Organic trustbusting

By Katherine Mangu-Ward for reason:

The phrase trust-busting always conjures sepia-toned images of pince-nez, Rough Riders, and bushy mustaches to me. But it's actually is alive and well: Yesterday, Whole Foods—apparently the Standard Oil of the 21st century—was hauled back out on the Federal Trade Commission's chopping block.

In early 2007, Whole Foods merged with another organic grocery chain, Wild Oats. The FTC decided that this looked like a trust that needed busting, arguing that "core" organic consumers would be stuck with only the Whole Food/Wild Oats hybrid for their shopping. We're talking about the people who need quinoa like turn-of-the-century householders needed their lamp oil.

A fast track decision let the merger continue, accepting Whole Food's argument that Wal-Mart and other traditional grocery stores have greatly expanded their organic offerings, and that even after the merger the chain has plenty of competition. But now an appeals court has revived the case by bouncing it back down to the lower court.

I, of course, am skeptical of anti-trust activity. I cringe just a little bit whenever I hear about a particular merger being slowed down substantially over monopoly concerns. I'm glad the XM-Sirius merger was approved last week, even if they had to make some ridiculous concessions.

Anyway, I thought this story was worth noting for similar reasons. Is it hard to imagine Wal-Mart and other grocers entering the organic food business if they thought they could make money in it? If Whole Foods raises prices to a high enough level, you can bet they'll jump in the fray with gusto and push prices back down.

The question is WHY?

From a recent article in The Economist:

The polls tell a dismal tale. Only 29% of Americans approve of the president. Only 14% approve of Congress. And just 6% view the economy positively. Yet many Americans combine despondency about the big picture with personal contentment. More than 80% say they are satisfied with their own circumstances. Even more are satisfied with their jobs. And although nearly everyone despises Congress, most Americans like their own representatives.

It is accompanied by a graph that shows an ever-increasing percentage of people answering "dissatisfied" to the question "How do you feel about the way things are going in America?".

Also, in an article today at Salon:

Earlier this month, Rasmussen Reports announced the humiliating finding that "the percentage of voters who give Congress good or excellent ratings has fallen to single digits [9 percent] for the first time in Rasmussen Reports tracking history." That extremely negative view of Congress cuts across partisan and ideological lines, as only small percentages of Democrats (13 percent), Republicans (8 percent) and independents (3 percent) believe that Congress is doing an "excellent" or even a "good" job. Perhaps most remarkable, some polls -- such as one from Fox News last month -- reveal that the Democratic-led Congress is actually more unpopular among Democrats than among Republicans, with 23 percent of Republicans approving of Congress compared with only 18 percent of Democrats. One would be hard-pressed to find a time in modern American history, if such a time exists at all, when a Congress was more unpopular among the party that controls it than among voters from the opposition party.

I think it's funny how often we rely on surveys that ask simply "Are you satisfied with...?", as if it doesn't matter "why" we are or are not dissatisfied. I might answer in the negative because I hear talk about raising taxes, destructive global warming solutions, or housing bailouts. Meanwhile someone else might answer in the negative because some people are too rich, congress isn't doing anything to keep our environment from wasting away, and too many villainous banks are foreclosing on people's home. Same answer, very different reasons. To me, it seems, those who are satisfied are effectively the "center" -- those who end up getting what they want most often. As the number of satisfied people get smaller and smaller, it just means we're getting more and more divided politically.

The politics of ethanol mandates

T. Boone Pickens in the LA Times (HT Hit and Run):

Back in 1996 when Bob Dole ran for president and I was his energy advisor, and he told me...on ethanol, he said, "Ethanol is, you say it's a bad fuel." I said, "Come on Bob, you spend more money making it than importing it." And he said, "Let me explain something to you about politics: There are 21 farm states, and that's 42 senators. Don't go any further." I'm getting the picture. I said, "They want ethanol." He said, "They're going to have ethanol." And so he said, "Don't waste any more of our time or your time telling us it's a bad idea, because they're going to do it."

Reason adds the following:

Apparently Pickens believes that taxpayers and ratepayers should help him finance his gigantic $10 billion wind farm. Like the ethanol barons before him, Pickens has learned to love subsidies and corporate tax breaks as much as next tycoon. Ah, hypocrisy.

Who's interested in the new housing bill

From Arnold Kling at Econlog:

The Center for American Progress is ecstatic over the $3.9 billion in community development block grants.

"Local governments could use the grants to purchase, renovate, and resell foreclosed homes, and then use the proceeds from these sales to repeat the process."

I get it. If I use my own money to purchases, renovates, and resell a home, that's greedy speculation. But if you use my money to do it, that's community development...

Basically, the housing bill rewards everyone who participated in the excesses of the housing market and punishes the rest of us.

Immigration to relieve poverty

From Kerry Howley at Reason:

Wage gaps between observably identical Nigerian workers in the United States and Nigerian workers in Nigeria (same gender, education, work experience, etc) are... considerable. They swamp the wage gaps between men and women in the US. They swamp the gaps between whites and blacks in the US. Actually, they swamp the wage gaps between whites and blacks in the United States in 1855. For several countries, the effect of border restrictions on the wages of workers of equal productivity "is greater than any form of wage discrimination (gender, race, or ethnicity) that has ever been measured." The labor protectionism that keeps poor workers out of rich countries upholds one of the largest remaining price distortions in any global market.

Who cares? You weren't planning on seeking employment in Nigeria anyway. The upshot is that even a very limited loosening of borders could do enormous, immediate good. No other poverty alleviation policy--microcredit, education, public health interventions, anti-sweatshop activism--compares with a work visa, even a temporary one.

Free markets and government intervention

By Will Wilkinson for Cato:

Many market institutions, like our advanced financial markets, are very far from being self-organizing outgrowths of unregulated market exchange. Instead they are, by and large, creatures of the vast body of law and government regulation that defines the rules of market exchange — that determine what may be bought and sold, and how — and are tightly integrated with more or less freestanding government institutions like the Fed. When these markets stumble, it’s just a rookie mistake of political economy to see that as problem with markets, per se, rather than as a problem with the way regulation and government institutions happen to have structured those markets and thereby structured the incentives of the individuals and firms that act within them.

People like to say that we're in our current mess because of the "free market", but that's only half the story. The market simply reacts to the framework forced around it by government.

A mixed up form of capitalism

From Steven Malanga for Real Clear Markets:

The U.S. has become a purveyor of what might best be described as selectively applied capitalism, in which we urge free markets and growth policies on the rest of the world but increasingly do not practice what we preach. Today, if you were building a country from scratch you would hardly look to the U.S. as a model of how to tax your businesses and residents, how to regulate your financial systems, or how to use markets and incentives to organize and run government most efficiently...

Nothing illustrates how difficult it is to end a government initiative, even when its raison d’etre has long passed, than the persistence of Fannie and Freddie. Several studies have estimated that today what Fannie Mae and Freddie Mac give us through their giant borrowing power and implicit government backing (which has recently become explicit) is a reduction in the interest rate on mortgages of about 25 basis points. In other words, the federal government has remained our biggest player in the home mortgage market through these two quasi-public entities for the sake of knocking a quarter of a percentage point off your mortgage.

Voting and self-interest

From Bryan Caplan at Econlog:

Most of the fear of low turnout probably rests on the empirically discredited Self-Interested Voter Hypothesis. If voters were selfish, then groups with unusually low turnout would become the punching bags of democratic politics. Fortunately, for all their flaws, voters have a strong sense of fair play. They may have crazy beliefs about the consequences of their favorite policies, but they are usually trying to promote the general interest. The main route to better policies isn't equalizing (or maximizing!) turnount; it's raising the average competence of the people who show up.

If you're a normal American, you're likely to conclude that we just need more (or better) education. But if you're an economist, it's hard to ignore a much cheaper alternative: Encourage people who don't understand the issues to stay home. At minimum, we should stop trying to raise turnout, and stop trying to make the politically apathetic feel guilty about non-participation. Apathy may not be a virtue, but it's a lot better than the activism of the irrational.

"The reality of the risk to society"

By Nobel Prize-winner Vernon Smith on Creative Capitalism:

But here's the rub: the longer the loan, and the greater the uncertainty of a stable economic environment, the greater the required upfront equity, or down payment. Taken to the limit, these factors can result in no one giving you a loan. No one is to blame, and intervention by a government agency to reduce the risk to the mortgage lender does nothing to reduce the reality of the risk to society.

Home buyers, who are also voters, don't like to accept that reality. Neither do the politicians who want to get elected and convince themselves, just as the potential home owners convince themselves, that you can get something for nothing -- that you can obtain low down payment loans on home purchases and avoid the inherent risks.

These risks hold for all assets -- almost all new inventions, products and businesses are not loan-worthy -- but homes represent the universally popular asset. Hence the emergence of the uneconomical but politically popular (and now discredited) GSEs: Fannie May and Freddie Mac, both now going south, unless rescued by the deep pockets of the US Treasury. That rescue is no less the mark of a Republican than a Democratic action; their divide here is mostly a matter of rhetoric.

Buying citizenship

From the Chicago GSB Magazine:

What if the United States began charging $50,000 a person for the legal right to immigrate? Nobel laureate Gary Becker, who came up with the idea, acknowledges it may be considered “repugnant” now. But he also says it could stanch the flood of illegal immigration, draw more skilled workers here, and even raise revenue for the country.

Becker’s not trying to eject illegal workers; in fact, he said, they could pay to stay. The idea is to upend the existing black market that exacts a much higher price for illegal immigrants — some who pay with their lives.

I could live with that. I'd still prefer it to be free, but unfortunately the political climate nowadays won't permit it. The thing I don't like it that it seems to say that immigrants can come as long as those who came first are compensated to somehow make up for the loss they will (presumably) experience.

Life's value

An interesting post at Cato by Jim Harper. He talks about how the EPA revised the value of a statistical life downward and how this is uncomfortable this is to people to think of. I've said before how we do this all the time, even if we don't think of it. For example, of course we value our lives, but we all drive fast or eat unhealthy food anyway. To live our lives in a way that completely eliminates any risk of danger, would, in my opinion, make life hardly worth living. Anyway, the paragraphs I like:

If you value life too highly, you will take steps to protect life and health that undermine the value of living. Why is life “precious”? Some say for it’s own sake. But most people believe it’s because of the wonderful range of experiences, adventures, tastes, emotions, and relationships we get to enjoy in life. The freedom. If we give up too much of that, focusing strictly on keeping our hearts pumping and air flowing in and out of the lungs, we’ve lost track of the reason for living. Simply maintaining bodies in a state of sentience is not what it’s all about. So regulatory policy must do what we must do as individuals: strike a balance between life and living. Fall too far out of balance in either direction and you’re either prematurely dead or living a life without meaning.

But if you disagree with the value the EPA is placing on human life, there might be something to that. The regulatory process makes a huge collective judgments about the value of life, lumping us all together into one big average.

We should be as free as possible to make our own judgments about risk and the value of life. It’s difficult with things like air pollution, but even those kinds of risks can often be controlled through individual judgments.

"Engaged, effective and focused"?

This is the second letter I sent to the WSJ this morning:

In his criticism of Republicans and “free marketeers”, Joseph Petrowski (“A Bipartisan Fix for the Oil Crisis”, July 10) neatly and succinctly expressed why many people don’t want government intervention with our energy situation. If the government, in fact, really was “engaged, effective and focused”, I think more people would be less concerned with its involvement. But unfortunately, that isn’t the case. First of all, with an approval rating in the low teens, it’s a wonder ANYONE wants Congress to do ANYTHING for fear of messing it up somehow. Secondly, our government isn’t structured in a way that will ever make it “focused” on much else that the re-election of its members or the perpetuation of its bureaucracy. And lastly, even if we were able to find a way to elect the most selfless politicians into office (and somehow keep them that way), they would run into what F.A. Hayek referred to as the “fatal conceit” when we charge them with picking the right technologies to subsidize or standards to mandate. Ironically, it’s the market mechanism Mr. Petrowski lauded in his appeal to Democrats, the amalgamation of the knowledge of millions of buyers and sellers manifested in prices, not the special interest-influenced selection by a small group of experts, bureaucrats, and politicians, that is best suited to address these kinds of problems.

Matt Hutchison
Atlanta, Georgia

I was a little confused by something Petrowski wrote in his article, so I added the following question for the editorial board at the end of my letter. We'll see if they respond.

By the way, was Mr. Petrowski saying that “the latest farm bill, ethanol and sugar tariffs, the cost of the Iraq war and Bear Stearns” are examples of free markets run amok? That’s the only reason I can think of why he would call criticism of biofuel subsidies and fleet mandates and the like naïve or hypocritical.

Should independence be a goal?

I sent the following letter, the first of two, to the WSJ this morning:

Much has been written (T. Boone Pickens and Rod Hunter are recent examples), explicitly or implicitly, about how we should wean ourselves from foreign oil for strategic reasons. The argument typically revolves around the fact that some of the countries most hostile to America are among those we buy a significant amount of oil and in buying that oil, we compromise our national security. But are there strategic reasons why shouldn’t work for energy independence?

If we as a nation are so beholden to these foreign countries who only want to see our downfall, why haven’t they already done something about it? Surely they know how catastrophic it would be for us if they simply shut off the valves. Doesn’t the reason have something to do with the fact that American consumers are the source of their wealth? Their way of life is tied to our way of life; they can’t disrupt ours without disrupting their own. I think the same could be said regarding acts of physical aggression. If foreign powers (such as Iran) decide to, say, fire a missile, when would they do it? When the benefits (whatever they might be) as they perceive them exceed the costs (lost oil revenues). The more we become energy independent simply for the sake of independence, we more we lower the costs of hostile behavior, making such behavior more likely. One of the great benefits of international trade is that it forces countries to behave because doing so is in their economic interest.

Matt Hutchison
Atlanta, Georgia

Graft and thugs in the Santa union

I actually don't know if it's really a union. Also, not terribly important, but I thought it was funny.

From the WSJ:

Then, in August last year, Mr. Connaghan disclosed that he had signed a contract with a Hollywood production company for a possible movie on a Santa convention. Mr. Connaghan acknowledged he stood to retain as much as $25,000 as the film's consultant, but said the group would also get up to $50,000. Some Santas said he was personally profiting as head of the organization. "I told him that is a conflict of interest and because of that you should resign," says Tom Hartsfield, 69, a founding amalgamator living in Panguitch, Utah...

Mr. Trolli then ascended to the presidency. His detractors say he began ruling with an iron fist in a white glove. His board stripped about 20 Santas of their membership for offenses such as maligning fellow Santas on Elf Net, a Web chat group run by the Amalgamated Santas. In November, he got the remaining board to agree to confidentiality agreements concerning board discussions. Mr. Hartsfield, who didn't agree with the new rule, complained on Elf Net. The message board's administrator, Jeff Germann, banned him from Elf Net for 60 days.

"He broke the rule," says Mr. Germann, a 6-foot-4-inch, 300-pound Santa from Springfield, Mo., whom some dissidents accuse of using his size to intimidate fellow Santas. Mr. Germann denies the charge: "The problem with being big is they always call you a bully."

Things became physical that month, when a Santa who had been banished from Elf Net tried to crash a board meeting of Amalgamated Santas at Knott's Berry Farm Resort Hotel in Buena Park, Calif.

"Our" money? Who is we?

Ray D. Madoff in an op-ed for the NY Times:

If this were only a matter of Leona Helmsley wasting her own money, no one would need to care. But she is wasting ours too.

The charitable deduction constitutes a subsidy from the federal government. The government, in effect, makes itself a partner in every charitable bequest. In Mrs. Helmsley’s case, given that her fortune warranted an estate tax rate of 45 percent, her $8 billion donation for dogs is really a gift of $4.4 billion from her and $3.6 billion from you and me...

There are other reasons the law should not encourage people to tie up their resources — and ours — for all time.

His argument is for increased spending requirements for private foundations. Apparently Leona Helmsley left $8 billion in a foundation for her pets or something, which means Uncle Sam doesn't get his share of the pie at her 45% rate. Mr Madoff doesn't like that. Somehow, he reasons, her money, now that she's gone, should be our money. However much he disagrees with how she spent her money, I don't see how anyone can believe he has a right to another's stuff, dead or alive. I don't buy the argument that because she is legally avoiding taxes, she's wasting someone else's money by doing what she wants with her money.

"Who is us and who is them"?

Third Cato post.

David Boaz on the congressional opposition to Inbev's proposed acquisition of Anheuser-Busch:

Maybe the real concern is that an “iconic” American brand will be owned by foreigners. Anheuser-Busch is indeed a classic piece of Americana, a company founded by German immigrants in a city founded by Frenchmen and named for the French king. And now, in an increasingly globalized world, it might be owned by a Belgian company that has been controlled by Brazilians since a 2005 merger. This sort of globalization is increasingly common. As Robert Reich said as far back as 1991, “It’s very hard to separate out any longer who is us and who is them. If you want to buy an American-made car today, you have a better chance buying an American-made car if you buy a Honda than if you buy a Pontiac LeMans, most of which is produced outside of the United States. People forget or they don’t understand the extent to which globalization has taken over these corporations — foreigners coming here, we’re going there. Chrysler owns a big chunk of Mitsubishi, Ford owns 25 percent of Mazda.”

Inflation and the Bible

Second Cato post.

Dan Griswold first quotes Gideon Gono, head of Zimbabwe's central bank, as quoted in this WSJ article and adds some well-placed commentary:

To justify his mismanagement Gono cites the Bible and Christianity:

"Anyone who says the bank governor should violate the head of state is violating a principle that Jesus Christ demanded of his disciples. A key element Christ looked for in his disciples was loyalty."

That begs the question: Loyalty to whom?

In reading his Bible, Mr. Gono must have missed the bit about “Thou shall not steal,” which is exactly what hyperinflation does. It massively expropriates wealth from private citizens and gives it to the government. When Peter and his fellow apostles were told by the government authorities of their day to stop preaching about Jesus (Acts of the Apostles, Chapter 5), they replied, “We must obey God rather than men.”

Is it so wrong to sell a vote?

Some good posts on the Cato blog yesterday. This is the first of three.

Dan Mitchell tells of a student's attempt to sell his vote for $10 (as reported here on Fox):

Max P. Sanders, 19, was charged with a felony Thursday in Hennepin County District Court after allegedly asking for a minimum of $10 in exchange for voting for the bidder’s preferred candidate. “Good luck!” …Sanders was charged with one count of bribery, treating and soliciting under an 1893 state law that makes it a crime to offer to buy or sell a vote. According to a criminal complaint, the Minnesota Secretary of State’s Office learned about the offering on the Web site and told prosecutors. Investigators sent a subpoena to eBay and got information that led to Sanders. “We take it very seriously. Fundamentally, we believe it is wrong to sell your vote,” said John Aiken, a spokesman for the office. “There are people that have died for this country for our right to vote, and to take something that lightly, to say, ‘I can be bought.’

It sounds pretty egregious to be sure, but is it all that different from what is being done already by special-interest groups and politicians? Special-interest groups promise support for a candidate (votes) for legislation favorable to their cause (subsidies, tariffs, barriers to competitor entry, etc). Politicians promise one another support (votes) on a given bill for legislation favorable to their cause -- election (usually in the form of earmarks or campaign cash). For the record, I don't advocate vote selling; I only find its condemnation by politicians hypocritical.

Tax-imposed inefficiency

Joseph Henchman of the Tax Foundation (HT: Club for Growth):

In 2005, the estimated time and money cost of complying with the federal Internal Revenue Code was 6 billion man-hours worth $265 billion.

If that's not an argument for a flat or even a much-simplified tax, I don't know what is.

Costs of African aid

From an LA Times op-ed by Edward N. Luttwak and Marian L. Tupy:

On a micro level, Africa is littered with failed projects financed by foreign aid, including a steel plant in Ajaokuta, Nigeria, that does not produce steel and agricultural projects in Mali that decreased rather than increased the production of grain. Millions of Africans have been uprooted, with their livelihoods destroyed, by the pursuit of harebrained agricultural and irrigation schemes dreamed up by ignorant and arrogant, if well-meaning, foreigners.

On a macro level, aid has kept predatory African states alive by enriching corrupt political leaders and paying the salaries of their bureaucrats, soldiers and police. Uganda, by no means an outlier when it comes to "budget support," receives 50% of its annual government revenue from foreign aid. Economist Paul Collier of Oxford University showed that aid pays for up to 40% of African weapons purchases. On a continent where interstate conflicts are mercifully rare, those weapons are often used to crush domestic opposition -- as has been happening in Zimbabwe.

Pulling aid away from dysfunctional African states seems like a shocking move. Allowing failing states to collapse, it will be said, could lead to anarchy and turn Africa into a haven for terrorists. In the aftermath of the U.S. invasion of Iraq, however, many now believe that terrorists are best confronted by security measures, including intelligence gathering and surgical strikes against individual terrorist groups, rather than by social engineering on the scale of entire countries.

He's a politician after all

Bob Herbert, in an op-ed for the NY Times, on Obama's directional lurching:

Only an idiot would think or hope that a politician going through the crucible of a presidential campaign could hold fast to every position, steer clear of the stumbling blocks of nuance and never make a mistake. But Barack Obama went out of his way to create the impression that he was a new kind of political leader — more honest, less cynical and less relentlessly calculating than most...

This is why so many of Senator Obama’s strongest supporters are uneasy, upset, dismayed and even angry at the candidate who is now emerging in the bright light of summer.

One issue or another might not have made much difference. Tacking toward the center in a general election is as common as kissing babies in a campaign, and lord knows the Democrats need to expand their coalition.

But Senator Obama is not just tacking gently toward the center. He’s lurching right when it suits him, and he’s zigging with the kind of reckless abandon that’s guaranteed to cause disillusion, if not whiplash.

Unvoluntarily voluntary

Jonah Goldberg in an LA Times op-ed:

In his speech on national service Wednesday at the University of Colorado, Obama promised that as president he would "set a goal for all American middle and high school students to perform 50 hours of service a year, and for all college students to perform 100 hours of service a year."

It's funny that, when the right seeks to use the government to impose its values, the left screams about brainwashing and propaganda. When the left tries it, the right thunders about social engineering. But when left and right agree -- as seems to be the case on national service -- who's left to complain? As ever, the slipperiest slopes are greased with the snake oil of "bipartisanship."...

Volunteerism is good. But why does every good thing need to be orchestrated by government? Most people think that churchgoing is a good thing. Does that mean the government should fund churches? That's what they do in Europe and -- surprise! -- most pews sit empty...

Indeed, there's ample evidence that countries with intrusive and expensive welfare states stifle their citizens' spirit of charity and volunteerism precisely because people conclude that every problem should be solved by government. Merely paying your taxes substitutes for charity, and cleaning up roadside litter for two years absolves you from doing anything more.

Required service is nothing more than free government labor. We might as well set their "service" up at the DMV, Social Security office, or DOT. It will essentially go straight to the bottom line, likely in the form of more money available as handouts to special interests. The sad thing is that it will be all be done in the name of love of country, when the primary beneficiaries will be politicians.

Don't worry - Congress knows

From my weekly email from Senator Isakson:

Last week, the Senate continued debate on a comprehensive housing package designed to stimulate the nation’s declining housing market as well as strengthen the regulation of Freddie Mac and Fannie Mae. This bill doesn’t bail anybody out, but it incentivizes buyers to come back to the marketplace. It provides liquidity to refinance loans that are under water. It motivates, inspires, and provides liquidity in the marketplace through Freddie Mac and Fannie Mae that does not exist right now.

Failure of the Congress to act, in my judgment, is going to cause us to have a protracted and devastating economic decline resting solely on the fact of the decline in the values of homes in America, the increase in the number of foreclosures, and the lack of liquidity in the lending market.

By saying that buyers need to be incentivized to "come back to the marketplace", he implies that home prices are too low and that buyers need to be brought back to bring values back to where they belong. How can he possibly suggest this? Would he have said the same thing after the tech bubble burst in 2000? Did Congress need to incentivize buyers to come back then? For all the people who can't afford houses when they were at their peak, falling prices are the best thing, and anything that artificially pushes prices higher hurts them. It only saves those who bought at the peak.