Marginal Utility

by Ken Houghton

I'm traveling Nostalgia Lanes recently, between cleaning out files and documents and some strange links in my e-mail. So let's Go to the Movies!

Robert Redford's Lions for Lambs averaged $3,025 per theater on its opening weekend in 2007.

Instapundit was loud and clear, twice, once directly:

"Lions for Lambs' Could Lose $25 Million." One can only hope.

and once while pillorying Redacted:

Lions for Lambs isn't exactly raking it in, either.

(I personally prefer this Google Advanced Search link, where the professor opened the week by wondering "IS THE DOLLAR TOO LOW? Or is the Euro too high?" linking to someone in the Torygraph who bemoans:

The die is now cast. As the euro brushes $1.50 against the dollar, it is already too late to stop the eurozone hurtling into a full-fledged economic and political crisis.

13+% later, we're still waiting for that European crisis.)

Now, Expelled, the selfmockumentary starring Ben Stein, opened wide and grossed $2,824 per theater opening weekend (nearly 7% less).

So what did we get?

I HAVEN'T SEEN BEN STEIN'S EXPELLED, and I regard "Intelligent Design" theory as pernicious twaddle. But it's interesting to see Stein clobbering Morgan Spurlock in box office. At any rate, according to the comments, at least, there's more to the film than I.D. twaddle.

Insty links,of course, to the Liberty Film people, who in turn link to a site that simply lies outright:

One notable success has been the intelligent design documentary Expelled: No Intelligence Allowed, featuring Ben Stein. Released on a little over 1,000 screens by the small Christian-based Rocky Mountain Pictures, the film picked up another $1.03 million on Saturday, and it will finish the weekend with just under $3 million. Not bad for a movie shot on a shoestring, released by a virtually unknown distributor and promoted very lightly.

Give you a hint: if you release on over 1,000 screens, you didn't "promote very lightly." Unless you bribed a lot of theater owners.

Labels: intelligent design, movies, PortfolioMarketMovers

by Ken Houghton

Consider this the counterpoint to yesterday's "they played without me" post.

Every once in a while, there is a statement that is so egregiously offensively wrong that it demands a blogspot. But, since after today I have something in common with Barkley Rosser's eldest daughter, I'm buried.

Fortunately, Felix came through with bells on.*

The statement, by the way, is:

Some argue that adjustable rate mortgage (ARM) originations fueled the bubble. Yet the ARM's share of total originations is a very weak forecaster of home prices, implying ARMs, although a source of cheap financing, are not a determinant of home prices. If ARMs were not available from 2001 to 2004, home purchases presumably would have been financed with long term debt, which was also very affordable.

You can guess the source.

*The only thing he leaves out is that Alan Greenspan himself encouraged people to take out ARMs, just as he started tightening. Of course, as with Himself being 100% in bonds (at his age) in 1996, just before he started loosening, this is purely coincident.

Labels: Housing Bubble, mortgage, Personal Finance Advice of Alan Greenspan, PortfolioMarketMovers

by Tom Bozzo

Apropos of (almost) nothing, Felix Salmon expresses some hope that President Obama will end the federal income tax deduction for state and local taxes, suggesting that as a policy matter, the deduction "really makes no sense" and making a progressive's case that — like itemized deductions generally — the benefits largely accrue to the well-to-do.

Now, the CBO study that Felix cites was commissioned by the "ranking member of the Senate budget committee," a.k.a. Sen. Judd Gregg, Republican of New Hampshire. Could he be a closet progressive tax-raiser? In late '04, we found Jonathan Weisman of the Washington Post reading the 2003 Economic Report of the President. It turns out that there's a political agenda to this tax policy change:

Then comes the Washington Post's Jonathan Weisman with the answer:

In crafting a broad [tax reform] agenda for his second term, Bush is trying to adhere strictly to economic theory...

In a speech... at the American Enterprise Institute, N. Gregory Mankiw, chairman of the White House Council of Economic Advisers, spoke repeatedly of "standard economic theory," "textbook economic theory" and "scholarly literature in economics" to bolster his arguments.

Well, that makes me feel a lot better. I won't be screwed as a payoff to even fatter cats, but simply as a matter of inexorable economic logic. Notes Weisman:

In the February 2003 Economic Report of the President, the White House held that the deductibility of state and local taxes -- especially property taxes -- "lowers the price of local public services" and unfairly favors local government services over privately provided services. [emphasis added and changed from the 2004 post]

And here's what I had to say about that:

It's true enough that the tax deduction for property taxes insulates me from the full brunt of my $7,690 property tax bill [those were the days!] in an amount determined by my marginal federal income tax rate. So I'll demand more services from the city than I would in the absence of deductibility because part of my would-be cost is effectively pushed off onto the upper-income Federal taxpayer. (Which is to say, I'm subsidizing my own consumption of local government services. I shall write myself an indignant letter.)

...[T]he ERP logic begs the question of whether it makes any sense to raise the price of local services. An almost equally well-known result of "standard economic theory" is that private interests will underprovide collective goods (law enforcement, for instance). For public services that are not quite pure collective goods, the question is whether we are actually over-consuming anything such that we should get a price signal to use less. For instance, given that roughly half of the Madison tax bill goes to the school district, is there really a problem that Madison's schoolchildren are getting "too much" primary and secondary education? Of course, since the quality and quantity of public services helps support Madison's high property values, there's some tradeoff between the size of our tax bills and our property wealth.

For another, the idea that it's "unfair" to support local provision of public services over private services -- which private firms may or may not deign to provide -- is a matter of religion and not economic theory... Does living on a 5,500-sq. ft. urban lot, without so much as an indoor parking space... and thus relying on the nearby public parks to burn off excess toddler energy, create a material unfair burden on Rainbow Play Systems, compared to the alternative of needing to provide my own "park" on a one-acre lot out in [exurban] Cardinal Point Estates? If your answer leans to the affirmative, please account for the cost of the non-private provision of the roads between the 'burbs and the rest of the world and re-answer.

The CBO raises a related issue of the extent to which there are regional or national spillovers for local expenditures:

• Whether the deduction is an efficient use of federal resources depends on the nature of the benefits from any services at the state and local level that it subsidizes.
  • To the extent that state and local taxes are payments by residents of those jurisdictions for services that they themselves receive from their state and local governments, the rationale for a federal subsidy is weak.
  • In contrast, if state and local taxes pay for services that have spillover benefits that are regional or national in nature, then a federal subsidy may be desirable to ensure that an adequate volume of such services is produced.

State and local taxes mostly pay for a few big things: public K-12 and higher education, transportation, health and welfare services, public safety, and community development. While the CBO director doesn't make the judgment, it should be obvious enough that the major expenditures have material "spillover benefits" and so the standard public goods argument for subsidy applies.

It's also perhaps worth remembering that, while its effect isn't included in the CBO calculations, lower-income taxpayers get an implicit state-and-local tax deduction via the federal standard deduction. I don't mean to say pity the poor upper-middle class, though. Rather, a proper "reform" would ideally address the entirety of the issue, which the deduction for itemizers isn't. To give Felix his due, I don't dispute the possibility that the tax system could be improved by applying generally lower rates to broader income. But a truly equitable, and socially efficient, solution would not only have to address the tax policy side of the issue, but also the local spending side — via, for instance, direct federal subsidies to replace the implicit subsidies from the current-law income tax. And good luck getting cloture on that.

Labels: Economics, PortfolioMarketMovers, Tax Incentives

by Ken Houghton

Felix Salmon delivers the death blow:

[M]aybe Mankiw is sophisticated enough to cope with such income volatility, unlike those poor people on food stamps.

Labels: Economics, PortfolioMarketMovers

by Ken Houghton

Ignoring that our luggage was lost and my IRS interview tonight may have to be done in tennis shoes and two-days-worn clothing...

1. Ed Glaeser (having presented what seems to have been a fascinating paper) responding to the question "Why didn't you include the current Iraq war in your discussion?" by noting that he stopped with Vietnam because "we have the LBJ tapes as evidence." And noting the point to which many of us return: It's possible that this entire cf is because GWB believes Saddam Hussein really did try to kill his father.
   
   
2. Dani Rodrik (following a presentation by William Easterly) by declaring that his presentation should be though of as "Easterly on Prozac"—and then proving it by attempting to embed YouTube clips into his presentation.*

More on the Rodrik presentation later.


He was sadly unsuccessful. I encourage everyone to go over to his blog and ask him to post the links. And while you're there, read this post, which dovetails nicely with that presentation. UPDATE: Dani Rodrik has posted those links, and summarized his presentation here.

UPDATE 2:Felix Salmon piles on, as it were, adding a clip via Infectious Greed to the mix.

Labels: Dani Rodrik, Economic Development, Economics, Iraq, PortfolioMarketMovers

by Ken Houghton

Why I Don't Read Mankiw's blog any more.

With the lack of comments, Mankiw has become a clipping service. And the problem is that he's not a good one. For instance, why read Mankiw citing Ruth Marcus (offered without comment and no comments) when one can read Thoma, DeLong, Baker, or Krugman, all of whom actually look at and discuss the evidence? Why read Mankiw on NPR's sock story, when Felix Salmon destroys the same?

Keith Hennessey may have told Mankiw to "start a blog," but he should have told him not to use Instapundit as his template. (Exception noted.)

Labels: Brad DeLong, Economists View, PortfolioMarketMovers

by Ken Houghton

While Felix and Yves are rising to something resembling a defense, the Sainted Bess at dealbreaker, FT alphaville, and minyanville treat the WSJ's rehash of James E. Cayne's sins today.

The winner hands down is Minyanville, which produces enhanced graphics as well:

Labels: Naked Capitalism, PortfolioMarketMovers, The Old Firm, WSJ