This James Hagarty/Wall Street Journal ($) article reports on a recent analysis that ranks the Bryan-College Station area — home of Texas A&M University — as the most “undervalued” housing market in the country during this year’s first quarter. In fact, eight out of the ten most undervalued markets are in Texas (Dallas and Ft. Worth are second and third, and Houston is fourth). Although such studies are usually accompanied by some hand-wringing from those who are concerned about the value of their home, the reality is that the availability of relatively cheap housing is one of the main drivers of Texas’ economic growth over the past generation. Here’s hoping that it continues.

John Kenneth Galbraith died Saturday night at the age of 97 in Cambridge, MA. The NY Times’ lengthy story on Galbraith’s remarkable life is here and the well-done Boston Globe story on Galbraith’s life is here.
Although Galbraith won world-wide recognition throughout his life as a liberal economist, a consultant to presidents, an active ambassador and a prodigious and witty author regarding America’s affluence, my sense is that his foremost legacy is as a wonderful teacher. During his long and distinguished career at Harvard, his lectures were among the most well-attended of any professor, prompting Harvard colleague Henry Rosovsky to pass along the now well-known anecdote that even his car mechanic had heard about Galbraith’s formidable teaching talent. Galbraith’s death comes about a year after the publication of Richard Parker’s seminal book about his life, John Kenneth Galbraith: His Life, His Politics, His Economics (Farrar, Straus 2005), reviewed here by Robert Skidelsky.
As noted in this earlier post, Parker in his book notes how the late President Lyndon Baines Johnson‘s rejection of one of Galbraith’s speeches prompted the following hilarious observation from LBJ about economics and economists:

“Did yíever think, Ken, that making a speech on ee-co-nomics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else.”

Thanks to Arnold Kling for pointing out this Robert Skidelsky review of Richard Parker’s new book, John Kenneth Galbraith: His Life, His Politics, His Economics (Farrar, Straus 2005), which contains the following earthy observation on economics from the late Lyndon B. Johnson, made to Galbraith while Johnson was throwing away a Galbraith-authored draft of a speech:

“Did yíever think, Ken, that making a speech on ee-co-nomics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else.”

Thomas Sowell (previous post here) is the Rose and Milton Friedman Senior Fellow of The Hoover Institution at Stanford University, where he has written yet another book, On Classical Economics (Yale 2006).
Although Professor Sowell’s preference for free markets and disdain for governmental planning has often resulted in him being labeled as a leading black conservative (whatever that means), this Jason L. Riley/weekend WSJ ($) interview of Professor Sowell provides an interesting insight regarding that label:

Free-market economics, a legacy of the classical school, is thought of as an old conservative doctrine. But Mr. Sowell explains that it was in fact one of the most revolutionary concepts to emerge in the history of ideas. Moreover, “the thinking of the classical economist was not only a radical break from landmark intellectual figures like Plato and Machiavelli, but also from mainstream thinking to this day.” The notion of a self-equilibrating system — the market economy — meant a reduced role for intellectuals and politicians, [Sowell] says.
“And even today many still haven’t accepted that their superior wisdom might be superfluous, if not damaging.”

Update: Following on the Sowell interview, this NY Sunday Times op-ed by Orlando Patterson, John Cowles Professor of Sociology at Harvard University, is a thoughtful and timely piece on the plight of young black men in America. He argues that academicians have an affinity for socioeconomic explanations and too often dismiss cultural explanations. As he notes: “Too much is at stake for us to fail to understand the plight of these young men.”

Economist Milton Friedman (previous posts here, here and here) and former General Electric CEO Jack Welch are the subject of a couple of recent interviews and, as usual, both of them have interesting observations to pass along. First, Friedman:

“The great virtue of a free market is that it enables people who hate each other, or who are from vastly different religious or ethnic backgrounds, to cooperate economically. Government intervention canít do that. Politics exacerbates and magnifies differences.”

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This WSJ ($) article reports ominously that the U.S. trade deficit widened by over $100 billion last year to $726 billion from $618 billion in 2004.
In this TCS Central article, Don Boudreaux lucidly explains why we shouldn’t worry much about it.
A far greater problem than the trade deficit is the widespread misunderstanding of it that often results in demagogic appeals for counterproductive protectionist policies.

2004 Nobel Laureate Edward Prescott is a Clear Thinkers favorite, and his work on Social Security reform reflects (here and here) a remarkable ability to present economic principles in a clear manner. In this Wall Street Journal ($) op-ed, Mr. Prescott criticizes playing politics with tax rates on capital gains and dividends, and — in so doing — provides this astute reasoning on the adverse economic effect of taxation:

So what are good tax rates? It’s useful to begin with consideration of a simple principle: Taxes distort behavior. From this powerful little sentence comes the key insight that should inform our thinking about setting tax rates. Any tax, even the lowest and the fairest, will cause people to consume less or work less. Taxes that are inordinately high only exacerbate this reaction, and the aggregate accumulation of these individual decisions can be devastating to an economy.
Good tax rates, then, need be high enough to generate sufficient revenues, but not so high that they choke off growth and, perversely, decrease tax revenues. This, of course, is the tricky part, and brings us to the task at hand: Should Congress extend the 15% rate on capital gains and dividends? Wrong question. Should Congress make the 15% rate permanent? Yes. (This assumes that a lower rate is politically impossible.)

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