Archives: Reg Murphy Pubs

College’s role in transforming the community

Written by Skip Mounts on . Posted in Reg Murphy, Skip Mounts.

A few weeks ago in this space I talked about my personal perceptions of the interaction of the college with the community and the community with the college. I referred to this interaction as the “strategic commitments.”

The first strategic commitment was the transformation of the college from a junior college to one offering bachelor degrees. From the perspective of the School of Business and Public Management I talked about our six bachelor degree programs that have been created since 2008. Two items have driven our work. What are the needs of the community and how can we differentiate ourselves from others? From this working framework you can understand our commitment to criminal justice and to hospitality and tourism.

The subject for today is ‘“strategic commitment 2” — the role of the college in transforming the community. I’ll give you a heads-up, this is going to take more than one column.

The first way of community transformation is the dual enrollment program. As many of you know, after meeting admissions criteria, high school students may enroll in college classes and earn credits toward high school requirements and have credits toward a college degree. This is free with books included — not a bad deal.

Free college credits and the lowering of overall costs of a college degree is the obvious benefit of the program. The more important benefit, in my opinion, is that high school students must come to campus and take classes with the wide variety of others at the college. This acclimation only occurs while on campus. Given that 75 percent of our students are first generation, this acclimation is essential and prepares students for the very different learning environment they will face as they pursue their degree. This increases the likelihood of their future success that will contribute to a higher standard of living.

The next way of transformation is seen in our use of internships. All of our bachelor’s degrees (as well as culinary arts) require students to complete an internship during their senior year. This is the best time to synthesize real world experience with the theory of the classroom.

We invest considerable resources in our internship requirement as we see them as much a part of our program as a class. Also, intern hosts are treated like faculty. At SBPM internships are not just something nice to put on a resume. They are requirement of graduation. Few schools in USG do this.

There are two general types of internships. The first lets a student survey all the operations of a business. Here they get to see things from an overall perspective. In a second type of internship, students focus on a unique problem or challenge faced by a local business.

Here our students under the watchful eyes of the host apply theory to solve real problems. This type is the most numerous of all the internships across the disciplines we touch — business, criminal justice, public management, health informatics, hospitality and tourism, and graduates of technical schools seeking to learn management. All must complete an internship — all.

Another measure of community transformation is seen in graduation. In May 2011, eight students walked across the stage to get a Bachelor of Business Administration. This past May (including a small commencement in December) saw 100 degrees award in SBPM programs — 100! These students had just been problem-solvers in internships. Now they become employees ready to join the labor force. While the base is small, this represents a compound annual rate of growth of 32.4 percent.

Even more amazing are the details. Median starting salary of our 2017 graduates is $35,620. Also, 91 percent of these graduates found employment in Georgia while 83 percent found employment in coastal Georgia. Finally 71 percent of the 2017 graduates found employment in their area of study.

Again, our goal is to have programs that support the needs of our economy. The economist in me loves the final observation — what I call the market test. Employers come back for more!

The next area of impact is in our commitment to developing a local entrepreneurial eco-system. Here there is a lot to say — all for another day.

For now, I you think we are making great strides in significantly answering the promise found in the second strategic commitment. While we at One College Drive are very different from what we were not that long ago, those of you looking to us to make our community a better place are different as well.

  • Reg Murphy Center
  • Skip Mounts

Does anyone care about federal budget deficits anymore?

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Honest talk from political partisans about the federal budget situation has always been rare. With the ascendance of progressives in the Democrat party and right-populists in the Republican party, it’s nonexistent.

Consider first the progressives. Progressives champion an extravagant expansion of the welfare state.

Free health care, free college, guaranteed jobs paying $15 an hour, and lots more. The cost of the most popular progressive programs is estimated to be around $42.5 trillion over the next decade.

To put that in perspective, federal spending currently amounts to 22 percent of GDP. Add the progressive programs and the percentage doubles.

How to pay for it all? Progressive Alexandria Ocasio-Cortez has proposed imposing a 28 percent tax rate on corporations, a 15 percent surcharge on millionaires and a carbon emissions tax.

According to the Congressional Budget Office, those taxes would raise about $2 trillion over the next ten years. How to pay for the remaining $40.5 trillion? That’s a detail to be worked out later.

Republican mendacity about the federal budget is more interesting.

In the first two-thirds of the last century, Republicans preached “sound finance” — the view that budget deficits, except in a state of emergency, are fiscally irresponsible. Republicans denigrated the notion, associated with British economist John Maynard Keynes, that tax cuts and spending increases can stimulate an economy in recession.

Then came Ronald Reagan, who threw sound finance out the window.

The Reagan administration won major tax cuts and major spending increases. The tax cuts, the administration claimed, would pay for themselves by stimulating the supply side of the economy.

They didn’t.

Republicans to this day condemn Franklin Roosevelt for the budget deficits run during the Great Depression. Yet the budget deficits under Reagan in a growing economy were slightly larger than the deficits under Roosevelt during the depression.

In the four years between 1933 and 1936, the federal budget deficit under Roosevelt averaged 4.9 percent of GDP. By 1938, the deficit was 0.1 percent of GDP.

In the four years between 1983 and 1986, the federal budget deficit under Reagan averaged 5.1 percent of GDP. It was still 3 percent of GDP in Reagan’s last year of office.

Republicans are now selective in preaching sound finance. Republicans are all for balanced budgets and fiscal responsibility when a Democrat is president. When one of their own is president, deficits are “supply-side economics.”

Consider the two most recent presidents.

Obama inherited a wicked recession. So Obama, like Regan, pushed for and won an economic “stimulus package.”

There were important differences between the Reagan stimulus and the Obama stimulus, but the essence of the two was the same: big tax cuts and big spending increases. And big deficits.

One difference was that Reagan was a bigger spender than Obama.

Under Regan, federal spending increased at an inflation-adjusted average annual rate of 2.5 percent, compared to 1.9 percent under Obama.

Yet in Republican circles, Reagan is hailed as a fiscal policy marvel while Obama is excoriated as a profligate spender.

And now?

In the first 11 months of fiscal year 2018, the federal budget deficit was $895 billion. In fiscal year 2016, the last under Obama, the federal budget deficit was $585 billion.

It has taken Republicans in control of the White House and Congress less than two years to increase the federal budget deficit by 53 percent.

And not a peep of concern from Republicans. Or Democrats.

So, each of the two major political parties has demonstrated that it could not care less about the fiscal state of the federal government.

  • Don Mathews
  • Reg Murphy Center

Communicating to others what an economist does

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

A couple weeks ago, Travis Stegall, Brunswick’s Economic and Community Development Director, stopped by the college to give a talk to the students in my economic development course. He did a great job. He was interesting and engaging, and he conveyed a real passion for seeing Brunswick develop into a thriving city.

But, for me, one of the most memorable moments of his presentation happened at the end, when a student asked, “What is the hardest part of your job?” Of all the challenges associated with developing community and bringing business to downtown Brunswick, Mr. Stegall pinpointed “Communicating to others what I do” as the most difficult part of his job.

I know how he feels. I would not say communicating what I do is the most difficult part of my job, but it is one of the more difficult parts of meeting new people professionally or, even worse, socially.

When folks find out I am an economist, they have one of two reactions: 1) they stagger back, turn pale, and tell me how much they hated economics in school, or 2) their eyes light up and they begin to ask for my opinions on current economic policy, usually as they segue into telling me their own opinions.

Often, neither reaction stems from a solid understanding of what economists — particularly microeconomists — do. To someone with the first reaction, I’d say a class or two in principles of economics only scratches the surface of all the cool stuff economists study.

And to someone with the second reaction, I’d say the federal reserve is fascinating, but studying it is not my cup of tea. My mentor in grad school described economics to me as a toolbox, rather than as a subject area. And I tell my students that although our syllabus lists a set of topics we will cover, economics is in the way we think about these topics, not in the topics themselves.

Truly, economists study topics across the board — markets and prices, effects of taxes or tariffs on trade, labor markets and employment trends, immigration, health care, sports, and on and on.

The value economists bring to a given field of study is a rational approach to problem solving. Economists assume (reasonably, I believe) that individuals weigh options and behave in their own self-interest.

Given this assumption and the right data, economists can answer almost any question one could ask about human behavior or effects of policy changes on human behavior.

Thus, economists often struggle to communicate what we do because we may study a wide range of topics, many of which are not front page economics news. The common denominator for economists is data. Economics is a toolbox allowing for the application of data and statistical best practices to real-world questions, or, as I like to call it, math with a purpose.

  • Melissa Trussell
  • Reg Murphy Center

Our work is not done at Coastal

Written by Skip Mounts on . Posted in Reg Murphy, Skip Mounts.

College classes have begun for fall semester 2018. Since fall 2011, Coastal Georgia’s School of Business and Public Management has grown from about 400 students to nearly 900 this fall. That is a compound annual rate of growth of 12.28 percent. Growth stocks should be so consistent. In this light, I would like to give you a report card on the School of Business and Public Management (SBPM).

When I came in March 2011 to interview for the dean’s position in the school, two things — which I call today the Strategic Commitments — were obvious. The first was that the community was committed to the transformation of the college to a bachelor degree granting institution. I call this Strategic Commitment 1 and was not surprised by it. What was surprising was Strategic Commitment 2. The community expected the college to be committed to transforming the community.

These commitments are not independent of each other. Clearly there are overlapping areas. My focus for today is Strategic Commitment 1.

Two things drive the development of the degrees we offer in SBPM: they must serve the needs of the community and State, and they must be differentiated from degrees that students could get at other schools. Our degrees must be useful and special.

Our first two degrees were a Bachelor of Business Administration (BBA) and a Bachelor of Science in Health Informatics (BSHI). An unusual feature of the BBA was that all of the classes were required. Students had no opportunity to study a unique area of business. This format did not easily address the needs of the market. With curriculum reform taken at the time, students can now choose a concentration for detailed study in accounting, economics, finance, leadership, marketing, management, and health care administration. As a result of the opportunity for enhanced study of an area of business, at present 68 students are choosing to study accounting and finance, two very difficult disciplines. Also, one of our young economists got a full-ride graduate scholarship to Washington University in St. Louis (one of 5 Wash-U awarded that year). This is amazing for an access institution starting its 10th year and are just two examples of student achievement. Students studying health informatics are now finding employment in major local, regional and national health systems. The BSHI, with its emphasis on computer science and data analytics is unmatched in the state.

Government agencies and nonprofits face increasing demands for their services while experiencing declining financial resources. These two opposing forces call for managers trained in business principles within the public sector world. This was the rational leading the development of the next degree — Bachelor of Science in Public Management. There is no other similar degree in the entire University System, especially with its concentration in nonprofit management and leadership. Again, our goal is to be appropriate, useful and unique.

The next degree developed over the past 10 years is the Bachelor of Science in Criminal Justice. This is the fastest growing degree at the college and is only in its fourth year. Criminal justice students choose to study public policy, homeland security, cyber security or data analytics. Needless to say, this is a cutting edge undergraduate degree and, with our wonderful relationship with FLETC, unmatched in the Southeast if not the nation. Here our goal is simply to be the best undergraduate program in the United States.

We also teach leadership and management skills to technically trained individuals. This is only open to graduates of technical schools. One might be a heck of a welder, yet we train them to be able to lead a team of welders. Here we complement the workforce needs of the state and, again, find ourselves in a unique market position in the state.

The newest addition to our degree offerings is a Bachelor of Science in Hospitality and Tourism Management (BSHTM). We have been teaching culinary arts for years (and remain accredited by the American Culinary Federation) and do really good work. Now, with the BSHTM, we have expanded our portfolio of offerings based on our area’s truly unique leadership in the hospitality industry. There is no other similar degree in the University System. Again we are appropriate, useful and unique.

There you have it. I work with a wonderful faculty and staff that are committed to our students and community.

What grade might you give us filling Strategic Commitment 1? I give us an “I” — an incomplete. We have done a lot but we are not yet done. There is much more to come. It’s been a heck of a ride but the finish line is not yet in sight. Thank you Golden Isles for all you have done for us.

  • Reg Murphy Center
  • Skip Mounts

Georgia agriculture rocks, check it out

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Drive west across south Georgia to the Alabama line and, depending on which route you take, you’ll pass through towns such as Homerville, Willacoochee, Hahira, Pavo, Ty Ty, Eldorendo.

If you don’t pay attention, you’re likely to think those little towns are nestled in the middle of nowhere.

If you pay attention, you’ll recognize that those little towns are nestled in stuff that is better than gold.

Those little towns are surrounded by acres and acres and acres of cash crops. Peanuts. Cotton. Blueberries. Pecans. Watermelon.

The quantities we’re talking about here blow the mind.

First, there’s the acreage. The U.S. Department of Agriculture estimates that Georgia farmers have planted 1.45 million acres in cotton this year. They’ve planted 700,000 acres in peanuts. That’s down from last year’s record high of 835,000 acres.

Georgia farmers have also planted 360,000 acres of corn, 180,000 acres of winter wheat and 170,000 acres of soybeans.

No wonder farm towns are small. With all those acres planted in crops, where’s room for a town?

Then there’s the quantities of the harvested crops. This year’s peanut crop is expected to be 3.1 billion pounds. Yes — billion, with a b. And, yes, that’s Georgia’s peanut crop, not the nation’s or the world’s.

The forecast for Georgia’s 2018 cotton crop is 2.9 million bales or about 1.45 billion pounds. For corn, 52.8 million bushels. Soybeans, 7.2 million bushels.

In 2017, Georgia farmers produced 700 million pounds of watermelon, 385 million pounds of onions, 193 million pounds of cabbage, 166 million pounds of cucumbers and 107 million pounds of pecans.

Poring over Georgia agriculture data is enlightening and fun. But it doesn’t compare to actually seeing those acres and acres and acres of planted fields on a long drive on two-lane roads through south Georgia farm country.

One suspects that Georgia farmers are obsessive-compulsive. The planted acres are as neat and tidy as can be. The rows of plants are perfectly spaced. The plants themselves are lush and green and full — pretty, too.

I’m partial to all these Georgia crops, but my favorite is blueberries. Blueberries, as the agriculturally cultured know, grow on bushes. The bushes have rich, green leaves and multi-colored branches and canes that twist in whimsical ways.

Blueberry production has really taken off in Georgia over the past generation. As the markets for tobacco and timber have sagged, many farmers have shifted to blueberries.

Georgia is called the peach state. But in 2005, the market value of Georgia’s blueberry crop exceeded the market value of its peach crop, and has every year since. In 2017, the value of Georgia’s blueberry crop exceeded the value of its peach crop by a factor of four.

It’s easy to romanticize about being a farmer — the quiet, the beautiful fields, the closeness to the earth.

The thought of sitting on a shaded porch with a cold beer watching blueberry bushes as far as the eye can see sway in a summer breeze had me checking how much my wife and I have saved for retirement and if there were any small houses for sale in the middle of a blueberry field.

But farming can be a rough go. So many factors are out of a farmer’s control — the weather, for instance.

In 2017, a warm winter followed by several days of freezing temperatures hammered Georgia’s blueberry and peach crops. The blueberry harvest fell by 53 percent from the previous year; the peach harvest fell by 76 percent.

At any rate, Georgia agriculture rocks. Take a drive and check it out.

  • Don Mathews
  • Reg Murphy Center

Good (right) and bad (wrong) economics

Written by Skip Mounts on . Posted in Reg Murphy, Skip Mounts.

Tariffs continue to be in the news. Not only are they being used as leverage to create new trade relationships, they are also being used as an instrument of foreign policy. How they are being used has never been addressed in this space. Our focus has only been that they are just bad economics.

While standing in line at Southern Soul, a fellow barbeque lover and reader of From the Murphy Center raised a philosophical question with me — how do we know if a policy is based on bad economics? We had a good lengthy discussion — the line was long and moved slowly — that needed to become public. So here it goes.

The most fundamental model in economics is supply and demand. Close your eyes for a moment and imagine a graphing space with price per unit on the vertical axis and quantity demanded and supplied on the horizontal axis. In that space, demand is a line that is downward sloping to the right, while supply is a line that is upward sloping to the right. Where the lines cross is called equilibrium.

Supply and demand contain the fundamentals of all human behavior. Buyers, in all that they do, willingly substitute. This is probably the contribution of economics to mankind; just the simple idea that consumers willingly move between alternative goods as they make choices. Sellers, on the other hand, face the engineering technological constraint that the marginal cost of making additional units of a product rise as more are made. This is a certain as gravity.

These two forces cannot be avoided. They are certain. They are indisputable. They cannot be ignored. It is what it is.

The supply and demand graph is only a simple way to depict human behavior. Trying to control the market does not alter the behavior that is contained in it. The forces do not go away. Again, it is what it is. Just accept it and move on. Attempts to ignore or rationalize away these fundamentals make everyone worse off.

This is how I judge various economic policies. Can I find supply and demand in them and what does the policy maker do with it? Does he/she accept and embrace the forces or do they ignore them or, worse, think they can control them? Anything that does the latter is bad (wrong) economics. This is what is so troubling about the rise of socialism among younger people. The tenants of socialism are built round behaviors that people simply don’t exhibit. They just don’t. Therefore socialist policies are bad (wrong) economics. Just Google Venezuela and read about their economy — if they still have one by now.

What I really worry about is that we economists, who love supply and demand, are not doing our job by showing others our love for this model and our acceptance and respect for simple and basic human behavior that is contained in it. At times it seems like we embrace the mathematics and statistics and the art of empirical estimation. Dr. Jonathan Gruber, the MIT economist who was a lead designer of the Affordable Care Act, had a nice mathematical model and pretty flow charts. The problem was that the behavior contained in supply and demand was ignored. It is emotional love, respect and commitment to the principles that we must show our students. Failing to do this will take us down the road for more bad economics and away from what is right and good.

  • Reg Murphy Center
  • Skip Mounts

Economic nationalism puts the swamp, administrative state first

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

“Drain the swamp” and “deconstruct the administrative state” are two stated goals of the rising populist wing of American conservatism.

The swamp refers to the lobbyists and entrenched interests who curry favor with politicians to gain legislative goodies (that come at the expense of everyone else) and the politicians who are happy to dole out the goodies in return for political support.

The administrative state refers to the mass of federal agencies and bureaus that impose regulations on people and businesses with no accountability to them, and apparently little, if any, accountability to Congress.

Another tenet of populist conservatism is “economic nationalism,” often expressed as the slogan “America First.”

Economic nationalism is an ideology that claims that a strong nation is an economically self-sufficient nation. To achieve economic self-sufficiency, the government takes it upon itself to direct economic activity through steep tariffs, subsidies to “critical” industries, strict regulations on cross-border capital flows and substantial investment in public infrastructure.

Therein lies a fundamental and irreconcilable contradiction of populist conservatism.

Administering tariffs, subsidies and all the rest of economic nationalism requires a huge and powerful administrative state. It requires legions of federal bureaucrats to rule on an enormous array of questions. Such as:

Which industries are to be protected by tariffs? How big should the tariffs be? Which industries are to be subsidized? How big should the subsidies be?

What infrastructure projects should the government undertake? Where? How much?

And in deciding which domestic industries to help with tariffs, subsidies and regulation, politicians and bureaucrats simultaneously decide which industries to hurt.

Tariffs on steel? Good for domestic steel producers, not good for domestic producers of goods made out of steel.

Further, government economic planning, which is what economic nationalism is, invariably has unintended consequences. For example, by restricting imports, tariffs also restrict exports.

Tariffs cause Americans to buy less foreign goods. That means fewer dollars supplied to the foreign exchange market. That causes the foreign exchange value of the dollar to appreciate, which makes U.S. goods more expensive for foreigners, which causes them to buy less.

So, domestic exporters, when the economic nationalists raise tariffs, you’re going to suffer. Welcome to government economic planning of the populist variety, where a few politicians and the administrative state decide which industries win and which industries lose.

Under economic nationalism, bureaucrats thrive. So do the lobbyists and entrenched interests who inhabit the swamp.

A government that doles out hundreds of billions of dollars in goodies — and harm — attracts lobbyists and special interests like doling out barrels of chum attracts sharks.

Entrenched interests lobby hard to get the goodies. Lesser interests lobby hard to temper the harm. The lobbyists get rich.

This is not academic speculation. It’s happening now.

Thousands of domestic businesses that stand to lose big from steel and aluminum tariffs have spent days and dollars applying for exemptions from the tariffs. Not receiving an exemption could spell the end of some firms. Who decides the fates of the applications? Department of Commerce bureaucrats.

Earnings of Washington’s prominent K street lobbying firms, already fat, are up 20 percent over last year.

And unintended consequences? How about the $12 billion to pacify farmers clobbered by the trade war? That’s $12 billion on top of the $20 billion in subsidies they’ll receive this year.

Some conservatives understand that economic nationalism enriches, first and most, the swamp and the administrative state. Populists don’t.

  • Don Mathews
  • Reg Murphy Center

College diplomas signal willingness to think, problem solve

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

Professors are often confronted with skepticism of students and find ourselves answering some version of the question, “What’s the point?”

I have just completed a summer term that has been a refreshing reminder of my answer to that question.

I started the summer apprehensive, as I was teaching a new course — the Economics of Religion — and in a style I had never before attempted: completely discussion-based with no formal lectures or exams. Classroom time for this course was to be much less structured than in my typical classes, and while the idea of this type of learning environment excited me, the uncertainty of it made me nervous. Would students read and be willing to discuss? Would they be serious enough about the topics to learn from discussion with peers? And, the one that is probably least important but frightened me most — would we have enough to say to fill the allotted time?

Not only did my students prove my anxiety unfounded, but they also renewed my faith in their generation’s ability to think critically and discuss rationally and respectfully. For around two hours each week, I had 20 students of varying religious backgrounds engaged in thoughtful, polite and lively discussion of how economic principles apply to individual and corporate religious behavior.

My favorite moment of the entire term came during our first class meeting, when we began to talk about the introductory chapters of our text. I opened the floor with the question, “What do you think?”

One student responded, “I have never thought about my religion in this way.”

Variants of this sentence were repeated by many students throughout the term and in their final assignment, which required them to apply what we had read to their own personal religious experience, or lack thereof.

In all of what we do as faculty and staff at a college, this sentence — “I’ve never thought … in this way” — is the point.

Labor economists have two theories on the value of a potential employee’s college diploma to an employer. One theory says the diploma simply serves as a signal to the employer that the applicant is a good worker. The second theory says the diploma represents years of accumulated knowledge and skills beyond high school.

My mission as an educator is the intersection of those two theories. It is irrational to believe a student will remember all or even most of the material covered in the college courses he or she takes. But, a college diploma should serve as a signal to potential employers that a graduate has gained and honed both a willingness and the ability to think about problems in new and challenging ways.

Above all others, this skill is most likely to translate into a productive worker who is receptive to on-the-job training and is capable of working well with others.

An educator’s job is to create “I’ve never thought … in this way” moments.

If you are interested in learning more about the subject of religion and economics, I recommend the book “Marketplace of the gods: How economics explains religion” by Larry Witham.

  • Melissa Trussell
  • Reg Murphy Center

Transaction costs go beyond the courts

Written by Skip Mounts on . Posted in Reg Murphy, Skip Mounts.

With the nomination of Judge Brett Kavanaugh to replace Justice Anthony Kennedy on the Supreme Court of the United States has come a renewed discussion of the importance of the Supreme Court and the role of its justices in our everyday lives. Should Supreme Court justices be strict constitutional constructionists or should justices interpret the Constitution taking into account changes in our culture and values? Alternatively, should Supreme Court justices simply interpret the law or should they, through their interpretation, make new law?

I must confess I enjoy hearing experts argue the various sides to these heady issues. I really enjoy a good explanation. After all, I have made a living simply explaining things.

Today, the question before us is should judges in general have a good understanding of economics, especially when making rulings on civil wrongs called torts? To this end I want to introduce you to Ronald Coase (1910-2013). Coase, best known for having been on the faculty of the University of Chicago School of Law, won the Nobel Prize in economics in 1991 for his work in the area economists call “transactions costs.” Using Adam Smith as an anchor, economists are very good at explaining how people, as they pursue their own self-interest, are guided by an invisible hand to promote the welfare of others. Furthermore, in a perfect world, this pursuit of private interest results in an allocation of economic resources that maximizes social welfare. This is the nature and benefit from competition.

The key phrase in the previous sentence is “perfect world.” The perfect world has many attributes, two of which are perfect knowledge and no transactions costs. This is to say, everyone in a market knows what everyone else knows and it is costless to get together and trade.

This is where Coase comes in. In his article entitled The Problem of Social Cost, he argued that in a lawsuit involving two people who are free to engage in trade, the resulting allocation of resources does not matter on what the judge rules. Here, judges don’t need to know economics. They just need to assign property rights — assign guilt.

An example may help. Assume that I live next to a noisy neighbor with a very loud stereo. I, however, like quiet. I go over and ask my neighbor nicely to turn it down and they tell me no. I ask again and all they do is turn it up louder. So, I call up my attorney friend, complain to the police, and then finally sue for quiet.

Let’s assume I win. By the judges ruling (giving me the property right of silence), I can have perfect quiet all the time. However, in the perfect world my neighbor might come over, offer me a little money, and ask is there a time I will be gone so they can make noise. Well, I will be gone some days and they did, after all, offer some money. So, yes, here are the dates. Give me the cash. In the end, I get some quiet and my neighbor gets some noise. This is the final allocation of resources that maximizes social welfare.

What happens if my neighbor wins and can have noise all the time? Again, in the perfect world, I may offer my neighbor some money to turn the stereo down on some days at some times, especially the days they are gone making noise somewhere else. They may very well agree. Here, like above, I get some quiet and they get some noise.

The ‘Coase theorem’ says that regardless of who wins — determined by the judge — we end up with the same amount of noise and the same amount of quiet. The key to this outcome is that my neighbor and I trade property rights after the judge rules.

However, what happens if there are transactions costs — we are unable to trade. In this case, the ruling of the judge matters. Here, the judge needs to understand the economic consequences of their ruling. Where is social welfare maximized? When I win or when my neighbor wins? How much quiet and how much noise?

The world is full of transaction costs. The beneficial impact of free trade and competition can be limited. We need to understand these limits. This is not to say we need to prevent competition and trade from occurring. The world is never quite perfect. Maybe we can get there with a judiciary that understands a bit of supply and demand. The economists at the Murphy Center are always glad to help.

  • Reg Murphy Center
  • Skip Mounts

Finally, labor markets are tight again

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Labor markets are always slow to recover from recessions, especially nasty recessions. And the last recession, the 2007-2009 recession, was nasty.

At long last, labor markets have largely recovered from that nasty recession. The national unemployment rate is down to 4 percent. Nine states – Colorado, Hawaii, Idaho, Iowa, Maine, Nebraska, North Dakota, Vermont and Wisconsin – have unemployment rates less than 3 percent. Only two states – Alaska and West Virginia – have unemployment rates greater than 5 percent.

Georgia’s unemployment rate is down to 4.2 percent. Nine Georgia counties have unemployment rates below 3 percent, while 81 – including Glynn at 3.3 percent, McIntosh at 3.7 percent and Camden at 3.8 percent – have unemployment rates between 3 and 3.9 percent. Only two Georgia counties have unemployment rates above 6 percent.

That’s how labor markets ought to be. Tight.

The labor market recovery has been remarkable, albeit protracted. Though the national recession ended in mid-2009, the national unemployment rate in 2011 was still 9 percent. By the end of 2015, it had fallen to 5 percent.

The labor market recovery in Georgia has been even more remarkable.

In 2011, Georgia’s unemployment was still 10.2 percent. Not a single Georgia county had an unemployment rate below 7 percent. Fully 118 of our 159 counties had unemployment rates in excess of 10 percent.

By the end of 2015, Georgia’s unemployment rate had fallen to 5.6 percent. Only one Georgia county had an unemployment rate greater than 10 percent.

The labor market recovery on the South Georgia coast has been more remarkable still.

We hardly need reminding that the recession hit harder and lasted longer in our neck of the woods than in most other necks of the woods. In 2011, Glynn’s unemployment rate was 10.4 percent, McIntosh’s was 10.6 percent, Wayne’s was 12.1 percent and Brantley’s was 13.2 percent.

By mid-2014, local unemployment rates were still alarmingly high: 8.1 percent in Glynn, 8.5 in McIntosh, 9.6 in Wayne and 10 percent in Brantley.

Brantley’s current unemployment rate of 4 percent is the lowest it has been since 2004. Wayne’s current unemployment rate of 4.2 percent is the lowest it has been this century.

Now there’s just one piece of the local labor market recovery left to complete.

During recessions, the labor force often shrinks. During the last recession, the nation’s labor force decreased by 2.4 percent, while Georgia’s fell by 6.5 percent.

Local labor forces shrunk much more. During the last recession, McIntosh’s labor force decreased by 11 percent, Wayne’s by 12 percent, Glynn’s by 13 percent and Brantley’s by 15 percent.

Recoveries draw people back into the labor force. The labor forces of both the U.S. and Georgia are now 3 percent larger than their previous peaks.

Unfortunately, the same cannot be said for local labor forces. Local labor forces are growing again but remain below their previous peaks. The labor forces of Glynn and McIntosh are 3 percent below their previous peaks, while Brantley’s and Wayne’s are off by 7 and 11 percent from their previous peaks.

We’re getting there, though, and the low unemployment rates are truly welcome.

  • Don Mathews
  • Reg Murphy Center