A small number of colleges have become much more competitive over recent decades, according to Caroline M. Hoxby, an economist at Stanford University. But her study -- published by the National Bureau of Economic Research -- finds that as many as half of colleges have become substantially less competitive over time.

I am not sure that I buy Hoxby's explanation for the phenomenon, which is that high school graduates nowadays are willing to travel farther to go to college. I suspect that high school graduates nowadays are the product of assortive mating, and college has become the ultimate status good for their parents. Affluent parents want their children to attend the colleges that the children of other affluent parents attend. This creates a highly skewed equilibrium.

Think of Harvard as like the Yankees. Enough money to buy whatever it needs to be a contender every year. Think of the typical college as like the Orioles or the Blue Jays. If they are fortunate, they can groom a few stars, but they will have too many weaknesses to be able to compete with the Yankees. Harvard's advantages are actually more durable than the Yankees'. One can imagine the O's or the Jays winning it all one of these years. Not so with Rutgers or George Mason.

By the way, in this metaphor, the analogue to Sabathia and Teixeira is not necessarily the faculty (even though you probably think this song is about you). I am thinking more about students. Steinbrenner U has a much larger share of outstanding students than outstanding faculty. If you have a Ph.D and want an academic position where you can encounter highly intelligent colleagues, you can go to any of at least three hundred institutions. But if you want to teach high-ability undergraduates, do not sink below the 40 most selective institutions. And if you want high-potential graduate students, do not sink below the top 10 graduate schools in your field.

I wrote most of the book between 1998 and 2001 and, for the passage about Karen, went from memory. But a year ago, while cleaning out stuff in my home office, I found a diary I kept occasionally about Karen when she was younger. I had written this passage on November 29, 1989, when my memory of what had happened earlier that month was much fresher. Here it is:

On Friday morning, November 10, I came into Karen's room while Rena [my wife] was waking her up and told her [Rena] all excitedly about the Berlin Wall coming down.

A couple of days later, when the new Newsweek came out with a cover story on the Wall, I decided to try to explain to her [Karen] what was going on. It was one of those significant events I really wanted her to understand, and I thought I could do so without prejudicing her but simply by telling her the facts.

I told her that the Wall was built to prevent people from leaving a certain area and that it was built when I was a young kid. If people tried to climb over it without permission, I told her, the men who built it shot them and tried to kill them. "That's not nice," said Karen. "That's rude."

But, I told her, the people who built it decided that it was wrong to stop people from leaving. And now I'm excited, I said, because they can leave. Then I showed my excitement. I said, "Now they can do things that they've always wanted to do like, like . . ." "Go to Disneyland!" said Karen. "That's right," I said. "And they can go to stores and buy neat things they haven't been able to buy like . . ." "Candy!" shouted Karen excitedly. "That's right!" I said. "Oh, boy!" [My notes don't make clear who said "Oh, boy!"] We got all excited together.

I think the two things she focused on are things that the Berliners really would think of first. (The media reported a few days later that the candy shops in West Berlin had sold out.) And by putting it in her terms, Karen understood a lot of the excitement and importance of the event.

I'm scheduling this post to appear on Saturday, when the article itself is scheduled to appear. I hope that the link is correct.

I think it will particularly interest those of you who have been following my arguments in favor of competitive government and against democracy. The book spells out those arguments and proposes ways to shift more decisions on "public goods" to markets.

I would say that resignation explains the paradox of Singapore's political economy. Even the supposedly "rebellious" SDP are more or less jogging on the spot. Opposition politics is a broken record in a Singapore. This actually shows the Opposition Parties' lack of energy in vision.

People, we only have ourselves to blame for the current situation.

Why get upset and work out over an article. We should not blame the writer but 66 pct of Singaporean that make it happened.

Most readers, however, were not happy campers.  One common complaint is that I am just repeating the propaganda of the civil servants I met:

Through his own admission, his views were mainly based upon the inputs given to him by the 80% of his time spent with top civil servants. These civil servants, as Singaporeans know, are either secret PAP members, pro-PAP, pro-government (which cannot be otherwise because they are working for the govt and their paymaster is the govt), pro-establishment, under bondage, relatives of those PAP members in power, or beholden one way or another to at least one of the people in power, or a by character balls-carriers and sycophants. Most important of all, these civil servants have not experience the sufferings and problems Singaporean commoners and opposition politicians have been suffering.

My response:

1. While I did spent a lot of time talking to civil servants, they were happy to distinguish between their own views and the broader public's.  When I tested their claims against the available Singaporean public opinion data, they held up.  The data show that that Singaporean "commoners" are very satisfied, not "suffering."

[T]he PAP has created a thought-control system that Goebbels would be proud of. By controlling the media and most forms of input, the PAP can shape the thoughts of the young. This is manifested through simple things like singing national day songs, equating Singapore with the PAP and the muzzling of dissenting views.

A Singaporean's sole loyalty is to himself. So, he votes for the party that he thinks can secure his personal survival and prosperity. He has no regard for what is good for his neighbor or for his country.

1.) GRC system (number 1 offender), gerrymandering and last minute redrawing of boundaries, very few days given for political rallies and host of minor things that is detrimental to opposition getting votes.

True, but in many other countries, far more severe electoral disadvantages fail to keep the opposition from winning elections.  What's different about Singapore?

2.) Total control of Mass Media, such that PAP is always portrayed positively and opposition portrayed negatively.

If the Mass Media is so biased and out of touch, why don't Singaporeans just switch to the web?

3.) Control of many companies providing essential services. Being the largest employer means voters working for the government and PAP will hesitate to rock their rice bowl.

Fair enough.  But if these companies are ripping off the rest of Singapore to buy their workers' votes, why don't the victims prefer the opposition?

4.) Intimidation of opposition and supporters, using ISA laws to unfairly detain people of credibility, making them migrate or a fugitive of the law. If ISA is not used, then other things like tax evasion or defamation will be used.

True, but see my reply to #1.

5.) The use of fear. By putting numbers on voting slip, some who wants to vote for opposition are afraid to do so for fear that it would be tracked and they will suffer consequences for it. Also scaring voters to think that if PAP is no longer government, Armageddon will happen the next day or if their constituency is managed by opposition, it will become slums.

However, as you know, I prefer to think of money as designed top down, to serve the needs of government.

But shouldn't what you "prefer to think" count for literally zero? What if I prefer to think that taxation has no deadweight loss and that the government will spend our money more efficiently than we would? Shouldn't people object that my preferences about x have nothing to do with what's true about x?

A better way to pursue truth on an historical issue is to check the history.

Economists generally take for granted, if only tacitly, a teleological view of money's historical development, according to which it first takes the "primitive" form of mundane commodities such as cowrie shells and cacao seeds, and then advances through various stages, culminating in the national fiat monies most economies rely upon today.

Money, Markets, and Sovereignty offers a spirited rebuttal to this naively "whiggish" perspective. Instead, its authors -- Benn Steil and Manuel Hinds, senior and former fellows, respectively, of the Council on Foreign Relations -- argue that the principal effect of national monies consists, not in their contribution to economic prosperity, but in their capacity to assist national governments in their efforts "to extract wealth from their population and to exercise political control over them."

Evidently, there is some overlap between my views and the views of the book that Selgin is reviewing. Thanks to Don Boudreaux for the pointer.

Here (or perhaps you should start here), he talks about stories. It is classic Tyler, playing cat and mouse games with your head. Basically, he is saying that stories have an advantage in that they serve as a filter for viewing the world, making them very economical in terms of memory and understanding. However, they have a disadvantage in that they serve as a filter for viewing the world, which means that they filter out information that might help us see reality with fewer biases. But watch it yourself. It's funny and insightful, and well worth your time.

On a completely different note, also worth your time is Steven Randy Waldman's account of a meeting between bloggers and Treasury officials.

Tyler is a master at synthesizing diverse strands. At a certain point, he took control of the meeting, and teased out what was common to our often conflicting comments -- skepticism that unsustainable aspects of the financial system that preceded the crisis were actually being changed, a sense that problems were being papered over or accommodated rather than solved.

Our view is best expressed by Baseline Scenario's Simon Johnson and James Kwak, who apparently were not at the meeting in person although were likely represented in spirit. That is, regardless of the intentions of regulators, when financial institutions are large, they become politically powerful. It is a variation on the cliche that if you owe the bank one dollar, the bank controls you, but if you owe the bank a million dollars, you control the bank. Small institutions can be controlled by regulators. With large institutions, the control shifts in the other direction.

Naturally, the officials in the regulatory community are less likely to see things that way. They are more likely to overestimate both their own ability to regulate large financial institutions and the value that those institutions provide to the economy.

Having said that, it could be there are people within Treasury who are quite sympathetic to the outsider point of view. They might have been trying to get that point of view more "air time" within Treasury. Or they might have been trying to bestow some credibility on that point of view by making it known that they were willing to sit down with bloggers.

Steven, who was there, takes a less charitable view, as you can tell from his must-read report. But my guess would be that somebody at Treasury genuinely sympathizes with the outsider point of view and is trying to bring it more into play.

Workers mostly build organizational capital, not final output. This explains high productivity per 'worker' during recessions.

Yet another reason not to try to apply 1930's Keynes to today's economy. Yet another reason that we could see a jobless recovery persist until profits improve.

H/T to William Grigg.

I don't know if you watch Law and Order Special Victims Unit but they had a rather frustrating take on the pharmacutical companies tonight.

In the episode one of their witnesses to a crime was suffering from heroin withdrawals. The doctor told the cops that he had to put the witness on methadone to help compensate for the withdrawal symptoms. But, he said, there was a better drug out there that could cure him of his heroin addiction, had side effects that were smaller than methadone, was in pill form (methadone apparently is administrated via IV), etc. Basically it was a wonder drug (can't remember what they called it).

So of course the cops ask the doctor why he is not using it and the doctor explains that the patent for this new drug has run out and since the FDA has not approved it yet no drug company is willing to run it thru the FDA trials to get it certified in the United States because they will not be able to make any money off it. Of course the cops start bad mouthing the "evil" drug companies and their lack of morals.

What I found interesting is no one bad mouthed the FDA: the true culprit in this "crime." I was hoping (yes it was a slight hope but still a hope) that the cops would have discussed the fact that the FDA is keeping the miracle drug off the shelves in the United States thru its arcane regulations and testing requirements. Instead the cops bad mouthed drug companies making profit over helping people out. To take the cop logic to its conclusion (at least from my point of view), I would have loved it if the cops had then looked at themselves and decided that they were making a "profit" off their cop salaries, sat down and calculated out exactly how much they needed to sustain themselves every month, and then decided to return that salary back to the City so that the City could use it to help people out in other ways.

Sir, it always amazes me when people attack profit like it is a bad thing.

Just thought I would let you know economics is not a strong point among the writers of Law and Order.

During these years hundreds of Oppositionists, both Russian and foreign, have been shot, or have died of hunger strikes, or have resorted to suicide. Within the last twelve years, the authorities have scores of times announced to the world the final rooting out of the opposition. But during the "purgations" in the last month of 1935 and the first half of 1936, hundreds of thousands of members of the party were again expelled, among them several tens of thousands of "Trotskyists." The most active were immediately arrested and thrown into prisons and concentration camps. As to the rest, Stalin, through Pravda, openly advised the local organs not to give them work. In a country where the sole employer is the state, this means death by slow starvation. The old principle: who does not work shall not eat, has been replaced with a new one: who does not obey shall not eat. Exactly how many Bolsheviks have been expelled, arrested, exiled, exterminated, since 1923, when the era of Bonapartism opened, we shall find out when we go through the archives of Stalin's political police. How many of them remain in the underground will become known when the shipwreck of the bureaucracy begins.

We could use some inflation to get back on track. Nominal wages are simply not flexible enough to get the job done in short order

But it certainly would not hurt to reduce real compensation. Some ideas for doing this:

1. Cut the employer contribution to the payroll tax. Bryan first proposed this, and others, including Alex and myself, have pushed it since.

2. Reduce employer-provided health benefits, but not by taxing those benefits. Instead of expanding the government mandate for employer-provided health insurance, the government should mandate cuts in employer-provided health benefits. I am not saying that this is good health care policy (although I could make a case that it is), but it is certainly good recession-fighting policy.

3. Direct stimulus funds toward flexible-wage sectors of the economy. That is, not toward state and local governments. Or else tie state and local stimulus funds to provisions requiring salary freezes at recipient governments. Require state and local governments to use the lowest-cost contractors, rather than go with union contractors.

4. Reduce the leverage of labor unions generally.

Of course, a political party dedicated to increasing labor's share of income (at least for those fortunate enough to have jobs) is not going to enact any of these policies. The friend of labor is the enemy of full employment.

Unfortunately, the real causes of the crisis are much scarier and less amenable to reform: they have to do with the inner logic of an economy like ours. The root problem is what might be termed "rational irrationality"--behavior that, on the individual level, is perfectly reasonable but that, when aggregated in the marketplace, produces calamity.

In my own unpublished tribute to Alchian, I lead with the following:

In 1975, I attended a week-long conference in Hartford,Connecticut at which the star attraction was economist Friedrich Hayek. Hayek had shared the 1974 Nobel prize in economics with Swedish economist Gunnar Myrdal, and he was doing a kind of victory tour of the United States. I told him that I thought Armen Alchian, one of my mentors when I earned my Ph.D. in UCLA's economics program, also deserved the Nobel prize. I asked Hayek what he thought. Hayek gave his characteristic wince, paused, and said, "There are two economists who deserve the Nobel prize because their work is important but won't get it because they didn't do a lot of work: Ronald Coase and Armen Alchian."

Sixteen years later, in 1991, Ronald Coase did win the Nobel prize. When I got the news, I called Armen and told him the story. He got a kick out of it and seemed to have a new hope that he would win. Of course, he didn't.