, insourcing companies perform large amounts of the crucial activities that make their workers and the overall economy more productive. They invest in physical capital and in research and development, and they help connect the U.S. to the global economy through international trade. The bottom line is larger paychecks. In 2005, compensation per worker at insourcing companies was $66,042 -- 31.8% above the average for the rest of the private sector of $50,124.

I do, though, pick one (admittedly small) nit with Mr. Slaughter's exposition, as I explain in this letter that I sent to the WSJ:

Bravo for Matthew Slaughter's outstanding explanation of the pattern and enormous benefits of foreign direct investment (FDI) in the United States ("What Tata Tells Us," March 27).

I've one nit to pick: Mr. Slaughter incautiously aids and comforts protectionists when he writes that FDI today is driven by "the evolving pattern of global imbalances." While incoming FDI does indeed increase America's current-account deficit and many other countries' current-account surpluses, there's nothing unbalanced - either in the sense of being unsustainable or of being harmful - about America's attractiveness to investors, or about foreigners being especially keen to invest their dollars in the U.S. rather than spend these dollars on American-produced goods and services.  Indeed, as Mr. Slaughter ably explains, such actions by foreigners are a great boon to foreigners and Americans alike.

Sincerely,
Donald J. Boudreaux