Medical choices

From a NY Times editorial:

A new national survey found that an alarming 20 percent of the population, some 59 million people in all, either delayed or did without needed medical care last year, a huge increase from the 36 million people who delayed or did not seek care in 2003...

According to the survey, the main reason is soaring medical costs, which have outstripped the modest growth in wages in recent years. High costs are deterring not only the uninsured from seeking care, but also many insured people who are struggling with higher deductibles, co-payments and other out-of-pocket expenses as their employers or health plans shift more of the cost burden to them.

Many patients with insurance said they went without care because their health plans would not pay for the treatment or their doctors or hospitals would not accept their insurance. Both insured and uninsured patients said they skipped treatments because they had trouble getting timely appointments, were unable to get through on the telephone, or could not make it to a doctor’s office or clinic when it was open. No doubt a weakening economy, high fuel prices, the home foreclosure crisis and general economic anxiety also played a role.

This was used as evidence in the case for universal medical care. First, I find it surprising (not really, I suppose) that they are so concerned that the high price has discouraged people from getting additional medical care. High prices discourage people from doing all kinds of things; many people eat less food, drive less-safe cars, and live in smaller or less-clean houses than they otherwise would. We can't all afford every treatment, every surgery, or every drug, just like we can't all afford every steak, every car, or every house. The medical care we have is a modern technological advance that costs money.

The second thing I think is funny that the "alarming" number they report of people who put off health care includes things like scheduling appointments and telephone frustrations. Considering how prompt we hear our Canadien and British friends receive care, I don't expect this to get better. And of course the economy had something to do with it.

Technological doping

I heard about both of these two issues in the same day.

The first is about the new Speedo LZR (from The Guardian) racing suit that is apparently pretty far technologically advanced:

It's a swimsuit so revolutionary that one athlete has claimed that it makes you feel like you're "swimming downhill". And, since it was launched in February, 38 world records have been broken by swimmers wearing it. Little wonder, then, that Olympic swimming teams are now falling over themselves to ditch their sponsors in order to get Speedo's LZR Racer swimsuit in the run-up to Beijing...

The suit took nearly four years to develop and involved enlisting the help of Nasa and a technique called computational fluid dynamics, says Jason Rance, head of Speedo's Aqualab, the company's global research and development facility. He says the swimsuit can reduce drag by up to 24%.

This article in Newsweek back in April quoted the coach of the Italian team as saying the swimsuit is technological doping. My guess is that he was only upset because his team has another sponsor. My wife told me she heard a story about it somewhere on NPR (can't find the link) that told me a lot of the other suit makers have since come out with their own versions of the suit.

The second is about a new type of golf ball (from the WSJ).

But it's how the pros hit it those humbling distances, and here at USGA headquarters, in a rather nondescript building out back, is ground zero in the war to keep those distances in check. Dick Rugge, a tall, thin 60-year-old, leads the USGA's efforts to keep the technology of golf balls from ruining the finer points of the game.

It is a battle many critics say was lost long ago. Sixteen players at the Open averaged more than 300 yards off the tee this month, while in the 1990 season, the top player on the PGA Tour averaged less than 280 yards. Jack Nicklaus uses the word "ridiculous" when he talks about the ball's distances.

I think it's funny how people are afraid of technological advancement for athletics. For some reason, we want to be able to keep the games in the same place they were 30, 40, or 50 years ago, equipment-wise, even though we know full well so many others things have changed since then to make comparability impossible. Basketball is probably the most equipment consistent over the years, and everyone knows you can't compare the careers of Lebron James to Michael Jordan to Oscar Robertson. So what if we can't compare Alex Rodriguez to Willie Mays to Babe Ruth or Tiger Woods to Jack Nicklaus to Bobby Jones? Better equipment only enhances the experience for fans and lets the athletes perform the best they can. Why should we limit their ability to perform at a high level just so we can compare their accomplishments to the past?

More visa's?

I laughed at an article in last weeks edition of The Economist ("Beauty and the Geek"):

IT'S not often that fashion models are paired with IT workers, except in the lurid fantasies of computer geeks. But because of a decision made back in 1990 they must compete for the same over-subscribed H-1B, a temporary work visa for specialised occupations. Until 2004, when the government lowered the cap on the number of H-1Bs it issued, it didn't matter so much. But now demand has far outstripped the limited number of visas available, and many foreign models are being denied the chance to sashay down America's catwalks.

Anthony Weiner, a New York congressman, wants to fix this tragic glitch. He has proposed a bill amending the rules so that the models will be reclassified into their own special immigration category. This would free up more visas for the nerds; and it would allow 1,000 models to strut their stuff in America each year, compared with just 349 in 2007, half the annual number admitted between 2000 and 2005.

It could be done in one of two ways, either of which I'd support. First, if it were an "earmark" of available visa's (ie carved out of the 65,000 or whatever H1-B's) then congressmen would be fighting to get special classifications for the highly-skilled, top-of-their-game talent businesses in their state need (ag scientists in IA, biotech in MA, finance PhD's in NY, tech in Ca). Then, I would hope, there would be pressure to increase the number of visa's to accommodate everyone. Second, if we'd give visa's to models in addition to the 65,000 available, we've raised the cap by 1000. Then, again, congressmen will try to get exemptions for businesses in their states, etc. Unfortunately, because the request is for models, I expect any proposed legislation will be mocked and not go anywhere.

Sanctions and Zimbabwe

Dan (not Clark) Griswold at Cato had this to say about imposing economic sanctions on Zimbabwe:

Events of the past few weeks have made it clear that President Robert Mugabe of Zimbabwe is a dictator and a bully who presides over a sham democracy epitomized by today’s mock “election.” But does that sad fact require or even justify imposing sanctions against that already tortured southern African country?...

I share the dismay with Mugabe’s thuggery and mismanagement of the economy, but count me skeptical that trade sanctions, oil embargoes and other economic reprisals would achieve anything positive.

If 165,000 percent inflation, widespread hunger, and mass shortages and unemployment have not undermined Mugabe’s government, Western sanctions are probably not going to make a crucial difference. Zimbabwe’s president and his sycophants will continue to enjoy their palatial homes, catered meals and chauffeured limos. Sanctions would only deepen the suffering of their unfortunate subjects. As our research at Cato has shown, economic sanctions almost never work.

Count me among that group. Because there are so many nation leaders out there willing to support rogue world leaders just to spite the U.S., my thought is that sanctions end up doing nothing more than punishing the citizens rather than the leaders. I think the more we expose the citizens to freedom and the wealth that free trade creates, the more likely they will demand more from their leaders. Cuba is a good example.

Paying the price to stay the same

An IBD editorial pointed me to a McKinsey Global Institute study that stated:

To meet commonly discussed abatement paths, carbon productivity must increase from approximately $740 GDP per ton of CO2e today to $7,300 GDP per ton of CO2e by 2050—a tenfold increase. This is comparable in magnitude to the labor productivity increases of the Industrial Revolution. However, the "carbon revolution" must be achieved in one-third of the time that economic transformation took in the Industrial Revolution if we are to maintain current growth levels while keeping CO2e levels below 500 parts per million by volume (ppmv), a level that many experts believe is the maximum that can be allowed without significant risks to the climate.

That's a heckuva lot. Again, we need to consider what is the cost of doing nothing and compare it to the cost of doing something. The IBD editorial says this increase in CO2 efficiency/use is necessary to maintain our standard of living. I know what their saying, but I wonder if standard of living is the right word. The research says it is necessary to maintain economic growth. To me, that says to maintain the level of increases in the standard of living. And I think it's important to add that it should be regarded as a global increase in the standard of living. And all of that says nothing about our actual ability to achieve the carbon emission goals.

"Barking Cats" and placing blame

Milton Friedman in his book Free to Choose.

The nature of government agencies:

What would you think of someone who said, "I would like you to have a cat provided it barked"? Yet your statement that you favor an FDA provided it behaves as you believe desirable is precisely equivalent. The biological laws that specify the characteristics of cats are no more rigid than the political laws that specify the behavior of government agencies once they are established. The way the FDA now behaves, and the adverse consequences, are not an accident, not a result of some easily corrected human mistake, but a consequence of its constitution in precisely the same way that a meow is related to the constitution of a cat. As a natural scientist, you recognize that you cannot assign characteristics at will to chemical and biological entities, cannot demand that cats bark or water burn. Why do you suppose the situation is different in the social sciences?

Who's to blame for pollution:

In the case of pollution, the devil blamed is typically "business," the enterprises that produce goods and services. In fact, the people responsible for pollution are consumers, not producers. They create, as it were, a demand for pollution. People who use electricity are responsible for the smoke that comes out of the stacks of the generating plants. If we want to have the electricity with less pollution, we shall have to pay, directly or indirectly, a high enough price for the electricity to cover the extra costs. Ultimately, the cost of getting cleaner air, water, and all the rest must be borne by the consumer. There is no one else to pay for it. Business is only an intermediary, a way of coordinating the activities of people as consumers and producers.

The costs of regulation

Two small bits from yesterday's WSJ editorial page.

The first ("Australia vs. eBay") is described as follows:

At issue is eBay's proposal to require its Australian customers to use its proprietary payment system, PayPal, for transactions. The Australian Competition and Consumer Commission thinks the move is anticompetitive because eBay's position as Australia's "leading online marketplace" means that shutting out other payment methods would hobble them unfairly...

Little wonder that the main objectors are the sellers, who pay PayPal's fees. Most, like Phil Leahy of the Professional eBay Sellers Alliance, say they're defending consumer choice. But given their own financial stake in the outcome, they're not exactly disinterested consumer champions. They object to the price eBay wants to charge. No regulation is forcing these sellers to use eBay.

The other "aggrieved" parties are banks and credit card companies such as the Australian Bankers' Association and American Express, which argue that they'll lose business if eBay shuts them out. EBay responds that other forms of payment -- namely bank-to-bank transfers and credit cards -- aren't as cheap or secure as PayPal. These companies could respond by improving their products. Instead, they're making their case to the antitrust regulator rather than to consumers.

It goes back to the idea that much antitrust regulation might be enacted in the name of choice for consumers (as if that alone is the goal) but is really about businesses that compete trying to make it easier on themselves. (Don Boudreaux has a great podcast about that here.)

The second ("Hairspray on Trial"):

The "trial" here involved a London hair salon owner named Sarah Desrosiers and an aspiring stylist, Bushra Noah, whose interpretation of her Muslim faith requires her to wear a headscarf at all times. Ms. Noah applied for a job. In their one brief meeting last year, Ms. Desrosiers decided that her refusal to show any hair wouldn't fit the trendy, "alternative" image that her Wedge salon in King's Cross seeks to project. Patrons and passersby, by her reasoning, like to see where their stylists' tastes run to – in Ms. Desrosiers's case to a dyed pink and blonde do on full display while she works.

Noah took her to court and won.

[The tribunal] found a novel crime: Ms. Desrosiers was guilty of "indirect discrimination" and causing Ms. Noah "injury to feelings."

The millionaire amendment's day is past

Gratefully.

Today, the SCOTUS rules against the millionaire amendment in the McCain-Feingold campaign finance reform bill. The amendment basically set limits on self-financing by wealthy folks running for office. It has the effect of stacking the deck against challengers in favor on incumbents. I didn't read the full opinion (only some snipits at the Club for Growth), but I really liked this part of the argument:

The argument that a candidate’s speech may be restricted in order to “level electoral opportunities” has ominous implications because it would permit Congress to arrogate the voters’ authority to evaluate the strengths of candidates competing for office.

Different candidates have different strengths. Some are wealthy; others have wealthy supporters who are willing to make large contributions. Some are celebrities; some have the benefit of a well-known family name. Leveling electoral opportunities means making and implementing judgments about which strengths should be permitted to contribute to the outcome of an election. The Constitution, however, confers upon voters, not Congress, the power to choose the Members of the House of Representatives, Art. I, §2, and it is a dangerous business for Congress to use the election laws to influence the voters’ choices.

I very much agree with the decision. I think all of these campaign finance spending limits do nothing more than limit political speech. As David Keating at the Club laments,

The case was decided 5-4, and it is very depressing to read the dissent. Four justices endorsed the idea that Congress could impose spending limits on campaigns. This wasn't even raised in the briefs by any of the parties in the case as far as I know.

It shows that the First Amendment is hanging by a thread.

Scary.

UPDATE: I realize I was wrong on the rules. The amendment allows the opponent of the millionaire to raise up to three times the per-person contribution limit.

"Crisis" = Excuse

I haven't been following politics long enough to have seen a "crisis" while under a Democratic administration. I've just assumed that Republicans would be the first to call a crisis right now if Kerry had been elected in 2004, even if it weren't necessarily true. I truly don't believe we're in a crisis now, though I admit things could be worse.

Anyway, in a post at Cato about the effects of trade on GDP, Daniel Griswold makes an interesting observation (that I, obviously, have never heard before):

Politicians love a full-blown crisis because it can be used to justify all sortsof regulatory and spending programs.

So if you're skeptical of business, you're probably looking for a reason to regulate them. All you need is to call a crisis so you have an excuse to regulate. Truthfully, though, conservatives have kind of gotten their own "crisis" with oil prices as an "excuse" to drill for more oil. Funny how that works out. The difference to me is that liberals see a crisis as a chance to regulate while conservatives see it as a chance to deregulate.

Kelo repercussions

The landmark eminent domain case was Kelo v. City of New London. It decided that government's could use eminent domain to take property from one private landowner to sell it to another private landowner (usually a developer). Well, it turns out things didn't work so well for the developer. (HT: Club for Growth)

Remember that landmark Supreme Court ruling known as the Kelo decision? The court decided that eminent domain allowed the city of New London, Connecticut, to seize a private owner's land for economic redevelopment by another private owner. The ruling was very unpopular and forced Susette Kelo to sell her home, which she never wanted to leave.

Now, three years later, Kelo's house has been torn down and the lot where it once stood is vacant. In fact, Real Clear Markets reports that there is no new construction in the area because the city-sponsored developer has been unable to secure financing - because interest is minimal.

It looks like government isn't as good as we thought at picking what's best for the city.

Health care lacking north of the border

Advocates of nationalized/socialized health care frequently point to Canada and Great Britain as successful models. I personally don't know enough of the details to argue. An IBD editorial had an interview, or something like it, with Claude Castonguay, the "father of Quebec medicare", the government health care plan that went nationwide. Apparently he's lost faith in its efficacy:

"We thought we could resolve the system's problems by rationing services or injecting massive amounts of new money into it," says Castonguay. But now he prescribes a radical overhaul: "We are proposing to give a greater role to the private sector so that people can exercise freedom of choice."

Castonguay advocates contracting out services to the private sector, going so far as suggesting that public hospitals rent space during off-hours to entrepreneurial doctors. He supports co-pays for patients who want to see physicians. Castonguay, the man who championed public health insurance in Canada, now urges for the legalization of private health insurance.

The article goes on to give the all-encompassing reason the programs won't work: "The problem is that government bureaucrats simply can't centrally plan their way to better health care." It goes back to my argument that you can't legislate prosperity.

New format

(not that anyone will notice).

Anyway, upon deciding that I've become too busy to make only one massive post each day, I'll post a couple times a day (hopefully), only commenting on one issue or article. If I see several unrelated articles worth looking into, maybe I'll put them into one post.

Wednesday's interesting reads - 6/18/08

"New York's Novel Way to Kill Charter Schools" WSJ op-ed by Amy Friedman and Peter Murphy:

"Recently, Tapestry won approval to add high school grades, and this is where the trouble started. To accommodate these new grades as well as serve the other students, the school decided to build a new building. It expected to pay about $8.5 million.

But last autumn, as a sop to labor unions, Labor Commissioner M. Patricia Smith ordered charter schools to adhere to state "prevailing wage" requirements, which mandate paying union wages for construction projects and which typically add 30% or more to the cost of a project. In Tapestry's case, it would add more than $1.5 million, putting the school's building expansion plans on hold."

Amy Friedman and Peter Murphy wrote a fantastic piece ("New York's Novel Way to Kill Charter Schools", June 18) that highlights the problems with government officials picking winners and losers. In their case, the choice was between organized labor and education alternatives, with the former being selected at the expense of the latter. Unfortunately, government does this all the time: from FDR's restriction of farmland that artificially increased prices for farmers to the mandated use of certain technologies like catalytic converters, scrubbers, and ethanol to local municipalities preventing the expansion of big-box stores to protect independent retailers. Since elected officials have made it known they are willing to hand out political favors to certain groups at the expense of others, those groups that can organize themselves would be foolish not to hire lobbying firms to help get pass legislation favorable to them. Is it any wonder, then, that lobbyists have become the villains du jour? Why are we still so comfortable with the idea of politicians arbitrarily picking these winners and loosing rather than letting the choice fall to all of us as we go about living our lives?

Matt Hutchison
Atlanta, Georgia

"Lawmakers vow to fight InBev-Anheuser deal" Reuters:

"After meeting with InBev's chief executive, Sen. Christopher Bond, a Republican, issued a statement saying, "My Missouri constituents say, 'This Bud's not for you'."

InBev CEO Carlos Brito has said he wants a friendly deal and vowed to keep the home of Budweiser, America's 'King of Beers,' in St. Louis. He also hired several Washington lobbying firms including one headed by former Republican Senate Majority Leader Trent Lott.
"When you hear promises, St. Louis has had bad experiences having promises turning into pink slips," Bond, a Republican, told Reuters.

Missouri's other U.S. senator, Democrat Claire McCaskill, sent a letter to Anheuser's board of directors on Wednesday. She urged them to reject the deal and consider what the brewer represents to her state and the country.

U.S. Rep. Russ Carnahan, a Democrat from Missouri, called Anheuser-Busch an American icon and said it is consistently ranked one of the top U.S. companies.

"It would be very shortsighted for the board or shareholders to accept short-term stock values at the expense of the long-term benefit of the company," Carnahan said."

This kind of stuff is so stupid and such a waste of time. Why do we care about who owns the company? It isn't a strategic interest.

"John McCain's SimCity Energy Plan" by Jerry Taylor with Cato:

"For those of you not in the cultural “know,” Sim-City is a long-standing series of computer games which asks the player to essentially play the role of a Stalinist super-planner. What to build, where to build, and how people are to relate to all those buildings in your custom-designed city is up to you, the all-knowing, all-powerful uber-planner.

It’s all good fun in the privacy of your own home (I guess), but is this the sort of game we want the next President to play? I’m going to go out on a limb and say no. John McCain, however, seems to disagree.

Consider, for instance, John McCain’s call earlier this week for the United States to build 45 new nuclear power plants by 2030 and another 55 sometime after that. The first question that comes to mind is, why 45? Did the McCain brain trust engage in some high level economic computer modeling to discover that the optimum number of new nuclear power plants is not 42, 47, or some other number … but the nice, round number of 45? I’m going to guess that they did not. I’m going to surrender to my cynical alter-ego and posit that, if one were to ask the question, “Sen. McCain, how exactly did you come to the determination that the economically optimal number of new nuclear power plants is 45 new facilities over the next 22 years?” the answer you would get would likely be totally incomprehensible."

Monday's interesting reads - 6/16/08

"Fiscal Poison Pill" NY Times op-ed by Paul Krugman (HT: RealClearPolitics):

"Anyway, back to my main theme: looking at the tax proposals of the two presidential candidates, it’s remarkable and disheartening to see how effective President Bush’s fiscal poison pill has been in restricting the terms of debate."

The basic idea is that the tax cuts have restricted what kinds of programs can be implemented by an Obama presidency because he'll have less money with which to do it. I actually agree with Paul Krugman. Not that I think this is a bad thing though, as he does. Milton Friedman said he was always in favor of tax cuts because they have the effect of constraining government.

Greg Mankiw had this to add:

"In other words, according to Krugman, the Bush tax cuts may well cause government under President Obama to grow less than it otherwise would.

Roughly the same story was told in Robert Reich's highly entertaining memior of the Clinton years, Locked in the Cabinet. Reich suggests that the Reagan tax cuts and resulting deficits constrained the Clinton administration from pursuing all the spending programs that Reich wanted.

Krugman and Reich view this situation as entirely negative, for they favor increased government spending. But for those classical liberals who prefer smaller government, their storyline supports the well-known and often maligned Starve the Beast theory."

The weekend's interesting reads - 6/15/08

"America's Berlin Wall" in The Economist:

"Because of pending legislation on President Bush's desk that is expected to become law by June 16th, any American who wants to surrender his passport has only a few days to do so before facing an enormous penalty.

That penalty is buried in an innocuous piece of legislation with the veto-proof name, Heroes Earnings Assistance and Relief Tax (HEART) act. The new law means active American soldiers will benefit from tax relief. To pay for that, Congress has turned on expats, especially those who, since new tax laws in 2006, have become increasingly eager to give up their citizenship to escape the taxman.

Under the proposed legislation, expatriates surrendering their citizenship with a net worth of $2m or more, or a high income, will have to act as if they have sold all their worldwide assets at a fair market price. If the unrealised gains on these assets exceed $600,000, capital-gains tax will apply. A study by the Congressional Budget Office guesses that the new law will progressively net the government up to $286m over five years. It is unclear, however, why people would suffer the consequences if they did not expect to save money in the long run by escaping American taxes.

That expats want to leave at all is evidence of America's odd tax system. Along with citizens of North Korea and a few other countries, Americans are taxed based on their citizenship, rather than where they live. So they usually pay twice—to their host country and the Internal Revenue Service. As this makes citizenship less palatable, Congress has erected large barriers to stop them jumping ship. In 1996 it forced people who renounced citizenship to continue paying income taxes for an extra ten years. Theoretically, the new law allows for a cleaner break."

This is why I support tax competition. People should have the right to opt-out of taxes paid to a country by renouncing citizenship and moving to another. Laws that penalize you for wanting to pay less in taxes are ridiculous.

"The Funny Thing About Freedom" Barron's editorial by Thomas Donlan (I don't have a link because my free subscription didn't come with online access):

"The current Democratic majority has been trying to put Davis-Bacon [a 1931 law created under Hoover that says federal construction projects must pay local 'prevailing wages', which has become synonymous with 'union wages, and then some'] provisions into more and more spending measures. For example, the farm-bill provisions that mandate using corn to make ethanol also mandate Davis-Bacon wages for construction of ethanol plants, as well as for other alternative-energy facilities.

This is contemporary political economics in a nutshell: Take something everybody would like to have, such as wind energy, solar power and gasohol, make it less affordable, then mandate it anyway."

"Meeting America's Energy Needs" letter to WSJ editorial board by Charles Schumer:

"Perhaps the Journal would prefer to power up a time machine and relive the 1920s when there were no guards whatsoever in place to mitigate risks to the U.S. economy. But just as the Great Depression exposed the need for better regulation of stocks, the volatility in energy futures trading shows the need for similarly reasonable and thoughtful checks."

I submitted the following letter in response:

"Senator Charles Schumer, in his June 15th letter (“Meeting America's Energy Needs”), commits a common mistake of big-government proponents by essentially asking of the editorial board (and by extension readers like myself), “Surely you wouldn’t want to go back to the low-regulation days of the 1920’s, would you?”. He then perpetuates the all-too-common misconception that the stock market crash of 1929, brought on by the scary loosely-regulated 1920’s, was the sole cause of the Great Depression (rather than, say, government meddling by Hoover and Roosevelt combined with a contractionary monetary policy at the Federal Reserve).

I personally have many reasons why I wouldn’t want to go back to the 1920’s, but a smaller regulatory environment that “mitigate[s] risks to the U.S. economy” is not one of them. Senator Schumer assumes that all of us have as much faith in the government (read: him and his colleagues from either side of the aisle) as he does when it comes to regulating the economy and energy markets. Given the record of Washington over the years, I’d prefer they didn’t try to do us any more favors by interfering with well-functioning markets, no matter how much Senator Schumer feels they need to get involved."

"Economics: How to Teach it and How Not To" by Arnold Kling:

"It's hard to imagine the invisible hand. After all, it's invisible. Leaving things alone, leaving people to their own desires and dreams would seem like the last way to make the world a better place. So most people have a natural disposition for using the government to make things better. It would seem that managing something is always better than leaving something unmanaged. But it's not true. I think the world would be a better place if more people understood the virtues of unmanaged, uncoordinated, unorganized, undesigned action."

This is a quote from Russell Roberts' new book The Price of Everything.

Friday's interesting reads - 6/13/08

Sorry no posts yesterday. Busy.

"Drilling in ANWR: What's Not to Like?" by Mark Perry on Seeking Alpha:

"From ANWR.org:

'The U.S. economy benefits from domestic production when new construction, service, manufacturing, and engineering jobs are created. These jobs occur in all 50 states. A national impact study by Wharton Econometrics estimates total employment at full production in ANWR to be 735,000 jobs. Federal revenues would be enhanced by billions of dollars from bonus bids, lease rentals, royalties and taxes.'

And these jobs would be created across the country, not just in Alaska. To see the number of jobs created by state, go here. And that's just for ANWR, and doesn't count the new jobs from oil production in the OCS.

Aside from possible environmental concerns about developing America's 140 billion barrels of domestic oil reserves, what's not to like? We'd get lower oil and gas prices, more jobs and increased tax revenues. Seems like those outcomes should be welcomed by politicians of any party. And they'd even likely get the support of union members."

After reading some of the comments, I posted this comment:

"a few points...

why do we keep talking about our "addiction to oil"? as far as i can tell, using the same logic, i'm addicted to all kinds of things: air, milk and bread, concrete and steel (looking out my office window at several buildings 30 stories +), etc. rather, I choose to use oil b/c its cheap.

as far as the effect of drilling on the environment? first of all, we shown that with recent technology, the impact is minimal. second, we effect the environment every time we turn around. so what? so do animals. so does falling water. as far as science tells us, dinosaurs died by some crazy natural phenomenon. beavers build dams - cute; humans build dams - disgusting. why are humans less natural than anything else?

so what if we run out of oil? as we run out, the price of oil will skyrocket. that, and that alone, is all the incentive we need to go to other options. the more expensive oil is, the better other option will be. so why, in the meantime, should we limit the use of our resources? we can see what hoarding of food has done for other countries. we don't need artificially higher priced energy.

as for who benefits when we drill for oil in anwr? how about tax payers? the oil companies don't own the land right now. the land will be leased. and maybe we charge by the barrel for extraction. any money the treasury receives from selling the rights to extract is less money taxpayers will have to pay. (that of course assumes you think government will lower taxes; i personally think they'll simply spend more.)

why so we need some kind of "race to the moon" type government-funded program? why are we as a society better off because we went to the moon? no one lives there. no one's close to living there. we don't vacation there. the government decided we needed to go there, so we spent a lot of money doing it. i'm sure there was some rocket or satellite technologies that were discovered in the process, but was it worth the cost? i'm skeptical that it was. i can't think of many (any?) technological directions the government has chosen for us that have been better at the process than the market.

and to make a short list of our future energy sources and say "that's it" is ludicrous and shortsighted. how in the world can any of us predict the direction of energy? we can't predict what the market will do next week. energy innovation in 20 yrs? forget about it. didn't you see "back to the future"? using banana peels and beer cans was imaginary, but you can count on innovation. which speaks to one persons comments about t. boone pickens thoughts about the efficiency of wind. my belief is that you can't base the efficiency of an energy source right now on someone's investment. he's betting, just like al gore and others, that we will either 1) be mandated by government to use at energy (you don't think they aren't funding the green lobby, do you?) or 2) seriously run out of other energy sources at which time the relative efficiency of these energy sources will increase dramatically."

"Fly the unfettered skies" on Free Exchange:

"And so ex-American Airlines official Bob Crandall argues that:

'Collectively, airlines have lost over $13 billion since deregulation, and that's after you throw all the profitable years into the mix. Carriers are cutting routes fast, but with low-fare competitors still growing, so far they haven't been able to raise fares enough to cover costs. We've seen 24 airlines go under or go bankrupt in the past six months alone...Re-regulation would suck. But the alternative could be just as bad.'

Felix Salmon asks, bad for whom?

'If lots of airlines go bankrupt, fine. It's not going to stop them flying, most of the time. And if they do stop flying, that's fine too. If you want to look at the effect of deregulation, don't look at profits, look at passengers. Passenger miles on airplanes in the US have been steadily increasing since deregulation, and continue to increase despite all those industry losses...
If the legacy carriers become a thing of the past, that might well be bad for Bob Crandall's net worth. But the rest of us won't mind too much: we'll just go the way of the Europeans, and fly other airlines instead.'"

"Political Brouhaha" by Brandon Arnold with Cato:

"InBev, a giant Belgian beer conglomerate, has made a bid to purchase Anheuser-Busch...

Anheuser-Busch is of course, headquartered in St. Louis. So it should come as no surprise that Missouri politicians have sprung into action to block the deal.

Senator Claire McCaskill is “nervous” and “upset” and plans on contacting the board of director’s at Anheuser-Busch to urge them to stop the deal. Governor Matt Blunt finds the deal “deeply troubling” and is frantically searching for a state law that would allow him to intervene.

This is yet another case of government officials trying to meddle in the free market to protect parochial interests. Thankfully, early indications suggest that despite the pleadings of Missouri’s elected officials, the federal government will not intervene in the possible deal."

This is really no different from the talk down here in Georgia from our senators about how they would oppose any deal between Delta and Northwest that didn't remain headquartered in Atlanta and keep the Delta name.

Wednesday's interesting reads - 6/11/08

"A Vote for McBama" by Robert Samuelson (HT: Greg Mankiw):

"But for me, McCain does have one provisional and accidental advantage. By most appraisals, the Republicans will get slaughtered in congressional elections, and I have a visceral dislike of one-party government. It didn't work well under Bill Clinton or George W. Bush. Divided government doesn't ensure good government, but it may limit bad government by checking the worst instincts of both parties."

As much as I'd like to believe that a Republican House working with a Republican Senate workign with a Republican president would pass Republican legislation, I know (because we saw) it won't. Democrats, I'm afraid, would be different. I'm afraid they will pass all kinds of left-wing, populist legilation. I can't help but think of all that was passed in the first months of FDR's presidency. I could be wrong though.

Don Boudreaux says a very similar thing here:

"I'm flabbergasted by the faith that people - left, right, and center - put in politics and in the candidates du jour. Millions of Americans today famously believe that a President Obama will fundamentally "change" America (into what, though, is unclear). And today, David Brooks suggests that a President McCain might well quash special-interest-group politics and turn Uncle Sam's attention chiefly to the general interest ("Talking Versus Doing," May 20).

These are delusions. I'll bet $100 that, regardless of which candidate wins the White House, in 2013 the federal budget will still contain agricultural subsidies and tariffs that take billions of dollars from the many to give to the few - that a majority of Members of Congress will continue to successfully sponsor earmarks - that the unfunded liabilities of Social Security and Medicare will be no smaller than they are today - and that partisan bickering will be every bit as much a part of the daily news as it is now."

"The Entitlement Mess" by John Stossel (via Townhall):

"Entitlement? How can you be entitled to someone else's money?

To finance "entitlement" programs, the government threatens force against the taxpayers who provide the money. Why are people who favor compulsion called humanitarians, while those who favor freedom are stigmatized as greedy? ...

"Change We Can Believe In Is All Around Us" WSJ op-ed by Brian Wesbury:

"It's also what everyone seems to want – change. Sen. Obama promises to provide "Change We Can Believe In." Sen. McCain suggests that "the choice is between the right change and the wrong change." If it's the war that is the focus of all this talk about change, well, that's understandable, and maybe people really do want change. But if it's the economy, it's hard to imagine that change could happen any faster.

In fact, the U.S. economy (really, the global economy) is transforming at an absolutely astounding rate. We're living in Internet Time, where policies and their consequences travel the world at the speed of light. The normal human reaction to such a rapid pace of change is to be overwhelmed, stressed out, anxious and fearful. As a result, it is probably true that when voters listen to talk about change, what they really hear are promises of "no change," which would be a huge difference from the status quo. They just want things "the way they were.""

Effectively what he's saying is that most of us are actually conservative in the classical sense: we want things to stay the way they are (or, have recently been). He's right. Most of us are very scared of change. Change brings insecurity and uncertainty, both emotionally and financially.

"Americans have had it so good, for so long, that they seem to have forgotten what government's heavy hand does to living standards and economic growth. But the same technological innovation that is causing all this dislocation and anxiety has also created an information network that is as near to real-time as the world has ever experienced...

Both Mr. McCain and Mr. Obama view the world from a legislative perspective. Like the populists before them, they seem to believe that government can fix problems in the economy. They seem to believe that what the world needs is a change in the way government attacks problems and fixes the anxiety of voters. This command-and-control approach, however, forces a misallocation of resources. And in Internet Time this will become visible in almost real-time, creating real political pain for the new president.

In contrast to what some people seem to believe, having the government take over the health-care system is not change. It's just a culmination of previous moves by government. And the areas with the worst problems today are areas that have the most government interference – education, health care and energy."

"Another Failure on Climate Change" NY Times editorial:

"There was blame enough to go around. Republicans and some Democrats complained — not without reason — that the bill’s manager, Barbara Boxer, had spent too little time in preliminary hearings discussing its potential economic impact. She also confused matters by adding last-minute amendments, including one aimed at reducing the federal deficit, that seemed to have little to do with the issue at hand.

The timing was terrible. A bill that would inevitably raise energy prices did not sit well with senators dealing with record gasoline prices. And a Republican leadership more interested in protecting industry than the environment behaved like babies, at one point spitefully forcing a complete reading of the 492-page bill, sapping any political momentum."

I submitted the following letter:

"In your June 11 editorial “Another Failure on Climate Change”, by essentially framing the discussion as choosing between “protecting industry and [protecting] the environment”, you established an inappropriate dichotomy. Very few on the “industry” side of the debate absolutely don’t care about the environment, just like very few on the “environment” side absolutely don’t care about industry; we all have a vested interest in both. What this country needs before we adopt environmental policy like this, therefore, is an open, frank discussion of the tradeoffs between environmental protection and economic prosperity. We all make tradeoffs similar to this all the time: almost no one eats fast food or smokes a cigarette totally unaware of the health tradeoffs, but they do it anyway. Let’s not rush Congress, and the rest of America, down a new regulatory path until we all are comfortable with how much we will be asked to sacrifice in terms of prosperity. Only then can we realistically decide if it’s worth it."

"How the Senate Can Help Ted Kennedy" WSJ op-ed by Steven Walker and Ronald Trowbridge:

"The recent news that Sen. Ted Kennedy has brain cancer sharply focuses national attention on the tragedy of all forms of cancer. The senator has a malignant glioma so difficult to treat that half of those diagnosed with it die within a year, and nearly all are dead within two years.

There are many promising new cancer treatments in the pipeline, but under current Food and Drug Administration (FDA) regulations, almost no one gains access to them, no matter how dire the need or how compelling the evidence that the drugs work.

Most people receiving a terminal cancer diagnosis die before the most promising treatments in the pipeline reach them. Why? Because those tragic events occur on the wrong side of the magical moment when someone at the FDA puts an approval letter on a fax machine declaring the drug they needed – and never got – is 'safe and effective.'"

I sent the following letter:

"Unfortunately, it isn’t until someone close to us is personally affected before we realize the costs of a particular policy. Steven Walker and Ronald Trowbridge obviously have. Let’s hope our United States Congress will soon. Messrs Walker and Trowbridge discussed in their op-ed what the Senate can do for one of their own, and my hope is that they act. It’s plain to me just how over-regulated the pharmaceutical industry is (to say nothing about the broader health care industry). I think it’s terrific that we’ve legislated a way for more potentially life-saving medicines to reach AIDS patients; it’s time we widen the tent to include other illnesses. The process of FDA approval costs the pharmaceutical industry and taxpayers billions and billions of dollars every year, but the most important cost – lost lives – is the hardest to quantify. Has anyone stopped to compare the number of lives saved by keeping potentially dangerous medicines off the market to the number of lives lost because a drug that went on to get approved took 10 years to get to market instead of 7 (or fewer)? Let’s make sure we’re not sacrificing the lives of the many to protect the lives of the few."

Tuesday's interesting reads - 6/10/08

"Report: Majority of Sellers in City Are Overcharging for Milk" New York Sun by Hope Hodge (HT: Club for Growth):

"The "Milk Money" survey, released yesterday by elected officials at City Hall, found that an overwhelming majority of milk distributors, from supermarkets to bodegas, overcharged an average of $0.40 for the grocery staple.

New York State's 17-year-old milk price-gouging law regulates the price of milk based on the size of the retailer and costs of production, among other factors. The price threshold is recalibrated monthly: This month, it is $3.93 for a gallon, $2.01 for a half-gallon, and $1.04 for a quart...

But a spokesman for the Neighborhood Retail Alliance, Richard Lipsky, took issue with her statement, saying the council's focus should be on reducing taxes and regulations, not adjusting price ceilings.

'If the retailers are doing such a good job gouging, they'd be going out of business,' he said. 'The cost of doing business — that should be the final objective.'"

"Out of Sight" NY Times op-ed by Bob Herbert:

"America needs to dream bigger, and in this election year, job creation should be issue No. 1. If I were running for president, I would pull together the smartest minds I could find from government, the corporate world, the labor movement, academia, the nonprofits and ordinary working men and women to see what could be done to spark the creation of decent jobs on a scale that would bring the U.S. as close as possible to full employment.

We’ve maxed out the credit cards, floated mindlessly in stock market bubbles, refinanced mortgages to death — now’s the time to figure out how to put all Americans to work."

Why does he think that a group of people can conjure up some way to get to full employment? Do we not learn from history? How many committees, boards, departments, etc were charged with employment, food rationing, or technology innovation during Russia's communist years to no avail? If we want people to be employed, we need to get out of the way of entrepreneurs starting companies and let the people get paid what they're worth.

"The Market and the Government" by Arnold Kling:

"These stories illustrate that markets adapt while government regulation can exacerbate problems. However, I doubt that this will alter the standard narrative, which is that every imperfection in markets requires more government regulation."

He quotes two article from The Washington Post. The first shows how the market adapts to higher prices; the other shows how the government makes problems worse (or creates them in the first place).

"Food Fight" by Alex Tabarrok:

"In a story rich with irony the Senate, led by Democrat Diane Feinstein, has voted to privatize its restaurants and food services. The House privatized twenty years ago. The result? Sort of like East and West Berlin.

In a masterful bit of understatement, Feinstein blamed [millions of dollars in losses] on "noticeably subpar" food and service. Foot traffic bears that out. Come lunchtime, many Senate staffers trudge across the Capitol and down into the basement cafeteria on the House side. On Wednesdays, the lines can be 30 or 40 people long.

House staffers almost never cross the Capitol to eat in the Senate cafeterias.""

"Obama Fires Back on Taxes" by Jackie Calmes for the WSJ:

"Barack Obama dismissed as old-style politics John McCain's and the Republican Party's warnings that he would be a tax-and-spend liberal. Most Americans, Sen. Obama said, would pay lower taxes if he is elected president.

The presumed Democratic nominee, taking questions from reporters Tuesday, also indicated he would raise the 15% capital-gains tax on the income from sales of investments to about 20%--not the near-doubling to 28% that Republicans and others have warned Sen. Obama would seek and would put the economy at some risk by doing so.

Sen. Obama said of the 20% rate, "my discussions with people like Warren Buffet indicate that it will probably not have any significant impact in terms of investment." Also, he said he would exempt small businesses and start-up companies from capital-gains taxes altogether, unlike Sen. McCain.

"You can get to a point where taxes are so burdensome on businesses that it inhibits their investment and plants and equipment, research and development. But nobody's talking about huge shifts in our tax system," Sen. Obama said."

Three thoughts. First, the question of raising taxes isn't about "how many" pay lower taxes. The question is "how much" is the total tax burden on the entire economy. From what he says, the total tax burden will increase. He is simply buying votes by promising the lower-income households they will pay less in taxes. Second, how would Warren Buffett know how millions of people will respond to a 5% increase in the capital gains tax? If he were a perfect forecaster, he's be a lot wealthier than he is right now. Third, if taxes are burdensome and inhibits investment for small businesses, why does the same not apply to large businesses?

"Why do people oppose globalization?" by Tyler Cowen:

"Rodrik himself seems to object to when Americans trade with countries in which first world labor standards are violated. But doesn't such trade raise wages in these countries and also give a long-run boost to labor standards? And where does the net unfairness lie? Haven't the Western powers -- if only through imperialism -- usually treated these countries much worse than vice versa? Didn't we steal Panama from Colombia for instance and take away a huge chunk of Mexico? (Were Europeans so nice to the Ottoman Empire?) Maybe the American worker ought to feel those folks deserve a bit of regulatory arbitrage (and that's not what most of the trade is based upon) in return. But it is striking how infrequently such a fairness calculus -- whether correct or not -- is even considered. That again is because most people engage in "in group, out group" thinking.

The bottom line is that most people support their countries to a highly irrational degree in most international questions or disputes."

This is something I've thought a little about lately. Why is it that we feel one group close to us (other our families maybe) is more deserving of our business than another? Why are we more interested in protecting the livelihood of a group of people in another state than a worse off group of people in another country? I read a comment somewhere that said how the person favors their family over their neighbor (understood), their neighbor over someone across town, someone from their town over someone from another town, someone in their state over someone from another state, and someone from another state over someone from another country. Why is that?

Alex Tabarrok makes a point along the same vein of argument here:

"Rodrik may be upset that people in other countries have poor on-the-job safety but (for the most part) workers who lose their jobs to foreigners really don't give a damn. What U.S. workers are upset about is losing their job and if asked to name the problem the U.S. worker will almost certainly say it's the low wages of foreigners not their poor working conditions. Moreover, the worker's diagnosis of the problem (problem to him or her that is) is correct and Rodrik's diagnosis (poor working conditions) is wrong. Why? Because higher safety standards in foreign countries would cause foreign wages to fall and thus would not much reduce competition from abroad, which is what the worker cares about. I assume that Rodrik knows this even if the worker does not.

Rodrik's deeper argument is also peculiar, especially for a liberal economist. A liberal economist should understand that for the most part labor, environmental and consumer safety standards are chosen not imposed (not always, of course, but for the most part in the long run). In the United States we have a lot of job safety because we are wealthy and are willing to pay for job safety with a reduction in our (already high) wages. In other words, Americans buy a lot of on-the-job safety for the same reasons we buy a lot of smoke alarms and DVD players. (OSHA has very little effect on job safety.) Job-safety is thus a choice Americans make about what to consume - we use some of our wealth to buy safety both at home and at work and some of our wealth to buy DVD players. Thus, to argue that we shouldn't trade with foreigners because they don't have the same job safety as Americans makes about as much sense as arguing that we shouldn't trade with foreigners because foreigners don't buy as many DVD players as Americans."

"Obama Should Learn from King Canute" by Juan Carlos Hidalgo of Cato:

"Legendary tale of King Canute:

'King Canute (995-1035) ruler of England, Denmark and Norway, was surrounded by sycophants. One day, he ordered his courtiers to take him to the sea shore, where he challenged them, saying, ‘Do you believe that I can halt the sea?’ None disputed the fact, so Canute commanded the sea to cease its upwards march. But soon Canute’s feet were covered in water, showing that even he was unable to hold back the tide.'

Legendary tale of candidate Obama:

'I am absolutely certain that generations from now, we will be able to look back and tell our children that this was the moment when… the rise of the oceans began to slow and our planet began to heal.' "

Monday's interesting reads - 6/9/08

"Europe Fears a Post-Bush Unilateralism, This Time on Trade" by Eduardo Porter for the NY Times (HT: Club for Growth)"

"The Democrats’ vocal hostility to trade is starting to scare many of America’s best friends. As Barack Obama and Hillary Clinton have bashed China and a variety of free trade agreements, allies who have been yearning for an end to President Bush’s in-your-face unilateralism are worried that a Democratic president may be just as undiplomatic, and unreasonable, when it comes to economic protectionism...

Most economists agree that trade plays a small role in the deteriorating fortunes of less educated American workers. But as their wages have sagged, their pensions have shrunk and their health insurance has disappeared, trade has become the scapegoat. Politicians, especially but not solely from the Democratic Party, have been eager to capitalize on those anxieties...

Before this country stumbles into a trade war, all political leaders would benefit from a careful examination of how other wealthy democracies have found ways to cushion economic blows on the most vulnerable and make trade more palatable to their workers.

More generous social policies are a far better choice than protectionism."

I've never understood how Obama reconciles his attacks on Bush's unilateralism, saying he will restore the harm he created through his foreign policies, with his own economic unilateralism of pulling our of trade agreements. On another note, I hope that a broader safety net isn't the price we have to pay for free trade.

"A Different Consensus" WSJ weekend editorial:

"Scarcity is a core economic concept, though politicians and even many economists prefer to ignore it. There isn't an unlimited amount of money to be spent on every problem, so choices have to be made. The question addressed by the Copenhagen Consensus Center is what investments would do the most good for the most people. The center's blue-ribbon panel of economists, including five Nobel laureates, weighed more than 40 proposals to improve the world by spending a total of $75 billion over the next four years.

What would do the most good most economically? Supplements of vitamin A and zinc for malnourished children.

Number two? A successful outcome to the Doha Round of global free-trade talks. (Someone please tell Barack Obama.)

Global warming mitigation? It ranked 30th, or last, right behind global warming mitigation research and development. (Someone please tell John McCain.) The nearby table lists other rankings.

"It's true that trade doesn't immediately save lives," explains Bjorn Lomborg, the political scientist who heads the Copenhagen Consensus Center. "But it's proven that when people have more money" – as tends to be the case when trade barriers fall – "they improve their health, their education and so on." The resulting prosperity reduces such problems as malnutrition and disease, while improving education. All three of those ranked high on the priority list."

"Milton Friedman Opposed a Pareto Improvement" by Bryan Caplan:

"One of Milton Friedman's most famous lines: "You cannot simultaneously have free immigration and a welfare state." He said it in a 1999 ISIL interview, and I've heard it quoted dozens of times...

Actually, I think Friedman's wrong. Yes, the U.S. welfare state pays more than most people on earth earn. But once immigrants arrive here, few of them want to settle for a welfare check; they want to earn some real money. In fact, once you realize that the welfare state is primarily about helping the old, not the poor, it turns out that immigration may be the only way for aging countries to sustain their welfare states."

I agree. I don't immigrants are here for welfare, or else you'd be hearing people talk about cracking down on illegal immigration by cracking down on welfare. Instead, we're cracking down on illegal immigration by cracking down on jobs. In fact, I've often heard the media say something to the effect of "If we take away the jobs, we take away the incentive for them to come."

"Charter Schools' Big Experiment" by Jay Mathews for The Washington Post (HT: RealClearPolitics):

"The back-channel scrambling for personnel, a departure from the more orderly hiring methods of traditional school systems, bothers some. [Leigh] Dingerson [education team leader for the Center for Community Change] faults Louisiana authorities for allowing charters to pour into New Orleans after the hurricane with "no coordinated vision or plan for how the system they were building would serve children well and equitably." "

This is the problem with people who don't trust markets. They think that there always needs to be a plan for things like this. What happened is that after Katrina, most of the public school system was wiped out, so they decided to let in chartered schools. The article quoted Dingerson earlier as saying "Louisiana school authorities have 'opened a flea market of entrepreneurial opportunism that is dismantling the institution of public education in New Orleans.'" She's right -- public education was being dismantled in favor of a system that gives more choice and costs less. The result was serious competition for teachers, which is the purpose of the quote above. But situation like this are exactly where market-imposed order are best. If the power to impose the order is given to politicians, school boards, teachers unions, or the like, the result would be a school system no different from any other failing school system in the country.

"What GIs deserve" Boston Globe editorial (HT: RealClearPolitics):

"The House bill is a window on how concentrated wealth has become at the top of the scale: a small minority of rich Americans making a fractional contribution can provide enough cash to finance the entire $52 billion (over 10 years) program. Does Bush really think they will miss a .47 percent surtax on income after their first $500,000?

Such stinginess didn't afflict Franklin Roosevelt, who in signing the original GI bill in 1944 said, "It gives emphatic notice to the men and women in our armed forces that the American people do not intend to let them down."

It's hardly too much to ask."

I hate this argument, because it isn't really an argument at all. It's the typical "the rich don't need all that extra money, they probably won't give it away on their own, so let's pass a bill to take it from them." My argument against this bill is still the same. If we need additional recruits, let's find a way to increase the compensation of all enlisted soldiers that increases enlistments. If we don't need more civilians signing up for the military, what's the point of the bill?

"Paradoxical presidential politics" by Star Parker for Townhall:

"Who can question that the success and prosperity of this country -- with its vast cast of individuals who have changed the world through creativity and innovation, with our long list of Nobel Prize winners -- is due to freedom?

And yet, Obama's prescription for the many challenges we face today, whether it is health care, education, or global competition, is increased government planning and control. Here is a man who now stands where no "expert" could have predicted, yet wants to tether our nation's future to the mind games of the same kinds of "experts", rather than letting what truly drives America's unique success -- free individuals and free markets -- work. A paradox."

Friday's interesting reads - 6/6/08

I had the last of the three letters I submitted to the WSJ published today.

"At $4, Everybody Gets Rational" by Charles Krauthammer for The Washington Post (via RealClearPolitics):

"America's sudden change in car-buying habits makes suitable mockery of that absurd debate Congress put on last December on fuel efficiency standards. At stake was precisely what miles-per-gallon average would every car company's fleet have to meet by precisely what date.

It was one out-of-a-hat number (35 mpg) compounded by another (by 2020). It involved, as always, dozens of regulations, loopholes and throws at a dartboard. And we already knew from past history what the fleet average number does. When oil is cheap and everybody wants a gas guzzler, fuel efficiency standards force manufacturers to make cars that nobody wants to buy. When gas prices go through the roof, this agent of inefficiency becomes an utter redundancy.

At $4 a gallon, the fleet composition is changing spontaneously and overnight, not over the 13 years mandated by Congress...

Some things, like renal physiology, are difficult. Some things, like Arab-Israeli peace, are impossible. And some things are preternaturally simple. You want more fuel-efficient cars? Don't regulate. Don't mandate. Don't scold. Don't appeal to the better angels of our nature. Do one thing: Hike the cost of gas until you find the price point."

The truth is that people respond to financial incentives. I don't have a problem with an additional fuel tax as long as they cut taxes in other places. I'm slightly skeptical they would do they, but you don't know. The left and the right would fight over whose taxes to cut.

"Libertarians and the Welfare State: Is It Time to Drop the Hard Line?" by Bryan Caplan:

"[T]he existence of welfare state is one of the main rationalizations for undercutting the greatest anti-poverty campaign the world has ever known: immigration. (Friedman said it most clearly: "You cannot simultaneously have free immigration and a welfare state." But Krugman's in full agreement). And unlike the welfare state, immigration has and continues to help absolutely poor people, not relatively poor Americans who are already at the 90th percentile of the world income distribution. There's no reason for libertarians to make apologies to social democrats: Libertarian defenders of immigration are the real humanitarians in the world, and the laissez-faire era of open borders without the welfare state was America's real humanitarian era."

"Leftist thinking left off the syllabus" by Rodrigo Abd for The LA Times (HT: RealClearPolitics):

"Leftist ideology may be gaining ground in Latin America. But it will never set foot on the manicured lawns of Francisco Marroquin University.

For nearly 40 years, this private college has been a citadel of laissez-faire economics. Here, banners quoting "The Wealth of Nations" author Adam Smith -- he of the powdered wig and invisible hand -- flutter over the campus food court.Every undergraduate, regardless of major, must study market economics and the philosophy of individual rights embraced by the U.S. founding fathers, including "life, liberty and the pursuit of happiness."

A sculpture commemorating Ayn Rand's "Atlas Shrugged" is affixed to the school of business. Students celebrated the novel's 50th anniversary last year with an essay contest. The $200 cash prize reinforced the book's message that society should reward capitalist go-getters who create wealth and jobs, not punish them with taxes and regulations.

"The poor are not poor just because others are rich," said Manuel Francisco Ayau Cordon, a feisty octogenarian businessman, staunch anti-communist and founder of the school. "It's not a zero-sum game.""

Thursday's interesting reads - 6/5/08

I'll go ahead and get the bragging out of the way. I had another letter published in the WSJ this morning. I was the one in response to the op-ed about lobbyists.

"Worried About a Recession? Don't Blame Free Trade" by Dan Griswold with Cato (HT: Club for Growth):

"Combined with those other factors, expanding trade and globalization have helped to moderate swings in national output by blessing us with a more diversified and flexible economy. Exports can take up slack when domestic demand sags, and imports can satisfy demand when domestic productive capacity is reaching its short-term limits. Access to foreign capital markets can allow domestic producers and consumers alike to more easily borrow to tide themselves over during difficult times.

If the U.S. economy does tip into recession this year, free trade and globalization will be among the likely scapegoats. The pain of recession will be real for millions of American households, but raising barriers to foreign trade and investment will provide no relief for most affected workers. In fact, reverting to protectionism would only reduce the capacity of our economy to regain its footing and resume its long-term pattern of growth."

"Billers, Players, and Income Inequality" by Arnold Kling:

"As Taleb points out, there are safe professions where you charge by the hour, so I might call them Billers. As a Biller, your earnings tend to have a high floor but a low ceiling. Think of an accountant.

What Taleb calls scalable professions are ones where you are not limited by what you can charge for an hour. Recording artists, professional baseball players, entrepreneurs, corporate CEO's, and financial speculators enjoy scalability. But, as Taleb points out, they have to compete in tournaments where there are a few winners and many losers. So we can call these sorts of people Players...

So one story for rising income inequality is that a larger share of income is going to occupations that involve tournaments, and more people are becoming Players. More Players and fewer Billers means greater inequality.

To me, this raises the public policy question of what should be done about the inequality it creates, if anything. There are some who believe that income inequality has an extreme social cost. To me, anything that limits (to a substantial degree) the upside of this kind of activity just to keep them from becoming relatively more wealthy would be a mistake.

"Why Cap-and-Trade Beats a Carbon Tax" by Felix Salmon on Seeking Alpha:

"In other words, as I've said many times in the past, cap-and-trade is flexible. Once you've installed the mechanism, it can and will be tweaked over time. Changing tax rates, by contrast, is much harder. Which is why cap-and-trade is superior to a carbon tax."

I left the following comment:

"But isn't it only harder from a political standpoint? If senators and representatives want to go on record to help the environment and force Americans to pay the full price of the energy they consume, wouldn't we want that to be as transparent as possible? How much harder is it mechanically to raise (or lower) the tax rate than to raise (or lower) the cap? Depending on how the thing would be administered (and admittedly I don't know that), I assume, or hope, changes would go through the same process. (Surely the tax increase wouldn't go to the floor for a vote while cap-and-trade "tweak" would simply be delegated to the bureaucracy.) Part of my problem with cap-and-trade is that it would allow so much be done at a level unaccountable to voters. "

Wednesday's interesting reads - 6/4/08

It's been a couple days since I posted.

"Windfall Profits for Big Food: Where's The Outrage?" by Mark Perry for Seeking Alpha:

"Question: Why don't the "obscene, windfall profits" of Big Food get the same attention as the profits of "Big Oil?" Where are the Congressional hearings and proposals for windfall profits taxes on Big Food? After all, the increase in profits for major food companies from 2005 to 2007 are ridiculously and obscenely higher than the paltry 12% increase in profits for Exxon Mobil (XOM) (see chart above)."

The answer is constituencies.

"Whose Side Are You On?" by David Boaz with Cato:

"In an article about the wave of conservative reform under Louisiana governor Bobby Jindal, the New York Times writes:

'Meanwhile the House is considering an income tax cut that would cost the state $300 million.'

Another way to say that would be:

'Meanwhile the House is considering an income tax cut that would save the taxpayers $300 million.'

It all depends on whether you identify with the taxpayers or the tax consumers."

And I would imagine you would likely answer the question based on who you think will spend the money best.

"In Defense of 'Sweatshops' " by Benjamin Powell for The Library of Economics and Liberty:

"Economists across the political spectrum have pointed out that for many sweatshop workers the alternatives are much, much worse. In one famous 1993 case U.S. senator Tom Harkin proposed banning imports from countries that employed children in sweatshops. In response a factory in Bangladesh laid off 50,000 children. What was their next best alternative? According to the British charity Oxfam a large number of them became prostitutes...

Because sweatshops are better than the available alternatives, any reforms aimed at improving the lives of workers in sweatshops must not jeopardize the jobs that they already have."

I had a debate with a friend at work a couple months ago about this. His point was that when a company opens a "sweatshop" in a country, it drives down the non-sweatshop wages in that country. This is a similar argument, I think, to why some people want to keep low-skilled illegals out of the country - they drive down the wages of the low-skilled workers who are already here. I think my friends claim is dubious (combined with, frankly, my inability to fully understand how that would happened), but I agree to give it to him for the sake of argument. He further asserts that even with sweatshop wages, these people will die from malnutrition -- in other words, the sweatshop wages only defer postpone because they aren't making enough money to sustain themselves long term. His thesis, therefore, is that because these people will die anyway, they shouldn't be allowed to drive down the non-sweatshop wages. My contention to that is that his philosophy would essentially require those who would receive the sweatshop wages to sacrifice their lives and die earlier so others can have higher wages. I asked him if he would be willing to take away from the extreme poor the right to earn money and sustain life, even if only for another three or four months, condemning them to an earlier-than-otherwise death, so others can earn more money for food, clothes, etc, and he said yes. I was shocked. I wish I could go into more details of our arguments, but space constrains. To me, taking away the right of someone to earn money in an attempt to sustain life, even briefly, is more heartless than the profit motivations of any "soulless capitalist" out there.

"Irreversible Climate Change Policy" by Arnold Kling:

"In practice, cap-and-trade creates an irresistible opportunity for politicians to use carbon permits as political favors to be handed out to special interests. This in turn means that there will be special interests with a large stake in keeping cap-and-trade policies in place, regardless of what transpires in terms of global temperature.

What is the probability that the United Nations derivation of climate model consensus overstates the problem of man-made global warming? Unless that probability is zero, it seems to me that we should prefer a climate change policy that is reversible to one that it irreversible.

Because I think that the probability that the UN is misleading us is significantly greater than zero, I think that the issue of irreversibility is quite important. Therefore, I think that a carbon tax is far preferable to cap-and-trade. Ten years from now the global warming scare might be completely debunked, and yet we will still be unable to unwind cap-and-trade. As with farm subsidies and many other policies, the problem will be long gone but the solution will be with us in perpetuity."

"Parsing Senator McCain" by Arnold Kling:

After quoting McCain's speech:

"I'll reach out my hand to anyone, Republican or Democrat, who will help me change what needs to be changed; fix what needs to be fixed; and give this country a government as capable and good as the people it is supposed to serve. There is a time to campaign, and a time to govern. If I'm elected President, the era of the permanent campaign of the last sixteen years will end. The era of reform and problem solving will begin. From my first day in office, I'll work with anyone..."
Arnold adds this:

"I prefer gridlock to bipartisanship and compromise. To me, bipartisanship means enacting cap-and-trade legislation. I worry that compromise means allowing the Democrats to block any attempt to reduce the size of government.

Senator McCain notes that his critics fear that a vote for him is a vote for a third term of the Bush Administration. Not all of that fear comes from the left. Some of it comes from those of us who remember the spirit of bipartisanship and compromise that gave us No Child Left Behind, the unfunded prescription drug benefit for Medicare, ethanol mandates, and zilch on reforming Social Security."

Count me in this group. In some respects, I'd welcome four more years of Bush. In others, that's the last thing I want.

"Norman Borlaug on the Food Crisis" by Alex Taborrok:

"I now say that the world has the technology - either available or well-advanced in the research pipeline - to feed a population of 10 billion people. The more pertinent question today is whether farmers and ranchers will be permitted to use this new technology. Extremists in the environmental movement from the rich nations seem to be doing everything they can to stop scientific progress in its tracks. Small, but vociferous and highly effective and well-funded, anti-science and technology groups are slowing the application of new technology, whether it be developed from biotechnology or more conventional methods of agricultural science. I am particularly alarmed by those who seek to deny small-scale farmers of the Third World -and especially those in sub-Saharan Africa - access to the improved seeds, fertilizers, and crop protection chemicals that have allowed the affluent nations the luxury of plentiful and inexpensive foodstuffs which, in turn, has accelerated their economic development."

"The Coming Oil Investment Boom" WSJ opinion by Holman Jenkins:

"Growing up would begin with recognizing that science doesn't prove the case against CO2. Our political system has been looking at the problem of climate change for a generation, and lack of action is not due to the machinations of big oil – but to the inability of policy to bridge a giant chasm between proposed costs and benefits. Even if carbon's guilt is assumed, the economics are far from certain that it wouldn't be cheaper just to endure a changing climate." [emphasis added.]

This, to me, is the biggest point of consideration. Is the cost worth the benefit, even if the science were taken as correct. Adopting some kind of global approach of carbon restrictions (either through a cap-and-trade or through a tax) would prevent the poor from ever gaining on the rich, especially in other countries.

Which is very similar to...

"Manslaughter by politicians" op-ed for The Washington Times by Richard Rahn (HT: Club for Growth):

"When politicians enact anti-economic growth regulations and taxes, even in the name of "global warming," "environmentalism," and "fairness," they are, in fact, shortening the lives of many of their fellow citizens and those in other countries.

I do not pretend to know with much certainty whether the Earth will be much warmer at the end of this century and whether any increase in temperature that does occur will reduce or increase human life expectancies. But I do know the following with high confidence: The global warming alarmists told us 15 years ago that the Earth would be getting steadily warmer - yet, in fact, it has been getting cooler for the last 10 years, and some of their new models say this cooling trend might continue for another 10 or 15 years. The restrictions on drilling for new oil have driven up the price of oil products to the extent they are causing unnecessary real hardship to billions of people on the planet and, as a result, people are spending less money on their medical care and medical research...

Environmental laws that require reasonably clean air and water can clearly be a net gain for human health and economic development. But, like anything taken to excess, the costs of many of the new and proposed measures to curb CO2 greatly exceed the benefits, thus costing both lives and treasure. Most serious economists who have looked at the issue believe environmental adaptation (as humans and other plants and animals have done for millions of years) would be far less costly than speculative actions to try to change the climate.

The fundamental problem is that many politicians do not understand or, perhaps, do not wish to understand tradeoffs. That is, every time they increase a regulation or a tax, or require a government expenditure that reduces economic freedom and does not meet a reasonable cost benefit test, they are not engaged in just some annoyance, but they are costing real human life years."

"In bed with bankers" AJC editorial by Maureen Downey:

"However, Georgia will never enact more substantive consumer-mortgage protections until the Legislature stops blaming the crisis solely on unsophisticated borrowers, ignoring the role played by unscrupulous lenders and a government that failed to protect its citizens.

The subprime market flourished because of three decades of deregulation. Loans were made without concern over whether the borrower had a job, income or any ability to make payments. Volume-hungry mortgage brokers enticed borrowers with tempting teaser rates that ballooned down the road, when the loan had been sold many times over to unwary investors."

I sent the following letter:

"After reading Maureen Downey's "In bed with bankers" editorial (June 4), I remain unconvinced that the "do-nothing" General Assembly needs to take action. She'd like our legislature to "protect its citizens", but only if they are the citizens who borrowed money to buy a home instead of the citizens who loaned money to buy a home (banks, after all, are ultimately owned by citizens). Does Ms. Downey need to be reminded that every successful economy is based on well-defined property rights and enforceable contracts? When a money-borrowing citizen enters into a contract with a money-lending citizen to buy a house, the borrowing citizen agrees to pay the borrowed money back to the lending citizen. If that money is not paid back according to the contract, does the lending citizen have the right to enforce the contract? If the General Assembly picks a favored citizen and legislates (or bullies) the lending citizen into altering the terms of that contract, which citizen needs protecting?"

If they didn't ask for a 150-word max I would have added more about some of her fallacies I quoted.