Why is saying "I don't know" a bad thing?

From Jerry Taylor at Cato:

Tomorrow’s debate will likely produce few sparks. I’m against nuclear energy subsidies and don’t think the industry would survive without them. Thursday and Friday, however, will be more interesting. I don’t have the faintest idea what sort of personal automobiles will be on the market in, say, 2030, and even less idea what the energy economy of the next generation will look like. I suspect, however, that John thinks it’s all rather obvious where energy markets and technologies are heading and that he has the perfect master plan to most efficiently accelerate all the big-time changes that history has in store for us.

Saying “I don’t know” to questions like these is never that good of an idea if you want to dazzle people with your wisdom and insight. On the other hand, it’s hard to marshall the argument that “the oil age is over and the age of genetically modified gerbils on treadmills is coming” (or whatever) and then say that the government needs to do something to get us there. Well, if its so inevitable, then why must
government act at all? We’ll find out if John can manage to resolve that tension in what will likely be his argument.

He's referring to V. John White, executive director of the Center for Energy Efficiency and Renewable Technologies and a debate they're having at the LA Times about the future of energy use and generation. I guess it's hard to be considered an expert when you don't know what's going to happen. Unfortunately, no one knows what's going to happen (although some might guess correctly on occasion), but admitting that doesn't put food on the table.

Gains from trade

I saw this by Pete Hoekstra and John Shadegg in the Washington Times quoted on Free Exchange:

Every month the United States runs a trade deficit of $60 billion, most of which is related to energy. Imagine the impact on the U.S. economy if we invested that money in the exploration and production of American energy. It would lead to job creation, it would ripple through the economy, the dollar would strengthen and we would finally see some stability in energy prices.

It followed this by the author of the Free Exchange post:

A bad reason for new drilling is that it will reduce our dependence on foreign oil. That's a bad reason because it won't, and it's a bad reason because "reduce dependence on foreign oil" is kind of a silly idea.

I agree. The idea of energy independence is pretty silly. First of all, it will never happen, no matter how much we (the government) "invest" in renewable energy. Second, the more resources we forcibly devote to energy, the fewer of those resources we devote to other, more productive endevours. But what got me interested in the Hoekstra/Shadegg quote was the idea that somehow our trade deficit can be otherwise "invested". I don't even know what that means. On this podcast with Don Boudreaux, he gives the example of buying a $2k laptop from Sony. It's a private transaction that doesn't incur debt (necessarily, though it could, but that's a different issue). If he instead bought the laptop (or oil) from a domestic producer, it doesn't mean "we" now have that money to spend or invest. In the end, you gave a producer American money for a good. That producer then must use that American money in places that accept American money (usually that means assets or good denominated in American money) or they can exchange it with someone into their home currency. That money will either be spent on American goods or invested in American assets.

Tyler Cowen sums up well my thoughts on the misguided idea of money leaving the country in a post about sovereign wealth funds:

If capital has "left" the U.S., it's because there was some gain from that transaction, such as when we buy oil. There's then a subsequent gain if those revenue are invested wisely in the United States. It's not just a wash through "recycling." If you spend some money in stores, and then some people then invest in our company, that's not a wash either.

A help for the housing market

Alan Greenspan:

He did offer one suggestion: "The most effective initiative, though politically difficult, would be a major expansion in quotas for skilled immigrants," he said. The only sustainable way to increase demand for vacant houses is to spur the formation of new households. Admitting more skilled immigrants, who tend to earn enough to buy homes, would accomplish that while paying other dividends to the U.S. economy.

He estimates the number of new households in the U.S. currently is increasing at an annual rate of about 800,000, of whom about one third are immigrants. "Perhaps 150,000 of those are loosely classified as skilled," he said. "A double or tripling of this number would markedly accelerate the absorption of unsold housing inventory for sale -- and hence help stabilize prices."

From Greg Mankiw.

I thought a similar thing a few months ago. Well, not the same thing because I was thinking about "illegal" immigrants as well, but that isn't as politically palatable as just focusing on skilled immigrants. It was in relation to a blog post on the AJC about how many homes are vacant because unskilled immigrants are returning home (or simply moving on) due to the lack of jobs/enforcement. The result is that the values of those homes still occupied are falling. The question was raised of whether someone would rather have their homes lose value or have illegal neighbors. The overwhelming response in the comments was that people would rather have their homes lose value. I was kind of shocked, but kind of not.

In the end, instead of trying to artificially boost demand, Congress should simply reduce (heck, remove) the artificial constraints on demand.

Don Boudreaux on lobbyists

From my inbox:

17 August 2008

Editor, The New York Times Book Review
229 West 43rd St.
New York, NY 10036

To the Editor:

Thomas Frank is confused. First he argues, in 2004, that capitalist materialism has been unleashed on this great land by, of all things, Americans' failure to be sufficiently materialistic. Now he asserts that the gigantic and powerful lobbying industry currently astride Washington is the child of the same free-market ideology that has allegedly succeeded in inflicting laissez faire on Americans ("What's the Matter With Washington?" August 17).

I waited in vain for reviewer Michael Lind to point out the obvious fact that, if the market really has become so dominant as Mr. Frank famously asserts, the government would have fewer, not more, favors to sell. Lobbying would be a dying industry.

Alas, the continued, kudzu-like growth of lobbying firms in Washington is powerful evidence against Mr. Frank's incessantly repeated insistence that free-market "idolaters" have shifted all power from government to markets.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
Enterprise Hall
George Mason University
Fairfax, VA 22030
703-993-1130 (office)

Selling immigration restrictions to the global waming crowd

Two posts about this report by the Center for Immigration Studies that concludes the following:

Overall, our findings indicate that the average immigrant (legal or illegal) in the United States produces somewhat less CO2 than the average native-born American. However, immigrants in the United States produce about four times more CO2 in the United States as they would have in their countries of origin...

When it comes to dealing with global warming, environmentalists in the United States have generally chosen to adopt what might be described as piecemeal efforts to oppose new sources of fossil fuel-based energy, such as the construction of new coal-fired power plants...But they have assiduously avoided the underlying issue of growing energy demand driven by immigration-fueled population growth...

But to simply dismiss the large role that continuing high levels of immigration play in increasing U.S. and worldwide CO2 emissions is not only intellectually dishonest, it is also counter-productive. One must acknowledge a problem before a solution can be found. The effect of immigration is certainly not trivial. If immigrants in the United States were their own country, they would rank seventh in the world in annual CO2 output, ahead of such countries as Canada, France, and Great Britain.

Unless there is a change in immigration policy, 30 million (legal and illegal) immigrants are likely to settle in the United States over the next 20 years. One can still argue for high levels of immigration for any number of reasons. However, one cannot make the argument for high immigration without at least understanding what it means for global efforts to reduce the emission of greenhouse gases.

It's kind of long, but it essentially says that because immigrants emit more CO2 in the U.S. than they would in their home countries, their impact on global warming should be considered in any efforts to increase levels of immigration. Why is it that they emit more CO2 here than at home? Because they are wealthier here than they would otherwise be. One of the big global warming arguments, to me at least, is that globally we're too wealthy and because of that wealth, we're emitting too much carbon into the air that is causing temperature change. Th point of the study seems to be that if we can keep these immigrants from getting richer by coming here, we can slow global warming. Additionally, if we can stop all of us from becoming richer, we can also slow global warming. Unfortunately, though, the second point seems to be the goal of all the climate alarmists.

This first blog post I saw about the study concluded with this by Ronald Bailey:

These figures are likely to be true. But is keeping people poor by depriving us of their labor and skills really the best way to address man-made global warming?

Of all the comments, I like this one best:

Of course, the best way to combat greenhouse gases is to drive American citizens into poverty and adopting the lifestyles the poor illegal immigrants enjoy in their native countries. But who would advocate that? oh, wait...

Dan Griswold adds the following:

What the CIS study is really arguing is that rich people pollute more than poor people, so the world would be better off if more people remained poor. The same argument could be used to oppose economic development in places such as China and India that has lifted hundreds of millions of people out of poverty in the past two decades.

Through the dark lens of CIS, the world is a better place when poor people remain stuck in poor countries, and poor countries remain poor.

Why are they so interested?

After discussing an effort by some to urge the "federal government to encourage states to adopt automated enforcement laws to reduce red-light running," Radley Balko notes the following:

What Alexander and Ladies' Home Journal don't disclose in the article, however, is that the National Campaign to Stop Red Light Running is funded by three private companies: Affiliated Computer Systems, Gatso USA, and Redflex, Inc. All three are in the automated traffic enforcement business, and all three stand to make millions should the campaign prove successful. That's a pretty big omission.

Bootleggers and Baptists abound. Surely those companies are only concerned about the safety of of drivers.

Homeschooling is legal (again) in CA

From Jacon Sullen at reason:

Last week a California appeals court reversed a February ruling that said state law permits homeschooling only by credentialed teachers. In the earlier ruling, noted here by Katherine Mangu-Ward, the Court of Appeal for the 2nd Appellate District concluded that the legislature had deliberately removed an exemption for homeschooled children from California's compulsory education law in 1929 and had never reinstated it. The decision alarmed tens of thousands of Californians who thought they had the state's approval in teaching their children at home. In last week's ruling, the court reconsidered, finding that the legislature had implicitly endorsed homeschools by exempting them from various regulatory requirements. "While the Legislature has never acted to expressly supersede" appeals court decisions that said a homeschool did not qualify as a "private full-time day school," the three-judge panel said, "it has acted as though home schooling is, in fact, permitted in California."

Thomas Donlan about the failed Doha round:

The real issues were not heard amid this cacophony. India and other developing countries don't need to protect subsistence farmers' tiny incomes; if a billion people live on a dollar a day and another two billion live on two dollars a day, it would take a mere $10 billion to double their income. And increased global trade could pay for such transition costs in very short order.

The developing countries really need cheap imported food and cheap imported capital so that hundreds of millions of subsistence farmers and sharecroppers can move off the land and enter more productive sectors of the economy. If India is going to create economic opportunity for all its people, it needs more mechanized agriculture and fewer peasants. As China has shown over the last 30 years, this is not quick, easy or pleasant, but it works.

In the same way, the U.S., the EU and a few other efficient farming countries don't need to subsidize any of their farmers: They have mechanized agriculture and they can produce food for the entire world without taking billions of dollars a year away from the rest of their economies.

No child should grow up thinking that their story, their hometown story, is not a part of the larger American story. It's time Washington stopped working for special interests and started working for rural America. So not only do I want to recruit the teachers, but I especially want to recruit the [?] in rural communities. I want to make sure that we're making investments in rural schools. I think we can connect all of America to 21st Century technology. We'll show that we value farming in this country by launching a program that gives a hand to the next generation of farmers and helps them buy their first farm.

From a new ad (I guess) by Barack Obama. You can guess what I think about this. I saw this on the WSJ Washington Wire blog. This is ridiculous. Anyone who can say "It's time Washington stopped working for special interests and started working for rural America...We'll show that we value farming in this country by launching a program that gives a hand to the next generation of farmers and helps them buy their first farm" with a straight face deserves a medal. Maybe 4% of the country works in agriculture but somehow they aren't a special interest. A simple look at Wikipedia (a killer source, I know) defines an interest group as "an organized collection of people who seek to influence political decisions." Farm lobby anyone? How does Obama define a special interest? Maybe they just aren't "special" enough.

The Byrd Amendment

I sent the following letter in response to this from the WSJ:

Senator Robert Byrd’s recent foray into protectionism isn’t his first (Byrd’s Bad Idea Is Back, Aug 8). His meddling has produced other “Byrd Amendments” designed to protect the few at the expense of the many. One of his most notable was an amendment to the Clean Air Act of 1977.

Congress was looking for a way to decrease pollution emissions in response to growing public demand, so Senator Byrd offered an amendment requiring utility companies to install expensive scrubbers that helped clean the air. Great idea, right? Unfortunately, a tax on emissions would have been cheaper because it would have forced utilities to find the most efficient way to reduce pollutions. Maybe the companies would have installed the scrubbers anyway. Or, maybe they would have switched to the more expensive “clean” coal (coal with less sulfur dioxide, which was the real pollutant) from the cheaper “dirty” coal. We’ll never know. Senator Byrd’s amendment made sure of it.

The significance is that the dirty coal came from Senator Byrd’s home state of West Virginia while the clean coal came from the West. The result was that he protected the mining interests in his home state from competition by mandating that all utility
companies use the same pricey technology, incentivizing the utilities to use the cheaper, dirty coal at the expense of both consumers, who then had to pay more for their energy due to the scrubbers, and the producers of the clean coal in the West. If only Senator Byrd cared more for U.S. consumers, both those living in and out of West Virginia, than he does for favored lobbies.

Matt Hutchison
Atlanta, Georgia

I guess this is why he (and Ted Stevens, John Murtha, etc) keep getting elected. See this post about term limits. I'll admit I don't understand all the arguments against term limits, but this is a pretty good reason for them.

Term limits

WSJ Sunday Political Diary:

U.S. Term Limits president Philip Blumel mocks Mr. Obama's attitude as "utter nonsense." He notes that lobbyists derive their power and influence from careerist politicians, giving rise to the so-called "iron triangle" of power in Washington: career politicians, federal agency bureaucrats and lobbyists. The idea of term limits is to break up that symbiotic and corruptive pact.

The argument that elections are a form of term limits is the standard reply from the business-as-usual crowd in Washington. "As an incumbent," says Mr. Blumel, "Mr. Obama knows full well that members of Congress have now skewed the laws to give themselves a virtual guarantee of a lifetime job. And as the self-appointed apostle of change, he ought to be taking the lead to change all that inequity."

That was in response to this from Barack Obama:

"I'm generally not in favor of term limits. Nobody is term-limiting the lobbyists or the slick operators walking around the halls of Congress. I believe in one form of term limits. They're called elections."

That is very closely related to this letter of mine in the WSJ. Checked politicians, either voluntarily or involuntarily, is the only real check on lobbyists.

Tradeoffs

I submitted the following letters to the WSJ in response to this editorial:

I’m happy to hear about Barack Obama’s favoring of a stronger dollar (“Barack and the Buck”, Aug. 8). Unfortunately, I fear he’s only making a well-timed political move related to high gas prices (not unlike Republicans banging the “drill now” drum) he doesn’t intend to carry out. The question for both him and the Republicans should be: “Why are you supporting this now instead of months or years ago?”. In Senator Obama’s case, I imagine it has something to do with an attempt to strike a balance between decreasing the cost of oil and appealing to his manufacturing base.

Many of us learned a long time ago that as the value of the home currency falls relative to that of foreign currencies exports rise (which is exactly what has happened in the US, especially over the last year) and imports fall. The reason imports fall, for example, is because their prices, in dollar terms, increase (oil, anyone?). The flip side of that is what Obama is hoping undecided voters in the Rust Belt don’t fully grasp: when the dollar strengthens, exports fall and imports rise. The result, of course, is that the prices of foreign imports, like oil, and the number of manufacturing jobs available to American workers will both decrease. While I’d like to see both candidates take a strong dollar stance, I don’t think the mercantilist mentality running through the country will let that happen. So much for a good idea.

Matt Hutchison
Atlanta, Georgia

It's been too long

Way too long. Actually, I think it's been two or three months since I updated the song at the top of the blog. I could do several, but since I'm only going to put one there, I must choose. This song isn't actually by The White Stripes but by the Raconteurs, Jack White's other band. It's from their most recent album, Consolers of the Lonely (here for the album on imeem and here for it on Amazon), and is called Top Yourself.


Enjoy.

"Plenty of stupid"

That was how Don Boudreaux described his email this morning. I wish I could say that I disagreed with his assessment:

8 August 2008

Editor, The New York Times
229 West 43rd St.
New York, NY 10036

To the Editor:

Paul Krugman is confused ("Know-Nothing Politics," August 8). While I agree that Bush's attack on Iraq was both stupid and immoral, many of the reasons that persons on the left (such as Mr. Krugman) offer against military intervention abroad apply equally to "liberals'" case for government intervention domestically.

Just as many on the right naively fantasize that foreign problems are best solved by force, "liberals" fantasize that domestic problems - real and imaginary - are best solved by force. Jobs disappearing in Ohio? No problem - force Americans to buy fewer foreign goods. Too many Americans without health insurance? Force taxpayers to give it to them. The "distribution" of income doesn't satisfy some Very Caring Person's criterion? Government should forcibly redistribute. A mine collapses in West Virginia? Uncle Sam should force mine-owners to increase safety. See. All very simple.

Unlike Mr. Krugman, I believe that both political parties are the party of the stupid - specifically Republicans are the party of the stupid and the hypocritical and the Democrats are the party of the stupid and the arrogant.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, VA 22030

Who's going to build the ladder?

I don't like the analogy, but I played along. I sent the following letter to this editorial in the AJC describing how the government is building the ladder that will get the economy out of its current hole:

In his August 8 editorial (“Rung by rung out of the hole”), Andre Jackson got his metaphor backwards by implying that it is the government that will “get us out of the hole”. No amount of monetary tinkering or Congressional grandstanding to show they are “doing something” is going to build the ladder he’s describing, especially not in an economy as dynamic as is ours. Instead, elected officials and government bureaucrats can do no better than to keep the needed tools and supplies necessary to build said latter – stable money for consumers to spend and businesses to invest – in the hands of the private sector and kindly step aside. Only then can the economy truly return to its feet and get back to making the U.S. the wealthiest nation the world has ever seen, just like it has in every other economic crisis we’ve ever experienced.

Required contributions

Don Boudreaux:

7 August 2008

Director, Coalition for Pulmonary Fibrosis

Dear Sir or Madam:

I received your e-mail encouraging me to ask my representatives in Congress to vote for H.R. 6567, which would "increase federal research funding for idiopathic pulmonary fibrosis."

Even though in March IPF stole the life of my dear mother, I cannot join your crusade for more taxpayer funding to fight this horrible disease. Congress does not conjure resources from thin air; any resources devoted to finding a cure for IPF must be taken from some other use - and there's no reason to suppose that Congress can judge better than private individuals how best to use resources. Who's to say that resources taken by government from the private sector to support IPF research would not yield even greater long-term benefits by being left in the private sector? Perhaps resources devoted to IPF research would otherwise have been used to cure
leukemia or to develop an automobile engine powered by water.

More importantly, being touched tragically by that disease gives me no moral claim to have Congress, in my name, take resources from other people. I can, and do, ask people to voluntarily fund IPF research. I cannot, and will not, support any effort to force them to do so.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, VA 22030

It just feels a little like blackmail

Maybe that's too strong, but I don't like it. Matt Miller starts strong:

1. The biggest threat to the poverty-ending power of capitalism today is the looming backlash against free trade and open markets in the developed world, especially in the U.S. If the rich world shuts its borders we’ll hurt economic prospects elsewhere in ways that no amount of “creative capitalism,” as discussed here, can begin to offset.
2. The paradox, then, is that the biggest, most “creative” boost American capitalists can offer the world’s poor is to ease the economic anxiety of workers here at home -- because it’s their insecurity that will fuel the protectionist backlash.

Then I got a little nervous:

3. Easing this economic anxiety means providing better health care and pension security for average workers.

Then I felt he fell off the truck:

4. This can’t happen without government playing a bigger role, and supplanting over time the central (and unique) role corporations have come to play in the American welfare state. It will also entail higher taxes.
5. American capitalists -- including, perhaps, Mr. Gates, though I’ve not seen him speak to these questions -- are generally confused about the necessity of this transition. On the one hand business leaders want to get out of the health care and pension business, because soaring costs are killing them. But in the next breath most executives say they don’t want “big government” more involved. Who else do they think is available?
6. In addition, American capitalists wrongly believe that the higher taxes needed to support this transition would hurt the economy, when the evidence from other advanced nations shows that the modestly higher taxes required to relieve corporations of this burden, and plug other gaps in the safety net, are perfectly consistent with strong economic growth. America would not become France or Sweden.

Why wasn't the answer education instead of appeasement? I have a really hard time with the idea of the idea of people blocking free trade unless given concessions. I feel the same way about income redistribution. I've heard people say that playing Robin Hood keeps the poor peaceful.

Immigrants and working conditions

I wrote the following letter in response to this piece in the WSJ by Thomas Frank:

After reading Thomas Frank’s recent piece (“Captives of the Meatpacking Archipelago”, August 6), I couldn’t quite tell if his criticism of conservatives was directed toward its policies about immigration or labor. (After all, the only way the “hellish conditions” he described even existed in the first place was because, the bosses had the workers, being illegal, “over a barrel”.) Though I concur with any immigration criticism, Mr. Frank also provides a fine example of how relatively un-”hellish” those conditions actually were.

The illegal immigrants who were working at the AgriProcessors plant (children included, which is unfortunate) were not forced to work under those conditions but chose to do so because of a lack of better options. When presented with a choice between returning to their home countries and working for little money on a dangerous job, we can see how they decided. While Mr. Frank has pretty good career options writing columns for The Wall Street Journal, those who risk so much to immigrate here illegally and work under those conditions, obviously don’t. It might make him feel good to help these workers make more money, for example, but when many of them lose their jobs due to increased competition for those higher wages from American-born workers and are then forced to take the next relatively more “hellish” job (or maybe even return home), I don’t think they will be so grateful.

Matt Hutchison
Atlanta, Georgia

I'm in utter disbelief

I really am. I saw this post by Matt Welch at reason, which led me to this post on the LA Times Opinion LA blog:

Democratic and Republican lawmakers in Sacramento just might be bailed out of their budget standoff by a new initiative that would slap a one-time wealth tax of 55% on Californians rude enough to have $20 million or more in property. The ballot measure wouldn't come to voters until June 2010 at the earliest, but that might not be a problem, seeing as how the current year's budget will probably still be stalled.

Secretary of State Debra Bowen announced today that the initiative is entering circulation. See the announcement here (pdf), and the initiative language here (pdf). The approach is, on the surface, the same as the Democrats' plan for closing California's gaping budget hole -- get it from the rich with new tax brackets. But the numbers differ and, when you get to the details you realize that this measure is creative. And by creative, I mean weird...

So, rich folk, you say you'd just take your money and Chevron stock and move to Telluride? Or the Bahamas? These guys are way ahead of you. The wealthy would have to pay to leave the state, whether their mode of exodus is a limousine or a pine box.

I read the PDF and it says the money (put into The Environmental Superfund) will be spent as follows:

1) To purchase 30% - 51% of the outstanding voting common stock of ExxonMobil Corporation.
2) To purchase 30% - 51% of the outstanding voting common stock of Chevron Corporation.
3) To purchase 30% - 51% of the outstanding voting common stock of General Motors Corporation.
4) To purchase 30% - 51% of the voting common stock of Ford Motor Company.
5) To purchase 30% - 51% of the outstanding voting common stock of Goldman Sachs Group.
6) To purchase 30% - 51% of the outstanding voting common stock of JP Morgan Chase Company.
7) To purchase 30% - 51% of the outstanding voting common stock of Citigroup Inc.

I just don't know what to think.

Legal theft

Walter Williams:

Edgar K. Browning, a professor of economics at Texas A&M University, has a new book aptly titled "Stealing From Each Other." Its subtitle, "How the Welfare State Robs Americans of Money and Spirit," goes to the heart of what the book is about: The rise of equalitarian ideology has driven Americans to steal from one another.

Browning notes certain kinds of equality have been a cherished value in America. Equality under the law and, within reason, equality of opportunity is consistent with a free society. Equality of results is an anathema to a free society, and within it lie the seeds of tyranny...

So what's Browning's solution? First, he reminds us of the biblical admonition "Thou shalt not steal." Redistribution programs produce the same result as theft. In fact, that's what a thief does: He redistributes income. The difference between government and thievery is mostly a matter of legality.

Taxes and the states

By Steven Malanga for RealClearMarkets:

I’ve often heard people around the country say that voters in places like California, New York and New Jersey (which instituted its own ‘millionaires’ tax on those earning $500,000 or more a year several years ago) get what they deserve. But beware. States that have taxed and spent themselves into a bind want everyone else to pay for their excesses. Even as Gov. Paterson excoriated his former colleagues in the state legislature for failing to recognize the magnitude of New York’s budget problems, last week he traveled to Washington, D.C., to urge the federal government to help bail out the state. Paterson argued creatively that the rest of the country should come to his aid because the Empire State is home to the country’s financial markets and thereby contributes disproportionately to the America economy--although I can imagine that there are many states that would gladly take those financial institutions off of New York’s hands if the governor considers them such a burden.

Paterson also contended that states like New York deserve aid because they send more in taxes to the federal government than they receive in return in spending. This is an old argument that one often hears from pols not only in New York, but in New Jersey, California and Massachusetts. Based on an annual ‘balance of payments’ study sponsored by former Sen. Daniel Patrick Moynihan from 1977 through 1999, the study found that certain states were always big losers. But even Moynihan realized that those states were mostly responsible for their own plight, because their federal legislators had led the way in constructing a tax system that not only redistributed income from the rich to others, but also redistributed income regionally.

The article starts by talking about how NY Gov. Paterson learned of several friends who had left the state due to high taxes and burdensome regulation. Now, he is asking the government (ie the citizens of other states) to pay him back for the revenue that was driven from his state.

"Lose the 'we.'"

Arnold Kling quotes Nicholas Lemann discussing a book by Arthur Fisher Bentley on political theory:

Under Bentley's rules, you can't talk about public opinion, because there is no such thing as "the public" (there are only groups) and opinions don't matter, only actions do. Abstractions like "the people" and "popular will" have no real content, either. "The public interest" is a useless concept, he says, because "there is nothing which is best literally for the whole people."

And adds:

I always thought that this was standard political theory. It was what my father taught me. Once, when I used the word "public interest" in one of my essays, he chided me that there is no such thing. It was his way of saying, "Lose the 'we.'"

This is pretty much the root good of a truly free society and why a truly democratic society creates problems. Whenever you try to pick on thing that is best for everyone, you will at the same time leave a lot of people unhappy.

Capitalism - defined

Well, not really. Jonah Goldberg responding to a critic of his support of capitalism:

Third, I agree that capitalism is flawed and that it doesn’t provide us with a sense of meaning. However, I don’t think that is it’s flaw. I don’t want the government to provide me with meaning. I don’t want to live in a society where politics is the chief provider of “meaning” either. Some may recall, I wrote a whole book touching on the problems with politics of “meaning.”

Fourth, I don’t believe that capitalism makes people irrelevant. Democratic free market systems respect individuals far, far, far more than systems which reject both democracy and free markets. Explicitly anti-capitalist systems treat the individual with barbaric indifference. In America, we lionize the individual. And, in our system, and those like it, the government is not openly hostile to the better and more authentic sources of meaning – faith, friends, neighborhoods, culture, civil society etc. Of course, sometimes the state oversteps its bounds, makes mistakes, gets in bed with business, whatever. But these are not the fulfillments of free market ideology. Most often they are violations of it.

The optimism of Gary Becker

From the Becker-Posner blog:

I am an optimist about the future prospects of America; that is, I believe the individuality, entrepreneurship, and drive in this country will continue to propel the economy and society forward at a good pace. The biggest risk to America's continuing success lies not in the considerations already discussed, but in the expansion of government regulations and controls that can throttle the dynamic energies of its competitive private sector. Clearly, various forms of government spending and regulation, such as spending on police and the military, on schools and other infrastructure, are crucial to any prosperous society. However, the tendency during the past half-century has been to go further than is warranted as different interest groups look to the government for help. Governments now often decide what consumer goods can be produced (see our blog discussion last week), subsidize housing and other goods, and regulate who can be fired and hired (especially in many European countries but also increasingly in the US). Governments also are placing greater stress on equality as opposed to opportunity and efficiency, and pay for medical spending, provide retirement incomes, and often impose heavy taxes on persons who earn more than average.

So far, this expansion of the role of government has not been a crucial deterrent to entrepreneurship and private energies in the United States-a much greater expansion of government has had much more harmful effects in countries like Italy and France. Although I remain optimistic, I do fear that interest group pressures toward a much larger role of government in the United States may become much harder to resist in the future, and that this could eventually kill, or at least badly wound, the free market-entrepreneurial goose that has been laying the golden eggs.

Is it worth it?

The following editorial appeared in yesterday's WSJ:

Yet at Doha, all of this wasn't enough to defeat the protectionists. The media spin of the moment is that this shows the rising power of the developing world. But the real dividing line in the world economy isn't this updated version of the North vs. South 1950s cliché. The real battle is between those who want to expand this era of global trade and prosperity, and those who want to carve out their own protected niches.

The latter seems to include Indian Commerce Minister Kamal Nath, who is the main villain in this week's failure. He preened as a Third World hero by refusing to open his country further to farm imports, insisting on a "special safeguard mechanism" that would have let countries jack up their tariffs if imports rose too rapidly. He claimed this would protect the "livelihood of millions of farmers" in India. But the rise of India's middle class has coincided precisely with the move of millions from the countryside to cities, as well as India's growing engagement with the world economy. More Indians will stay poorer longer because of his obstinance.

The U.S. political class also bears a substantial part of the blame. In its waning months, the Bush Administration has less power to persuade. But part of that weakness goes back to the original trade sins of its first two years. With its steel tariffs and overstuffed farm subsidy bill of 2002, the Administration sent a signal that domestic politics took precedence over U.S. global trade leadership. Its credibility never recovered.

I submitted the following letter in response:

Like many others, I was unhappy to hear of the recent failure of the Doha trade round (again) (“The End of Free Trade?”, July 31), but we shouldn’t be so quick to lay the blame (the “main villain”) at the feet of other countries. The U.S. is a nation that knows the benefits of trade, both for producers and consumers. We should be willing to assume international leadership on the issue of free trade by adopting these kinds of multilateral agreements, flaws and all, even when they don’t appeal to the mercantilist sentiment currently running through our country. If India wants to increase tariffs on farm imports, who are we to say it’s wrong to protect domestic agriculture, with our “do as I say, not as I do” policy of trade negotiations? We all know how lower barriers to imports are a boon to domestic consumers because of lower prices and greater product choices. If India were to increase farm tariffs and cut themselves off from these benefits, causing some pain for our already subsidized farmers, is that worth the gains available to us, them, and all other developed and developing nations from a more open world trade environment? Obviously it is to the negotiators. But don’t count me among that group.

Matt Hutchison
Atlanta, Georgia

Prices and dispersed knowledge - Hayek

From F.A. Hayek's The Fatal Conceit that I'm reading:

We are led - for example by the pricing system in the market exchange - to do things by circumstances of which we are largely unaware and which produce results that we do not intend. In our economic activities we do not know the needs which we satisfy nor the sources of the things which we get. Almost all of us serve people whom we do not know, and even of whose existence we are ignorant and we in turn constantly live on the services of other people of whom we know nothing. All this is possible because we stand in a great framework of institutions and traditions - economic, legal, and moral - into which we fit ourselves by obeying certain rules of conduct that we never made, and which we have never understood in the sense in which we understand how the things that we manufacture function.

Modern economics explains how such an extended order can come into being, and how itself constitutes an information-gathering process, able to call up, and to put to use, widely dispersed information that no central planning agency, let alone any individual, would know as a whole, posses, or control. Man's knowledge, as [Adam] Smith knew, is dispersed...Information-gathering institutions such as the market enable us to use such dispersed and unsurveyable to form super-individual patterns. After institutions and traditions based on such patterns evolved, it was no longer necessary for people to strive for agreement on a unitary purpose (as in the small band), for widely dispersed knowledge an skills could now readily be brought into play for diverse ends.

Who stole the American Dream?

By Rick Newman on Seeking Alpha:

The Mexicans and Salvadorans and Indians and Chinese have robbed us, too, because they've taken a lot of jobs that American are fully capable of doing for more money. What's the point of working hard if somebody else is willing to work even harder for less?
...
And the biggest villain, of course, is our own government. Where are the gasoline subsidies? Or the tax breaks that will give us the incentive us to work harder? How about a bigger mortgage interest deduction to make owning a home worth all the trouble? And why doesn't the government send us all some more money to help restore our work ethic and our quality of life?