Tuesday, January 1, 2013

Bubbling Up...1/1/2013

1) The College Textbook Bubble Is Out Of Control by Sam Ro @ Money Game
Here's the insane chart:

Woj’s Thoughts - Why are textbooks so expensive today? We all know that student loans are rising exponentially to pay for tuition. Is it possible those loans are also subsidizing textbook sales? It’s doubtful that quality has increased that dramatically in the past 40 years and production costs are certainly lower. I suspect there is some institutional arrangement creating the surge higher, but unsure of specifically what that might be. Any suggestions?

2) The Folly of Obsessing over Marginal Tax Rates, by Garett Jones @ EconLog

It's often wise to pay more attention to marginal tax rates than to average tax rates.  If you can make your first $100 tax free but the 101st dollar is taxed at a marginal rate of 99% you'll probably decide to earn $100 at most.  
But what is marginal?  When it comes to career choices or the state you'll live in or whether to have an extra child the marginal decision is very big, and a rational person will base that decision mostly on the average long run costs and benefits.  In cases like this, the official marginal tax rate won't matter nearly as much as the long run average tax rate.

3) A Free-Market Monetary System by Friedrich A. Hayek @ Ludwig von Mises Institute
I think it is very urgent that it become rapidly understood that there is no justification in history for the existing position of a government monopoly of issuing money. It has never been proposed on the ground that government will give us better money than anybody else could. It has always, since the privilege of issuing money was first explicitly represented as a Royal prerogative, been advocated because the power to issue money was essential for the finance of the government-not in order to give us good money, but in order to give to government access to the tap where it can draw the money it needs by manufacturing it. That, ladies and gentlemen, is not a method by which we can hope ever to get good money. To put it into the hands of an institution which is protected against competition, which can force us to accept the money, which is subject to incessant political pressure, such an authority will not ever again give us good money.
Woj’s Thoughts - Warren Mosler has often suggested researching the “Currency as a Public Monopoly” for my dissertation. While I’m not entirely sold on that project, at least yet, I was bit surprised to find this speech by Hayek discussing his own research on “a government monopoly of issuing money.” Although Mosler and Hayek almost certainly hold different views about the benefits and costs of such a monopoly, the potential of researching both perspectives piqued my interest. Maybe I will do some preliminary research on the subject and see where it leads.


  1. Hi Woj, as always I really enjoy your posts, it is one of the feed items I most look forward to.

    My two cents on college textbook costs: I can only speak from an engineering perspective, but I suspect this can be applied to other disciplines. When I was an undergrad (many years ago) my textbook costs were high but not exorbitant. However when I got my graduate degree, I noticed a large jump in the price of textbooks. Because the topics and the knowledge required to write an authoritative book on these very specialized aspects of engineering is much more involved. The topics were cutting edge and research driven. In fact most of my graduate 'textbooks' were mostly course packs driven by the professors research (very expensive and specialized), but the courses that did actually have textbooks were twice as expensive as undergrad textbooks, again this is likely because of the much more specialized nature of the subject matter.

    And if this trend is true for other disciplines then I think the recent growth in textbook prices partially reflects the trend of students staying in school longer and getting graduate degrees and paying for the more expensive graduate level textbooks.

    My take at any rate.

    1. Thank you for the kind words, which make the time and effort spent all the more worthwhile.

      Your take is fascinating and something I hadn't previously considered. I would imagine the number of students in grad school today is far larger than a couple decades ago. Your point about the time and knowledge necessary to write a textbook may also play a significant role as higher income consulting jobs have become more prominent in many fields.

      Hope you have a happy and healthy new year!

  2. 3) "...there is no justification in history for the existing position of a government monopoly of issuing money."

    Tradition is always an accepted justification.

    I think I read of Thomas Aquinas explaining why the State issues money; in any case, justifications have been offered for hundreds of years.

    My view is that as we crawled out of the dark age and established some minimal level of order, the owners of everything were in charge of everything: justice, property, and money. (And tradition & continuity get us from there to here.)

    Charlemagne came up with the 12-shilling-per-pound thing. I think it was based on the relative values of gold and silver.

    1. I think it's a bit of a stretch to say always. Hayek appears to have been rejecting the very notion that tradition is a reasonable justification. This may also deal with a bit of semantics on whether one is trying to simply explain the course of actions through time or their validity as the best/only possible outcome. Personally I think tradition is more appropriate for the former.

      As for Aquinas and Charlemagne, I have very little prior knowledge of their work and/or actions. I'll keep those suggestions in mind when I pursue further research on the matter.

  3. Joshua,

    If you decide to go down that path, I can't recommend enough George Selgin's work in the area of currency monopolies.

  4. Jonathan,

    Thanks for the suggestion. Next semester I'll be taking Macro with Larry White, so I imagine we will begin discussing Selgin's work in more detail.