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.' "