Nobel Predictions

From Thomson Reuters.

Posner on Keynes

The great law-and-economics guru has become a Keynesian.

Is a mandate a tax?

There has been some blogosphere discussion of whether a health insurance mandate is or is not a tax, motivated largely by President Obama's recent assertion that "nobody considers that a tax increase." . (See, for example, Jeff Miron and Donald Marron.) The issue is largely semantic, but behind the sematics lies some interesting economics.

The best place to read about the topic is this old paper by Larry Summers. Larry says, "Essentially, mandated benefits are like public programs financed by benefit taxes." But there is much more to Larry's article than that. Please click through to the paper and read it for yourself.

More Competition

John Taylor is blogging. Jeff Miron is blogging again.

Is there a healthcare crisis?

Click here and here for contrarian views.

People Respond to (Perverse) Incentives

A great story about the deadweight loss of tariffs:

To Outfox the Chicken Tax, Ford Strips Its Own Vans

BALTIMORE -- Several times a month, Transit Connect vans from a Ford Motor Co. factory in Turkey roll off a ship here shiny and new, rear side windows gleaming, back seats firmly bolted to the floor.

Their first stop in America is a low-slung, brick warehouse where those same windows, never squeegeed at a gas station, and seats, never touched by human backsides, are promptly ripped out.

The fabric is shredded, the steel parts are broken down, and everything is sent off along with the glass to be recycled.

Why all the fuss and feathers? Blame the "chicken tax."

The seats and windows are but dressing to help Ford navigate the wreckage of a 46-year-old trade spat. In the early 1960s, Europe put high tariffs on imported chicken, taking aim at rising U.S. sales to West Germany. President Johnson retaliated in 1963, in part by targeting German-made Volkswagens with a tax on imports of foreign-made trucks and commercial vans.

The 1960s went the way of love beads and sitar records, but the chicken tax never died. Europe still has a tariff on imports of U.S. chicken, and the U.S. still hits delivery vans imported from overseas with a 25% tariff. American companies have to pay, too, which puts Ford in the weird position of circumventing U.S. trade rules that for years have protected U.S. auto makers' market for trucks.

The company's wiggle room comes from the process of defining a delivery van. Customs officials check a bunch of features to determine whether a vehicle's primary purpose might be to move people instead. Since cargo doesn't need seats with seat belts or to look out the window, those items are on the list. So Ford ships all its Transit Connects with both, calls them "wagons" instead of "commercial vans." Installing and removing unneeded seats and windows costs the company hundreds of dollars per van, but the import tax falls dramatically, to 2.5 percent, saving thousands.

Nobel Prize Pool

Think you know who will win the Nobel Prize in Economics? Willing to put your money where your mouth is? Then click here.

If you are looking for some suggestions, click here for a list of the most cited economists. Note that 6 out of the top 10 have already won.