Ethanol's downside(s)

Ethanol's day should have come and gone several years back . . . it's painfully obvious that it's not the panacea it was presented as being a decade ago (and even then, it was problematical). Reason TV features a discussion of the whole sordid mess:

Ethanol advocates claim that the biofuel is a cheap, renewable energy source that reduces pollution and our dependence on foreign oil. It sounds too good to be true — and it is.

Ethanol, especially the corn-based variety, is bad for taxpayers, bad for consumers, bad for the environment, and horrible for the world's poor. In fact, even environmentalists are critical of ethanol subsidies these days. The ethanol craze has distorted markets and increased the price of food worldwide. The only people who still support ethanol subsidies are the ethanol producers — and politicians from both sides of the aisle. Together, they make sure the subsidies keep coming.

Swedish welfare state myths

Michael Moynihan sits down with author Johan Norberg to discuss the realities of the oft-praised "Scandinavian Model":

The durable myth of recycling = efficiency

By way of Tim Blair, a link to the article in which John Tierney declared himself a target for hate mail from schoolchildren, environmentalists, and municipal workers by pointing out the origins and true costs of the recycling hoax:

Believing that there was no more room in landfills, Americans concluded that recycling was their only option. Their intentions were good and their conclusions seemed plausible. Recycling does sometimes makes sense — for some materials in some places at some times. But the simplest and cheapest option is usually to bury garbage in an environmentally safe landfill. And since there's no shortage of landfill space (the crisis of 1987 was a false alarm), there's no reason to make recycling a legal or moral imperative. Mandatory recycling programs aren't good for posterity. They offer mainly short-term benefits to a few groups — politicians, public relations consultants, environmental organizations, waste-handling corporations — while diverting money from genuine social and environmental problems. Recycling may be the most wasteful activity in modern America: a waste of time and money, a waste of human and natural resources.

The obvious temptation is to blame journalists, who did a remarkable job of creating the garbage crisis, often at considerable expense to their own employers. Newspaper and magazine publishers, whose products are a major component of municipal landfills, nobly led the crusade against trash, and they're paying for it now through regulations that force them to buy recycled paper — a costly handicap in their struggle against electronic rivals. It's the first time that an industry has conducted a mass-media campaign informing customers that its own product is a menace to society.

I've always had my doubts about the modern recycling movement . . . and how it seems to have become more a replacement religion than an economic or even environmental concern. I knew the stated economics were dodgy, in that it seemed that the claimed benefits from recycling more and more "stuff" seemed ever smaller, while the actual costs clearly were growing. People now recycle as a moral imperative much more than as an economic necessity, and municipal governments everywhere are just as trapped in a no-win situation as J. Winston Porter (the former US government official who set the ball in motion back in 1988):

"People in New York and other places are tilting at recycling windmills," says Porter, who left the E.P.A. in 1989 and is now president of a consulting firm, the Waste Policy Center in Leesburg, Va. "There aren't many more materials in garbage that are worth recycling." Porter has been advising cities and states to abandon their unrealistic goals, but politicians are terrified of coming out against recycling. How could they explain it to the voters? How could they explain it to their children?

Indeed, how do you gracefully admit that you've brainwashed an entire generation with nice-sounding nonsense? The scariest thing is that this article was published in 1996! Not only has nothing changed, but things have gotten worse, as more municipalities have insisted on moving further and further in a pro-recycling direction.

J.J. Hill, Rail Robber Baron

There's a good biography of Canadian rail magnate J.J. Hill over at Gods of the Copybook Headings:

Neil Reynolds at the Globe recounts the legend of James Jerome Hill (1838-1916), the Canadian who built an American transcontinental railroad, without government subsidies.

[. . .]

Hill also played a key role, until Sir John A Macdonald and his business allies at the Bank of Montreal muscled him out, in the early history of the CPR. He pushed for the appointment of Van Horne as General Manager of the CPR and argued, correctly, that the road's route was economic nonsense. For political reasons the transcontinental route was built through northern Ontario - this long before any significant natural resources had been discovered in the region. The more commercially viable route would have taken the road through Chicago and St Paul, thereby picking up traffic for the Pacific ports of Seattle and Vancouver. Eventually the CPR was forced to purchase the SOO Line to tap into the Chicago and St Paul markets.

Of course, the route taken by the Canadian Pacific had to be within Canada . . . the political realities of the day didn't allow mere economic facts to get in the way. Mistrust of the American government was nearly as bad then as it has been for the last 20 years (I kid, I kid).

Maps are cool

Megan McArdle is a map junkie:

When you see the map, it becomes radically apparent just how firmly Britain was the root of the Industrial revolution. With the lone exception of Japan, the darkest places on the map are either next to Britain, or former British colonies. And aside from Saudi Arabia and Chile, all the growth seems to spread outward from those Anglosphere points of infection. Nowhere, not even Saudi Arabia, has the income density of Western Europe and North America.

And it's hard not to agree with this sentiment:

It's a pity that geography is so rarely taught in schools above the third grade level — there's an enormous amount to learn about societies just from looking at maps.

Congress to repeal law of supply and demand, film at 11!

Megan McArdle recaps some pretty basic economic facts for the benefit of congressional head-in-the-sand types who seem to have dangerous misconceptions:

Let's look at the basic economics here. I agree that there is a "speculative premium" in the market — the price changes obviously do not simply reflect change in demand conditions or other new information. They're too volatile.

That doesn't mean that this speculative premium is wrong. Speculation is not a synonym for "gambling"; it's a synonym for "guessing". The speculative premium reflects people guessing that the mismatch between supply and demand will be even greater in the future than it is now.

Sometimes speculators are wrong, of course — just ask my classmates who took out $100,000 worth of student loans for business school so that they could hold onto that valuable Webvan stock. But sometimes they're right — the Confederate speculators who made a fortune buying and holding staples in the Civil War guessed, correctly, that the South would be getting a little hungry by and by.

Of course, this makes people angry who want to consume cheaply now, which is why you hear so much talk about war profiteers. But in fact, the speculators were providing a very valuable service. Without them, the confederacy would have consumed those staples early in the war at an artificially low price, and been even hungrier later.

Nobody likes paying higher prices today than they did last week, last month, or last year. But the price reflects a huge mass of information on supply and demand, in a neat little numerical form. Prices rise when supply is lower than demand, signalling that the product is becoming harder to find/manufacture/harvest, and the rational response on the part of the consumer is to use less of the item or to look for substitutes.

Prices work better than anything else we've ever invented for regulating supply and demand . . . far, far better than installing philosopher kings, commisars, or regulatory bodies to determine "fair" or "equitable" value for any given item. Trying to impose conscious human control over a process will only make the situation worse both in the short term and over the long haul.

But politicians aren't elected because of their economical insight . . . and they are always impelled to be seen to be doing something. This is never a good thing.

QotD: Open borders to eliminate wage disparities

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.

Kerry Howley, "The Road Out of Serfdom", Hit and Run, 2008-07-23

Combatting historical inaccuracy

Johnathan Pearce remembers his early history lessons:

Last night, I watched a repeat of a programme that took me back about 30 years to when I was a young kid being taught history by a very leftwing history teacher. The period of study was the Industrial Revolution, and I remember getting what I call the default-setting "Black Satanic Mills" version of the 18th and 19th centuries, full of horrible factories, brutish owners, vicious and incompetent governments, heroic but downtrodden workers, starving farm labourers, not to mention a cast list of all those splendid French revolutionaries. I think it was at about this time — 1976-77 — that I formed in my still-young head the vague sense that I was being sold a line, that something about this was not quite accurate. Anyway, I was only 10, I was more interested in sports and messing about with my mates, and had yet to take a more serious interest in the world of current events. But even at that age I developed a love of history that has stayed with me, and for all that he is a died-in-the-wool leftie, my old history teacher, who is now retired, is someone of whom I have fond memories. He is actually one of the nicest of men and I keep in touch with him. The programme in question was fronted by Tony Robinson whom many non-Britons will know as the guy who played Baldrick in the glorious Blackadder TV series. In more recent years, Robinson, who is a campaigner for things like trade unions, long-term care for the elderly and other causes, has made a name for himself as an enthusiast for ancient history. His programme last night was a classic example of the sort of history that I was taught at school: wittily presented, but at its base incredibly biased, often factually inaccurate, and playing into a narrative of UK history that has coloured our views of industry, law, industrial relations and trade ever since.

One of the main parts of the programme was about the use of the death penalty and how the harsh penal code of the time was used to protect the property of the landed classes and the emerging class of entrepreneurs. That the code was harsh is undeniable. By the early 1820s, there were scores of offences, even ones like stealing potatoes or game, that were punishable by death. What Robinson ignored, however, is that juries frequently refused to convict such crimes because they could see that the punishment was outrageous. And in the 1820s, Robert Peel, Home Secretary at the time, swept almost all capital crimes off the statute books, save only for murder. Robinson does not mention this. And Robinson scorned how landowners were allowed, under the English Common Law, to defend their property by deadly force. He then juxtaposed pictures of poachers being executed with the recent case of Tony Martin, the Norfolk farmer who shot, and killed, an intruder at his home after having been burgled repeatedly. As far as Robinson was concerned, Martin was a throwback to the disgusting concept of using deadly force to guard property, and did not stop to consider that it is often very poor, vulnerable people who are the victims of robbery and attack. The arguments presented by the likes of Joyce-Lee Malcolm, who, for example, has defended the right of use of deadly force in self-defence, do not even enter Robinson's frame of reference. Indeed, the whole show gives us an insight as to how the UK political left — Robinson is an avid Labour Party supporter of the old, hard-left variety — view the whole concept of self defence and the role of the state generally.

Incentives work . . . sometimes too well

Kerry Howley links to a report in Slate on how incentives can lead to unexpected consequences:

Give Birth to a Patriot on Russia Day was cooked up three years ago by Ulyanovsk's governor, Sergei Morozov, to prod the local population into improving the region's dismal 2-to-1 death-to-birth ratio. It worked like this: Women who gave birth on June 12 would be guaranteed one of a variety of prizes—refrigerators, TV sets, washing machines, even cash, and one lucky family would be picked to win the grand prize: a brand-new Russian-made jeep called the UAZ-Patriot.

[. . .]

On June 12, while Russia enjoyed its day off, doctors all over Ulyanovsk struggled to survive the most hellish day of their professional careers. The region's maternity wards, which usually stood half-empty, were suddenly filled beyond maximum capacity. Masses of screaming pregnant women seemed to materialize out of thin air. Stressed-out and sleep-deprived doctors ran around frantically attending to patients. Most doctors were forced to work multiple shifts just to keep up with demand.

When the clock finally struck midnight and the last bloody sheet dropped to the ground, the tally was impressive. Eighty-seven children were born in Ulyanovsk that day, nearly four times the region's average daily birthrate. With just a few prizes, Morozov's team had found a solution to a problem that has haunted Russia for the last two decades. Or so it seemed.

Rogers blinks

Colour me astounded: Rogers is offering a better deal:

Rogers Communications Inc. has thrown a bone to potential iPhone customers by offering a limited-time promotional data rate plan that should silence complaints about Canadian pricing for the eagerly-anticipated device.

The wireless giant said today it would give iPhone subscribers who sign up before Aug. 31 the option of purchasing a 6-gigabyte data plan for $30 per month in addition to any voice plan.

While that still doesn’t match the unlimited data plans offered in the United States by AT&T Inc., the promotion offers significantly better value than the rate plans Rogers unveiled earlier this month.

Under that pricing model, the cheapest plan offered just 400 megabytes of data, 150 minutes of weekday talk time and unlimited evenings and weekends for $60 per month plus fees and taxes.

Interestingly, $60 per month was about as much as I'd be willing to pay.

So, I take back some of my pessimism that the public outcry from potential Rogers iPhone customers wouldn't force the company to make any change to their offerings. It's still not as good a deal as many other countries' iPhone offerings, but it's much better than the original offer.

H/T to Jon for the link.

New record price . . . for pot

Rising prices are being reported everywhere . . . even in the drug trade:

During a routine traffic stop in Ohio, police discovered over 100 pounds of the most valuable marijuana ever documented:

Police curbed the gray, four-door Mercury Grand Marquis Ruci was driving after he allegedly committed a lane violation, the highway patrol statement indicated. A specially trained, narcotics-detecting dog was brought to the scene, and its reaction to the car signaled the presence of drugs, the statement said.

A search of the vehicle yielded 104 pounds of hydroponically-grown marijuana stuffed inside eight black plastic trash bags. Police said the marijuana had an estimated street sale value of more than $4.7 million. [Naperville Sun]

This is really an incredible discovery and I'm surprised it hasn't generated more attention. At $4.7 million for 104 pounds, we're talking about an ounce that's worth $2824.51! That just blows away everything listed at High Times's market quotes section, where ounces of high-grade marijuana in Ohio last month were listed at $400. It also overwhelms the STRIDE data collected by drug enforcement officers showing that U.S. marijuana prices averaged around $200 per ounce as of 2003.

So far, I haven't heard of anyone smoking this new type of marijuana, but that's probably because the police took it all.

Don't worry though: it's the usual middle-man markup by both the police and the media. Regular users shouldn't find this particular kind of sticker shock next time they are in the market.

Steve Jobs reportedly "disgusted" with Canadian partners for iPhone 3G

According to The Register's Cade Metz, Apple's Steve Jobs isn't too happy with the deal they've struck with Rogers — unhappy enough to prevent Apple's own stores in Canada from selling the iPhone 3G:

On Friday, the 3G Jesus Phone makes its debut in 22 countries across the globe, including Canada. But you can't buy one from a Canadian Apple Store.

"[The 3G iPhone] will not be sold in [Canadian] Apple retail stores, but we will have the product to demo, and all our specialists will be trained on the 3G iPhone as well," is the word from an Apple automaton at the Eaton Centre Apple Store in Toronto.

According to AppleInsider, Steve Jobs has barred 3G iPhone sales from Canada's six Apple Stores because he's "disgusted" with the service plans laid down by cell provider Rogers Wireless. Rogers' monthly service plans for the reborn Jesus Phone start at $60 Canadian a month for just 150 calling minutes, 75 outgoing text messages, and 400 megabytes of net data. And each requires a three-year commitment.

Jobs is loath to sell these plans, so he's forcing Rogers and partner Fido to sell them on their own.

Interesting indeed, if true. Also "3G Jesus Phone" . . . heh!

iPhone Watch: D minus 2

Wired is first out of the gates with a look at the iPhone operating system:

I can't tell you how we got ahold of a first-generation iPhone loaded with version 2.0 of the iPhone operating system. What I can tell you is that if I do reveal this information, homicidal ninjas will come to my house and kill my family. Nevertheless, we do have one — and we were able to take a look inside and find a few minute yet interesting changes. Here's a preview of some of the ways in which iPhone 2.0 differs from iPhone 1.0.

iPhone 2.0, of course, is the operating system that will come preinstalled on iPhone 3G models when those start shipping on Friday, July 11. iPhone 2.0 will also be available as a free software upgrade to people who have first-generation iPhones.

[. . .]

Contacts Search
The Contacts application now features a long-awaited search function. No more scrolling through endless menus: You can just type the first few letters of a name and the list narrows down to matching entries as you enter each letter. The search applies to fields that aren't visible, too, so you can search on company names, for instance.

Here, we entered the search term "Wired" and Chris Anderson, the magazine's editor in chief, popped up in the search results. Amy Winehouse popped up when we typed in "trainwreck."

The nutbars are apparently also iPhone 3G fans:

iPhones and sustainable agriculture don't have a lot in common, but a bedraggled group of publicity-seekers and iPhone enthusiasts who want the next U.S. president to plant an organic farm on the White House lawn have connected the two as a reason to line up for Friday's iPhone 3G launch.

Led by a fresh-faced sprite called Daniel Bowman Simon — who looks more likely to be driving his father's SUV than getting his hands dirty hoeing a row of seeds — Waiting for Apples' mission is to encourage people to grow their own food while setting a Guinness World Record for the most time spent waiting in line to buy something.

The group also wants to promote The White House Organic Farm Project, which is taking names for a petition to inspire the next president to plant an organic farm at the White House, the official residence of the U.S. president.

A few members of Waiting for Apples have been camped out in front of New York City's flagship Apple Store on Fifth Avenue since Friday morning, fortified by stacks of organic produce that a friend is delivering to them via bicycle from the Union Square Greenmarket.

An uncharitable person (like, well, me) might say something like "These folks probably don't bathe regularly anyway, so a week of camping out isn't likely to make them smell any worse than they normally would."

And no iPhone round-up would be complete without at least one of my fellow Canadian malcontents whining on about how Rogers is overcharging for iPhone service:

I'm Canadian and proud of it. Despite the fact that Macworld operates out of San Francisco, I still live in Halifax, Nova Scotia with my wife, two kids and our dog. It's a wonderful place to live and bring up a family. However, not everything is peachy up here, north of the border.

Specifically, for the past couple of weeks, I've had an uneasy feeling--the kind of feeling you get when you are walking in a strange city late at night and you notice a gang of thugs behind you. The difference is, these thugs wear suits and work for Rogers. Don't let the suits fool you, they are trying to rob me blind.

I'm referring, of course, to the iPhone plans announced by Rogers Wireless, which is Apple's iPhone partner here in Canada. The plans (all priced in Canadian dollars) are $60 a month for 150 weekday minutes, 400MB of data, and 75 text messages; $75 for 300 weekday minutes, 750MB of data, and 100 text messages; $100 for 600 weekday minutes, 1GB of data, and 200 text messages; and $115 for 800 weekday minutes, 2GB of data, and 300 text messages. Each plan also includes unlimited evening and weekend minutes (9 p.m. to 7 a.m.), visual voicemail, and access to Rogers Wireless and Fido Hotspots. Sending additional text messages will cost 15 cents per message, and additional data is billed at a rate of 50 cents per megabyte for the first 60MB, and then an additional 3 cents per megabyte. The price for extra weekday minutes varies depending on the plan, ranging from 35 cents to 15 cents.

No word on whether Rogers also wants one of my kids and an extra limb or two as well.

Parenthetically, RuinediPhone.com is up to 54 thousand petitioners who may well be upset but a significant proportion of whom are likely to be lined up outside a Rogers outlet at 10 am on Friday morning. I almost wish Rogers was evil enough to note who'd signed and then refuse to sell 'em an iPhone on Friday morning . . .

To restate: Rogers is a corporate entity. Corporations exist to make money. The only way Rogers will be prompted to change their current iPhone offerings is if it becomes clear that their current plans will not yield as much profit as a revised plan. The only way this might happen is if enough people choose not to purchase an iPhone 3G when they become available on Friday. Signatures on a petition are just a moral gesture . . . not an economic one.

Of course, it would help in so many other ways if the Canadian wireless market wasn't a duopoly of Rogers and Bell . . .

Even Macworld is questioning the iPhone 3G pricing!

It's starting to seem like piling on when even the Mac-heads at Macworld are asking impertinent questions about the iPhone 3G service costs:

Nothing stirs the imagination like an major Apple product update such as the iPhone 3G. Weeks before its July 11 release date, people will talk excitedly about its new features, thrill to its touted benefits, and dream of the day they can finally hold one in their hands. Very little, it seems, can dim people's enthusiasm.

Until the pricing information gets released, and the cold, hard sting of dollars and cents sets in.

AT&T released its rate plans for the iPhone 3G this week. The plans are essentially US$10 higher than existing iPhone plans, and text messaging is no longer included. Messaging rates start at $5 per month for 200 messages and go up to $20 a month for unlimited texting. Or you can pay as you go, at a rate of 20 cents for each text message. The end result — even though the iPhone 3G costs less than its predecessor, you'll wind up paying more in service charges over the life of your two-year contract with AT&T.

Those figures caused a few of us around the Macworld offices to pause from our anticipatory iPhone 3G yearnings and take stock: Are the changes promised by the latest iPhone worth the higher service plan rates. Below, you'll find two arguments — one from an editor who's had second thoughts and another from one who's as gung-ho about the iPhone 3G as ever.

Fascinating. Even the most die-hard Apple fans are balking at paying the anticipated higher costs for the newest, coolest iPhone. Could it possibly be that Apple and their various partners are over-estimating the traction that "cool new toy" can get against "hard economic reality"?

To recap: I'm following this story because I was toying with the idea of buying an iPhone 3G, but the announced costs from Rogers (the only Canadian firm handling the iPhone) are making me reconsider whether I'd be better off sticking with my Treo 600 . . . especially as Bell Mobility has improved their own data offerings since I last checked them out. Because I lost my cell phone soon after renewing my Bell contract, I ended up paying a lot for my current Treo, so if I can keep it going for a few more years, it'd probably be the wiser economic choice.

I've never actually bought an Apple product before, although I've occasionally used them at work. In no way was I looking at the iPhone as a "have-to-have" purchase . . . perhaps I'm not alone in this.

iPhone's "poisonous bite"

For a high-profile tech toy, the iPhone 3G isn't getting quite the happy welcome Apple may have anticipated. Take, for example, this Canadian Press headline:

Apple's iPhone may have poisonous bite for consumers with its high rate plans

Apple's iPhone may have a poisonous bite for Canadian consumers who want the much-desired touchscreen phone when it finally goes on sale later this month.

Analysts said Wednesday that consumers will have to pay the voice and data rates set by Rogers Communications Inc. (TSX:RCI.B) if they want the high-end device unless early sales are slow.

Rogers is the only Canadian carrier that has a network capable of running the iPhone, which goes on sale on July 11.

"Right now Rogers thinks that the iPhone is such a compelling device that people will essentially pay anything to get one," said PC Magazine's Sascha Segan.

"They they'll sign away their lives for three years, they'll pay higher data rates than are charged on other devices because the iPhone is so incredibly sexy and so incredibly desired."

As I said a couple of days ago, no matter how loud the screaming is from the peanut gallery, unless sales are significantly lower than they expect, Rogers is not likely to do much to make their offerings more consumer-friendly. From their point of view, there's not much reason to do so: the product is so eagerly anticipated that they will probably run out within the first few days of availability. If that doesn't happen, perhaps Rogers will reconsider, but the smart money is betting against it.

Bottom line: if you really want an iPhone 3G, but don't want to pay as much as Rogers wants, you have to restrain yourself from lining up next Friday. That's it. If enough of you do it, so that Rogers is left with lots of unsold iPhones after a few days (or weeks), they'll have to reconsider their situation. I don't expect it will happen: the feeding frenzy will occur exactly on schedule at your local Rogers storefront.

But I'd be delighted to be proven wrong.

Canadians now wealthier than Americans?

In an astonishing economic turnaround, Canadians appear to have overtaken Americans in terms of individual wealth, according to Macleans:

How did this happen? Canada often comes out ahead when you look at squishy things like quality of life. But since when were we richer? Mintz credits the rising loonie, the boom in commodities, and better public policy. He says that over the past decade productivity growth in the U.S. has slowed, while we've been hacking away at our government debt and lowering taxes. In short, as a nation, we've been doing everything right, while the U.S. has been doing everything wrong.

When you look at how individual Canadian and American families make and spend their money, it gets even more interesting. The numbers show that our median household incomes are about the same, or at least they were back in 2005 when the most recent figures came out. That year the median household income in Canada was about US$44,300, after you adjust it for the exchange rate and our lower purchasing power, while the American median was US$46,300. Since then, the loonie has gained on the U.S. dollar, so we've likely narrowed the gap. But while our incomes may be similar to American incomes, we're still much wealthier because we have less debt. What you make isn't a good measure of how rich you are — to figure out your true wealth you should add up everything you have and subtract what you owe. And Americans owe more. A lot more. Here in Canada the average amount of personal debt per person is US$23,460. In the U.S. it's a whopping US$40,250. And all those numbers are from 2005, just before their housing market slipped into a sinkhole. If you looked at the numbers now, you'd find that Americans are even further behind, because their largest asset — their home — is worth less. "There has been a lot of destruction of wealth in the U.S. over the past few years," says Mintz, "and that would affect the net worth figures significantly. I would suspect that they would be even worse off today."

This is a very interesting article, although it does reinforce a few smug Canuck notions, it's surprising how different the average statistical American is from the average statistical Canadian. (Note the careful deployment of the word "statistical" in that statement.) Certainly some of the differences between Canadian and American attitude to debt can be traced to the differences in tax policies: Americans can deduct mortgage interest, while Canadians don't have that incentive. That alone would encourage people to take on a larger mortgage debtload, and with the housing market currently wobbling and the employment picture dimming, there are going to be more people discovering that they can't service those larger debtloads.

That being said, we're still disproportionally dependent on the overall health of the US economy . . . if recent anaemic economic numbers continue or worsen, Canada will still suffer as our largest trading partner does. In economic terms, no North American country is an island, and we're all much more vulnerable to economic downturns in the US economy than we used to be.

H/T to Craig Nodwell for the link.

QotD: The Pursuit of Happiness

Some science suggests that happiness is essentially a fixed commodity. It may rise or fall sharply because of events — getting a raise, breaking a leg — but over the long run, people adapt to those experiences and revert to their natural level of satisfaction (or melancholy).

Scratch that theory. According to a recent global survey, happiness is not only variable but on the rise in most of the world.

Two things, it appears, are needed to increase the supply of happiness: freedom and money. As it happens, a substantial amount of freedom is crucial to the creation of wealth. There is no such thing as a rich totalitarian country, as even the onetime totalitarians in Beijing finally realized. So in a very real sense, freedom is the key to happiness.

Steve Chapman, "The Pursuit of Happiness: How economic liberty creates personal fulfillment", Reason Online, 2008-07-03

Online protest against Rogers iPhone rates

I doubt it'll do much to influence the decision-makers at Rogers, but there is an online petition being put together against the high rates for Canadian iPhone users:

A Canadian online petition has been launched to protest the rate plans offered by Rogers Communications Inc. (TSX:RCI.B) and its Fido subsidiary for Apple's iPhone when it goes on sale next week.

On Friday, Rogers and Fido released the pricing for iPhone calling plans, listing them as starting at $60 a month and requiring three-year contracts.

Nearly 22,000 had signed the online petition posted on the website RuinediPhone.com by 7 p.m. on Monday.

Oddly, when I tried to visit that site this morning, I got a 403 error. According to a post at the group page on Facebook, Rogers has blocked access to the site for Rogers customers, and they're recommending using a proxy to get access instead.

Elizabeth sent me this link to a Financial Post story:

The petition, found on the Web site ruinediphone.com, was launched shortly after Rogers unveiled its pricing scheme last Friday for the iPhone, scheduled for sale in Canada July 11.

The Web site, titled "Screwing Canadian iPhone consumers since ‘08", also includes an open letter to Apple CEO Steve Jobs.

Signed by James Hallen, the letter calls on Mr. Jobs to intervene and pressure Rogers into cheapening up their iPhone rates.

"I was going to buy an iPhone for me, my girlfriend and my family. Now, sadly, I cannot afford the plan," writes Mr. Hallen. "I hope you can do something Steve; we are loyal customers and trust that you will. We don't want to lose faith in Apple."

While I'd like to think that this online effort would have some effect, the only real way Rogers will be forced to reconsider their pricing model is if potential buyers stay away in droves on July 11th. Lower-than-expected sales would be a strong indication to Rogers that they've overpriced the iPhone.

I don't expect that to happen: there are too many people eager to get their hands on an iPhone . . .

QotD: Basic economics

It's easy to shrug this kind of stuff off, especially with a (newly veto-tastic) former oilman in the White House, but all that will change six months from now, and the Democrats are rubbing their hands at the prospect of unified government. In the meantime, the air is only getting thicker — on both sides of the aisle — with Mahatir/Larouche levels of hostility toward those shadowy bankster types who make money without even manufacturing widgets or tilling the land.

Seriously, did we kick communism to the curb only to suddenly discover, centuries after the French, that a free market will attract (and benefit from!) suspiciously smart people in pinstriped suits who are using their money to — wait for it — make more money? "Speculators" provide crucial liquidity (which is marketese for "money with which to buy the stuff you want to sell"), and perform a valuable function in helping locate assets that are under- or over-valued. Even those nassty speculatorsses at the end of the real estate boom (the evil "flippers" mom told you about) did some good stuff: They allowed people to sell their houses at a tidy profit, and fixed up old properties in preparation for resales that maybe never came. Many gambled and won (as did the people who sold to them), many others gambled and lost (freeing up "winners" who will buy those properties at firesale prices). That's all kind of the point.

Matt Welch, "There Was Music in the Cafes at Night and Re-Regulation in the Air", Hit and Run, 2008-06-24

QotD: EUrocrash imminent?

Is the European Union heading for a Yugoslavian-style denouement? It sometimes looks as if its political class, oblivious to the wishes or concerns of the EU’s various populations, is determined to bring one about. The French and the Dutch voted against the proposed European Constitution, but that did not deter the intrepid political class from pressing ahead with its plans for a superstate that no one else wants. To bypass the wishes of the people, the politicos reintroduced the constitution as a treaty, to be ratified by parliaments alone. Only the Irish had the guts — or was it the foolhardiness? — to hold a referendum on the issue. Unfortunately, the Irish people got the answer wrong. They voted no, despite their political leaders’ urging that they vote yes. No doubt the people will be given an opportunity in the future — or several opportunities, if necessary — to correct their mistake and get the answer right, after which there will be no more referenda.

The European political class was briefly taken aback. What could explain the Irish obduracy? Several explanations came forth, among them Irish xenophobia and intellectual backwardness and the malign influence of the Murdoch-owned press. The narrowest economic self-interest was also said to have played a part. Having been huge beneficiaries of European largesse over the last 30 years, the Irish — who have the second-highest per capita GDP in Europe after Luxembourg — are now being asked to pay some of it back in the form of subsidies to the new union members from Eastern Europe. Ingrates that they are, they don’t want to pay up, especially now that their own economic growth rate has slowed dramatically in the wake of the financial crisis and the economic future looks uncertain.

Another explanation for the Irish “no” vote was that Irish citizens had been frightened by the proposal of the French finance minister to equalize tax rates throughout Europe, thus destroying unfair competition (all competition is unfair, unless the French win). No prizes for guessing whether the high tax rates of France or the low rates of Ireland would become the new standard. Ireland’s golden goose would find itself well and truly slaughtered in the process.

Theodore Dalrymple, "Europe's Unhappy Union", City Journal, 2008-06-18

Happy Tax Freedom Day, Canada

It's four days earlier this year:

Effectively, "every dollar they earn before June 14 would be required to pay the taxes owing to all levels of government."

The computation of tax freedom day includes income taxes, property taxes, sales taxes, profit taxes, health, social security and employment taxes, import duties, licence fees, taxes on alcohol and tobacco, natural resource fees, fuel taxes, hospital taxes and an array of other levies.

Thanks to the reduction of the goods and services tax and trimming of various provincial taxes, this year's tax freedom day falls four days earlier than in 2007.

That in turn was five days sooner than in 2006, which followed a two-day gain from the latest-ever tax freedom day - June 25 in 2005.

"Even with the recent improvements, tax freedom day still falls 40 days later than in 1961, the earliest year for which we have calculations," Veldhuis said.

"Given the number of different taxes imposed on Canadians, it is virtually impossible to know exactly how much tax we pay," he added.

"The point of tax freedom day is to give people a comprehensive and easy-to-understand indicator of the total amount of taxes paid to all three levels of government."

Why so gloomy, America? Because of the media

Gregg Easterbrook points out that while Americans think that the country as a whole is doing badly, they as individuals are doing well. The media's "if it bleeds, it leads" emphasis on doom and gloom has much to do with this:

The Democratic National Committee recently ran an ad blasting John McCain for saying the country is "better off" than in 2000. Yet, arguably, except as regards the Iraq war, Mr. McCain's statement is true. In turn, Mr. McCain is blasting Barack Obama for suggesting that international tensions are not as bad as they've been made to seem. Yet, arguably, Mr. Obama is right.

Democratic attacks on Mr. McCain and Republican attacks on Mr. Obama both seek to punish impermissibly positive thoughts. At a time when there exists a sense of crisis over the economy, fuel prices and many other issues, this reinforces the odd, two realities of life in the United States today: The way we are, and the way we think we are. The way we are could use some work, but overall, is pretty good. The way we think we are is terrible, horrible, awful. Possibly worse.

The case that things are basically pretty good? Unemployment is 5.5%, low by historical standards; income is rising slightly ahead of inflation; housing prices are down, but the typical house is still worth a third more than in 2000; 94% of Americans do not have threatened mortgages, and of those who do, most will keep their homes.

Inflation was up in 2007, but this stands out because the 16 previous years were close to inflation-free; living standards are the highest they have ever been, including living standards for the middle class and for the poor.

All forms of pollution other than greenhouse gases are in decline; cancer, heart disease and stroke incidence are declining; crime is in a long-term cycle of significant decline; education levels are at all-time highs.

People are subject to so many negative images from TV coverage, and so many hard-luck stories in newspaper reports, that it's no wonder that they believe that the rest of the country — the rest of the world, actually — is spiralling down the toilet.

It's a truism that bad news sells, and that good news isn't as popular. The individual media outlets probably have less overall influence than they did 20 or 30 years ago, but the overall tone still emphasizes bad news . . . and we're all much more likely to pay attention to doom and disaster than to positive or neutral reports. It even makes sense: good news won't generally make much immediate difference in our day-to-day lives, but the local car plant shutting down or a major bridge collapsing in the city will loom large in our short-term view. We're attuned to bad news, and the media serve up to us what we pay the most attention to . . . it's a vicious circle.

More on the "Canadian DMCA"

Bob Kopman sent me another link decrying the recently proposed bill C-61:

Canada, one of the shining lights in the copyright and intellectual property world, has a shadow approaching that may dim that for all. The name of that shadow? Bill c-61, which was formally introduced by Industry minister Jim Prentice an hour or two ago. One of the 'highlights' is the abolition of court's flexibility in statutory damages, fixing it at $500 (CAD)

The bill, dubbed the 'Canadian DMCA' has not been popular with many of those it will effect. Over 40,000 have joined a facebook group, run by Michael Geist opposing it. Geist, a law professor at University of Ottawa, has been fighting to oppose these laws for some time now. On the tabling of the bill, he writes "The government plans for second reading at the next sitting of the house, effectively removing the ability to send it to committee after first reading (and therefore be more open to change)"

The bill is controversial in many ways. Whilst supporters of the bill will point to the allowances for time shifting, format shifting, and the ability to 'private copy' (moving a song from CD to an mp3 player for instance). It will, however, prevent that activity, though criminalization, if there is any sort of technological restriction on it. Anti-copy flags on TV shows, DRM on music, or rootkits on CDs would mean that any attempt to make a fair use, would be subject to prosecution and heavy fines.

I guess it's time to lobby the MP . . . before we get to third reading.

Modern economic frenzies in a nutshell

James Lileks gets all screedy about the oil situation:

I've heard some people yearn for a windfall profits tax that would reinvest the money in alternative energy, or rebate it back to the consumer. Fine. Apply that to your business. Here's the acceptable profit level. You don't get to make any more than that. If you do, the state will confiscate the property and divide it among your competitors, or give it back to your customers. Have a nice day. But oil is different. It's necessary! So is food. Farmers are doing well. Let us therefore set the acceptable level for corn farmers, take away the excess profits, invest it new forms of sweeteners or biofuels farmers cannot yet produce, and give people rebates for Splenda to compensate for the price of high fructose corn syrup.

It's not that we cannot produce any more oil; you suspect that some are motivated by the belief, perverse as it sounds, that we should not. We should not drill 50 miles off shore on the chance someone in Malibu takes a hot-air balloon up 1000 feet and uses a telephoto lens to scan the horizon for oil platforms. Also, there are ecological concerns. (The ocean is a wee place, easily disturbed.) There's something else that may well be my imagination, but I can't quite shake the feeling: high gas prices and shortages of oil make some people feel good. This is the way it has to be. Oil is bad. Cars are bad. Cars make suburbs possible. Suburbs are the antithesis of the way we should live, which is stacked upon one another in dense blocks tied together by happy whirring trains. So some guy who drives to work alone has to spend more money for the privilege of being alone in his car listening to hate radio?

Good.

Yes, I know, projection and demonizaton and oversimplification. But this is true: there's a side of the domestic political structure that opposes expansion of domestic energy production, be it drilling or nukes or more refineries.

But remember, just like George Bush, James Lileks has family ties to the [dum, dum, duuuuuum!] oil industry.

Proposed changes to Canada's copyright law

In a display of serendipidity, Jon sent along a link to this Toronto Star article on proposed revisions to the Copyright Act:

Canadian consumers could face damages of $500 and upwards for owning bootleg copies of music, books and other copyright material, under legislative reforms introduced today.

There would be fines of up to $20,000 for public infringements of copyright law, such as posting music to the Internet or even giving a iPod loaded with your music.

The Conservative today unveiled long-awaited changes to the Copyright Act, a bid to bring the law into the digital age.

And if you're confused about the changes, the government has some advice — go see a lawyer.

"If you need to know how the law applies to a particular situation, please seek advice from a lawyer," read the warning printed on the information sheets distributed to reporters this morning.

"Intellectual property is complicated," a government official told a briefing this morning.

This does seem to support some of the things reported in the article I linked to earlier today.

Update: According to Cory Doctorow, this is just like the American DMCA, except worse:

Canadian Industry Minister Jim Prentice introduced his answer to the American Digital Millennium Copyright Act today as planned, and it's even worse than the US DMCA. The Canadian DMCA allows every single exception to copyright to be eliminated by adding DRM: whatever the law allows you to do, a corporation can take away, just by using DRM to prevent you from doing it. Breaking DRM is illegal, unless you fit into a tiny, narrow, useless exception for security research.

It used to be that Parliament got to write copyright law. Now, it's Hollywood companies, who get to overrule Parliamentary law with whatever "business rules" they put in their DRM.

Michael Geist has the depressing analysis. Makes me want to cry. Watch this space for tips on getting in touch with your MP to make sure that this farce dies in Parliament.

Megan McArdle on Sweden

Megan responds to a particularly uninspired criticism:

So sorry that I didn't provide links on my Sweden post about disability, unemployment, and so forth. I just sort of assumed that Sweden's amazing rates of disability, "true" unemployment rate that may top 20%, and so forth were common knowledge. They certainly aren't particularly controversial. But if there is anything less common than common sense, it's probably "common knowledge".

That, presumably, is how this got written. It's a compendium of extremely weak Google-fu that betrays a pretty fundamental lack of knowledge about Sweden's economic problems.

Let me be clear: Sweden is not by any means a dystopian hell on earth full of morose workers standing in endless queues for Yugoslavian shoes. It's a lovely place to live, full of people who are about as happy as genetics and the weather permit them to be. However, Sweden is wrestling with a lot of big issues. I was going to write a post about them to correct some of Ms. G's more bizarre misperceptions, but I was beaten to the punch by the inimitable Michael Moynihan, who has lived in Sweden, is married to a (lovely) Swede, and has spent far more time on the subject than I have, explain. Luckily for you, he's done a far better job than I would have. I won't excerpt, because it should be read in its entirety.

Places where "feminism" isn't even in the dictionary

Foreign Policy lists the worst of the worst: the places in each region where women are the furthest from equality:

YEMEN
Worst in the Middle East
Share of women in Assembly of Representatives: Less than 1 percent
Female-to-male income ratio: 30:100
Female literacy rate: 35 percent

Early marriage is commonplace in Yemen, with 48 percent of girls married by the time they are 18 and some brides as young as 12. The result: poor health for mothers and babies. One in 39 women die during pregnancy or childbirth, and 1 in 10 children doesn't make it to a fifth birthday. Yemeni women live particularly restricted lives; for example, getting a passport and traveling abroad requires a husband's or father's permission.

SIERRA LEONE
Worst in Africa
Share of women in Parliament: 13 percent
Female-to-male income ratio: 45:100
Female literacy rate: 24 percent

Sierra Leone has the unfortunate distinction of having the worst gender inequality in the world, according to the U.N. Human Development Report's gender index, which scores countries on health, education, and economic indicators for women. One in 8 women dies during pregnancy or childbirth, and women have an abysmal life expectancy of just 43 years, one of the lowest in the world. Girls can expect to receive only six years of schooling. On top of it all, the horrors of Sierra Leone's decade-long civil war, in which perhaps a third of the country's women and girls suffered sexual violence, haunt women today. Widows struggle to get by, survivors of wartime rape face stigma and discrimination, and men continue to assault women with impunity. The country's Parliament enacted laws last June that criminalize wife-beating and allow women to inherit property, but how well those measures will be enforced remains to be seen.

QotD: Trade is THE solution to poverty

Trade is THE solution to poverty. Throw in international labor mobility, and we're well on the way to remedying any of the problems that money can fix — like controlling infectious diseases, providing electricity, clean water and sanitation, feeding people, educating women, and so forth. Or at least that's what Kym Anderson, an economics professor at the University of Adelaide in Australia more or less asserted in his presentation on trade and migration on the third day of the Copenhagen Consensus 2008 Conference.

Anderson looked at a number of econometric modeling scenarios and calculated the cost and benefits that would obtain from full trade liberalization under realistic assumptions derived from the current World Trade Organization's Doha Development Agenda negotiations. Anderson estimated that liberalization of global merchandise trade would mean an annual increase of $287 billion per year in global GDP, of which $86 billion would go to developing countries. This compares very nicely with the $104 billion in development assistance that the governments of industrialized countries gave to developing countries in 2006.

In other calculations, Anderson found that the long term effects of trade liberalization would be that global income in 2098 would be up to 10% greater than it otherwise would have been. The associated net present values from freer trade range from $50 trillion to $424 trillion. Consider that in 2007, total gross world product was $53 trillion. In other words, both the immediate and long-term benefits from free trade are enormous. Anderson reports benefit cost ratios ranging from 269:1 to 1121:1.

Ronald Bailey, "And the World's Top Priority Is . . . Free Trade?: The fourth dispatch from the 2008 Copenhagen Consensus Conference", Reason Online, 2008-05-29

Pollyanna? Call on line 2

Steve Chapman tries the unheard-of trick of viewing the glass as half-full:

At the risk of ending up on Pollyanna's Christmas card list, allow me to differ. Oil prices are unpredictable, particularly in the immediate future, and it's easy to think of events that could force them higher — like, say, a war between the United States and Iran. But in the long run, there is every reason to think that the steep, rocky ascent we have been on will give way to a welcome downhill path.

I'm not alone in my optimism. Michael Lynch, head of an energy consulting firm in Massachusetts, told the Associated Press the current price of gasoline "is the peak or very close to it." Analysts at the investment bank Lehman Brothers say we are just as likely to see oil at $80 a barrel as at $200.

It's easy to take a trend line as eternal fate. The oil market may look particularly inflexible, given the finite nature of fossil fuel deposits and the insatiable needs of growing economies. But two important things in the oil market can change. One is demand. The other is supply.

Demand here is already in full retreat. People are abandoning SUVs for hybrids, taking mass transit and even venturing out on foot. "The average American motorist is driving substantially fewer miles for the first time in 26 years," reported USA Today recently. "Miles driven in February declined 1.9 percent from February 2006 before rebounding slightly for a 0.3 percent year-over-year gain in March." And that was before gas got to $4 per gallon.

On the other hand, if the price of gas actually started to fall, it wouldn't take long for the professional doom-and-gloomsters to switch to something else to frighten everyone. After all, that's what they do best.

Taxpayers lose the game

It should be no surprise that major league sports franchise owners love having new stadium facilities for their teams . . . but very few of them actually pay more than a small percentage of the actual costs: the local taxpayers usually pay the lion's share. Do they actually benefit from this?

My favourite NFL team, the Minnesota Vikings, are actively trying to persuade the voters of Minneapolis (and the state government) to pony up several hundred million dollars for a new stadium to replace the Hubert H. Humphrey Metrodome. The team may move if they don't get a new facility, but that would probably be a better deal for the taxpayers — if not the football fans — and the team owner would have to try bargaining with some other city government for lavish subsidies.

The real danger of reducing trade with China

Mark Steyn gets to the biggest danger in any potential reduction of trade between China and the west:

I don't mean the moments when he [Obama] gets carried away and announces that his Administration would "stop the import of all toys from China". As it happens, that's a policy I'm not unsympathetic to. Over 80% of American toys are made in the People's Republic and, while that may well be appropriate given the whiff of totalitarian coerciveness that hangs around Barney the Dinosaur, I can't say I'm entirely comfortable with contracting out US innocence to the butchers of Tiananmen. For one thing, come the Sino-American War, Beijing will have the ultimate fifth column inside the west: the nation's moppets, resentful at having their Elmos and Spongebobs cut off the duration, will be shinning down the drainpipe after dark in ski masks and blowing up power stations to hasten the day of liberation.

Scary stuff.

Is government funding necessary for "pure" science?

Ronald Bailey looks at a new book by Terence Kealey:

Kealey traces the fits and starts of technological progress through stagnant Bronze Age empires like Egypt and Assyria to the technologically innovative small merchant cultures such as the Phoenicians, Philistines, and Lydians that made crucial advances like the alphabet, ironworking, and coins. Technology stagnated under the Romans and surprisingly made headway during the Dark Ages which saw the invention of three-field crop rotation, the heavy plow and the horse collar which lifted food production by more than 40 percent. These inventions arose in areas of northern Europe where farmers sold food to city markets. This meant that they could specialize in growing food and obtain other goods they needed in trade from city dwellers. In the deep countryside where feudalism held sway, crop yields did not markedly improve for centuries. The period also saw the invention of windmills, trousers, butter, barrels, and buttons.

Then came the Renaissance in Italian merchant cities which invented double entry bookkeeping. This advance in accounting enabled enterprises to accumulate debts and credits in their own rights, making them entities separate from any individual. Italians also invented insurance to cover the risks of trading. The first stock exchange opened in Antwerp in 1460. Kealey then takes us to the dawn of the Industrial Revolution which again took off in small trading countries, especially the Netherlands and England. The common thread that he identifies is that technology takes off when individual and property rights are recognized.

Kealey shows in nearly every case the crucial inventions of the past two and half centuries were called forth by markets, not invented by scientists working from ivory towers. These include the steam engine, cotton gin, textile mills, railroad engines, the revolver, the electric motor, telegraph, telephone, incandescent light bulb, radio, the airplane — the list is nearly endless.

All of this is undeniably true, but it doesn't address the constant refrain from the institutional scientific world: that these are all merely "technological" inventions, not pure science. The usual claim is that private enterprise can't or won't fund basic scientific research because there will be no obvious way to profit from the research — and it won't provide the investigator with a temporary monopoly from which to derive the profits to pay for the research in the first place.

There are lots of data points which indicate that government funding in R&D will actually slow down private investment in that area: for the obvious reason that the government has deeper pockets than most private organizations and is not directly influenced by the profit motive . . . if someone else is already working in that area (and you'll eventually get access to whatever they come up with anyway), you're better off to devote your resources to something else.

Burma: promise unfulfilled

Kerry Howley looks at the country and notes that even before the tragedy inflicted by Cyclone Nargis, things were trending towards the awful:

In the mid 1950s, denizens of Burma, Thailand, and South Korea were about equally wealthy, but one nation seemed especially likely to prosper. In contrast to the others, Burma was already an exporter of rice and oil, had a relatively high literacy rate, and seemed well on its way toward a parliamentary system of government. It was full of teak, gems, and rich soil. As David Steinberg points out in Burma: The State of Myanmar, any observer "would have pointed to Burma as the potential economic and political leader of the three." War-torn, resource-poor South Korea "would not have been a contender in anyone's imagination." In 2006, South Korea's GNP per capita was $24,500; Burma’s was $1,800.

Look closely enough at the pictures of destruction wrought by Cyclone Nargis, and you begin to realize how very little there was to destroy. There, a bamboo house in shambles; here, a thatch roof torn off; there, a dirt road obscured by scattered palm fronds. When the cyclone struck, tens of thousands of people had no solid structure to cling to, and the cyclone's ghastly death toll is as much a function of the country's poverty as is the storm's strength. Had the same cyclone hit the prosperous Burma that might have been, the death toll would have been far less dramatic.

The South Korea comparison matters because Burmese poverty is so often treated as an inevitability rather than a byproduct of bad governance. The imprisonment of activist Aung San Suu Kyi is well known and roundly denounced; the junta's punishing monetary policy, which maintains an official exchange rate 200 times lower than the market rate in order to benefit state-owned businesses, is less often noted. Burma's banking system is barely functional, and the government tightly controls trade. According to the Progressive Policy Institute, Burmese rice exports have dropped by 99 percent since 1950. The junta says it is committed to a market-oriented economy, but it has reversed most of the gestures it has made in that direction.

The situation in Burma, already tragic, is being made significantly worse by the ham-fisted actions of the ruling junta. People are literally suffering even worse privations because the authoritarian government does not dare be seen to need help from outside — it might weaken their grip on power. There isn't a hell special enough for this kind of inhuman behaviour.

Update: Brian Micklethwait considers the question of whether an invasion threat would help or hinder.

Well, whatever. What is definitely true is that if, during a natural disaster, a government treats its own people as hostages rather than anyone they are supposed to help, then helping those people means shoving the government aside, at least for the duration of the disaster. Trouble is, smashing up a government does not, to put it mildly, necessarily mean helping its people. It's one of those necessary-but-insufficient situations. I actually think that if these generals did fear an old-fashioned invasion, a bit more than they do now, they might tolerate an NGO invasion instead. Surely, a threatened invasion, a real one, might accomplish something here. Trouble is, if you threaten something, it is better to mean it.

In praise of gridlock

By way of Samizdata, some political wisdom from a man who calls himself "not just stupid", but a "student of stupidity": P.J. O'Rourke:

It occurs to me that America could wind up with a Democratic president. This scares me. Not because I hate Democrats — although I do, come to think of it — but because a strong Democratic president and a strong Democratic Congress could put an end to partisan bickering in Washington and result in politicians from both parties working together to solve America's problems. And then we're really screwed.

I have been covering politics for 38 years. Trust me: we don't want politics to quit. That's why we need a Republican president — not because Republicans are good but because we need gridlock. I love gridlock. Gridlock means government can't do things.

The two most frightening words in Washington are "bipartisan consensus." Bipartisan consensus is when my doctor and my lawyer agree with my wife that I need help.

Bipartisan consensus — like the stimulus package that has been delivered to us courtesy of Congress and the president. A $168 billion stimulus package that is supposed to change the trajectory of a $13 trillion economy.

Now, even somebody who flunked high school physics — and I did — can tell you that the energy of $168 billion is not sufficient to budge $13 trillion worth of inertia. It's like trying to use Dennis Kucinich to push Hillary Clinton off the Democratic campaign platform.

Much more here (PDF document).

Hurrah for Jindal!

Until his name came up as a potential running-mate for John McCain, I don't remember ever hearing about Bobby Jindal. I think this will change regardless of whether he joins McCain or not. Megan McArdle is a fan:

With a river of federal money flowing in, Louisiana, which used to be stuck at the bottom of state corruption indices, could have gone back to business as usual while the politicians and the powers that be diverted a few rivulets to their own use. Instead, Jindal and the legislature passed anti-corruption laws that in a surprising turn of events actually seem to have done something about corruption — suddenly the state is getting the best scores in the country. They pushed through disclosure rules for all government officials — state and local, appointed and elected. He got a law passed that forbid legislators from doing business with the state. And he took on a tax and regulatory structure that had been built around the notion that companies couldn't go anywhere, and could hence be bled dry.

Huey Long deliberately built a bridge lower than standard so that boat traffic couldn't go upriver. The days when New Orleans could enforce that kind of dominance are long gone, but the old institutional structures remained. For example, Louisiana had special taxes on utilities, on new equipment purchases, on businesses that borrowed money. The unsurprising result was that companies deferred maintenance and refused to buy new equipment, making them uncompetitive unless they paid low wages. It's classic rent seeking behavior by the legislature, and Jindal actually got rid of it; new businesses are now locating there, and others are upgrading.

Staving off disaster in Massachusetts

Katherine Mangu-Ward realizes that she missed some key elements after her move to Massachusetts:

Massachusetts must have been a terrifying place in 1995. A relatively recent arrival in the commonwealth myself, I had no idea that the mid-90s was a time when health care was unobtainable. I didn't know about the washed out bridges and unplowed roads. Nor do I recall seeing bands of feral children roaming the streets from 8:00 am to 3:00 pm due to the lack of public schools.

But a popular ballot initiative to eliminate Massachusetts's income tax — thus bringing the state budget back to 1995 levels — is being greeted with howls of protest and predictions that the state will degenerate into underfunded chaos.

Gas tax economics

Megan McArdle explains why gas prices are so high, and why mucking around with tax holidays is not going to fix anything:

Supply is elastic on the downside — companies can take the stuff off the market and store it if they don't like the price, or throttle back their refineries. But there's no way to expand the supply, because Americans can't import gasoline from abroad; each mix must be specially formulated to the air quality regulations of its regulatory region.

Lots of people are unaware of this: regional variations in price sometimes prompt the idea of bringing in supplies from other regions, but for regulatory reasons this generally can't be done. Individual states and provinces have differing standards for additives and blends — which can't be easily met by supplies for other markets — so they sometimes act to drive up the prices disproportionally within that market.

It's not a market failure . . . it's another example of unintended consequences of regulatory action.

Because supply is unresponsive to price on the upside, and prices are already quite high enough for companies to make a profit, the price of oil is currently basically set by consumer demand: they bid the price up to the point where they want to consume the maximum amount that refineries can supply. Oil companies can't sell more gasoline by lowering prices, and they also will not sell any less gasoline, because the current price is the price at which consumers want to consume all the gasoline they produce. Hence, if you lower the tax, the price stays the same, and 18.4 cents goes to the oil companies for every gallon.

Now, one might say that this is good because it will incent them to find more oil. But this is not, in my opinion, a very good argument. First of all, we're also considering mucking around with windfall taxes, which are a much bigger disincentive to invest than any piddling 18.4 cents per gallon. Second of all, oil companies can discover more oil, but they are hard put to increase refinery capacity, because no one wants any refineries near anyone; virtually all of our refineries are decades old, with improvements coming from throughput enhancement rather than new built capacity. The limiting factor on gasoline right now is refinery capacity, not oil supplies. And third of all, they're already making really quite a lot of money. We don't need to give them even more.

US greenhouse gas emissions up 6.6%

It's true! Of course, it pales in comparison to the 21.1% increase notched by those smug Kyoto signatory nations, of course.

H/T to Nick Packwood, who writes:

The average global increases in so called "greenhouse gas" emissions 1997 - 2004 has been 18%. The average decrease in greenhouse emissions amongst signatories to Kyoto is... let's see here... you are saying it is a 21% increase? But that is impossible. They signed an agreement.

QotD: Audio recordings

I am, sadly, old enough to have been assistant manager at an A&A Records and Tapes and to remember the excitement and trepidation that came with the introduction of the CD. It was not just the new colder sound of these things but a sense of loss at all that acreage of cover art reduced to the CD's smaller footprint. They were so compact we used to shelve each CD in a cumbersome plastic box three times its length; the new digital format seemed all too easy to steal. Little did any of us see where that logic would lead.

Nick Packwood, "The return of the repressed", Ghost of a Flea, 2008-02-14

Those untrustworthy Chinese economic numbers

Regular readers will know that I've been a long-term skeptic about the economic figures reported by the Chinese government (for example, here and here back in 2004). As a result, this post at the Economist is not very surprising:

As China's importance in the global economy increases, investors are paying more attention to its economic numbers. Yet the country's official statistics are notoriously ropy. Some commentators accuse China's government of overstating GDP growth for political reasons, others complain that the official inflation rate is fraudulently low. So which data can you trust?

One reason to be suspicious of GDP figures is that China is always one of the first countries to report them, usually only two weeks after the end of each quarter. Most developed economies take between four and six weeks to produce them.

However, the Economist still feels that the Chinese economy is larger than reported. My sense of distrust in the figures argues for it being neither as big nor as robust as the reported figures indicate. They're professional economic reporters . . . I'm a guy typing a blog entry. I wonder what the long-term odds are for either of us to be closer to the truth?

It's tough to disagree with this, though:

The prize for the dodgiest figures goes to the labour market. The quarterly urban unemployment rate is meaningless because it excludes workers laid off by state-owned firms as well as large numbers of migrant workers, who normally live in urban areas but are not registered. Wage figures are also lousy. There has recently been much concern about the faster pace of increase in average urban earnings. But this series does not cover private firms, which are where most jobs have been created in recent years.

Now that China is such an engine of global growth, it urgently needs to improve its economic data. Only a madman would drive a juggernaut at full speed with a faulty speedometer, a cracked rear-view mirror and a misty windscreen.

The nature of guilds

In a discussion on the technical writing mailing list earlier this week, someone proposed trying to organize technical writers in some form of union or guild. Kevin McLauchlan tackled the idea of a guild head-on:

Doctors and lawyers don't often work in groups of hundreds or thousands, but their guilds regulate them (a little) and keep their clubs exclusive (sorta), and collude with government, thereby keeping membership numbers controlled and prices up. For example, [in Ontario] the medical association just graciously "permitted" a new medical school to come into existence.

The other side of that is that they've been not permitting some/many to come into existence. This, in a province and a country that is becoming desperately short of doctors. Here in the land of socialized medicine, a large (and rapidly increasing) percentage of the population does not have a family doctor, simply because there are not enough licensed doctors to go around. Instead, people use the hospital Emergency room for every medical need, or they go to walk-in clinics (where they rarely see the same doctor twice . . . but at least some records are kept . . . but they don't always go to the same clinics because. . .)

Clinics are closing, or are going on reduced operating hours because they can't find doctors to work the time-slots. Lots and lots of our doctors (including my own GP) are foreign-born and foreign-trained, but many foreign-born, foreign-trained doctors are working as taxi drivers or other occupations because they are not permitted to practice medicine in this place that is so desperately lacking doctors.

Between government (that gives them the clout to enforce) and the medical association that does the enforcing, the number of doctors is kept artificially low. The newly arrived doctors from India, Malaysia, Arab counties, Eastern Europe, etc. are not permitted to become Canadian doctors. Part of the excuse that's given is that their skills need to be harmonized with the Canadian medical standards of practice . . . but there are not enough resources to process most of the applicants. But the lack of resources lies directly at the doorstep of the /g/u/i/l/d/ Medical Association that sets the numbers of med-school seats, the number of med schools that can be accredited, the number of programs and personnel that can mentor and supervise immigrant doctors until they get up to speed.

That kind of power and impunity can exist only when you've got government in your corner, supplying the legal clout to make your /g/u/i/l/d/ association pronouncements carry the force of law. The results are kinda harsh, when the turnaround time for a change of priorities is a matter of years or decades.

So, STC (or some other techwriter guild) would need to get government on-side in order to set quotas and price guidelines that could be enforced on the hundreds of thousands of companies that employ us in onesies, twosies, and small groups. They'd also need to enforce requirements for our services. Unlike engineers, we provide services that can be dispensed with, or that can be offloaded to non-professional, non-accredited techwriters . . . unless the law says that any product that is sold must be accompanied by documentation that carries the <STC?> seal of approval . . . having been created by <STC?> accredited writers. Of course, that kind of requirement would drive even more production offshore. Unlike the provision of medical services, product development and production can be done very far away from the people who eventually purchase the product.

Some ideas just won't go away

So it is with the idea of creating new states where existing ones are not meeting expectations. Katherine Mangu-Ward has more:

If Peter Thiel funds something, it's bound to be cutting-edge awesome.

He is a supporter of the Methuselah Mouse Prize, which seeks to slow, stop, and eventually reverse aging. He was a producer of the film Thank You for Smoking, based on Christopher Buckley's charmingly ambiguous novel about a pro-tobacco lobbyist. An early investor in social networking, he was involved with Linked In and was the first investor in Facebook. He's big at the Singularity Institute (reason's Ronald Bailey caught up with him at the Singularity Summit earlier this year, check out the interview in the May print edition), which ponders and pushes artificial intelligence in preparation for a Vernor Vingeian "intelligence explosion." His first success was PayPal, which he originally hoped "would grow to become an extra-governmental system of currency, something reminiscent of the world described in Neal Stephenson's novel Cryptonomicon, in which programmers use encryption to create an offshore data haven free from government control."

And last week, Thiel announced a $500,000 investment — the same amount he put into Facebook in June 2004 — in the Seasteading Institute. Seasteading, or "homesteading on the high seas," is an idea that has long attracted libertarians and others who would like to see a little more competition between forms of government. The idea is to get out into international waters and set up a floating outpost (or 12, or 1,200) from which people can come and go, experimenting with different types of legal, social, and contractual arrangements.

Micronations have been discussed before.

QotD: Biofuel warm-mongering

The biofuels debacle is global warm-mongering in a nutshell: The first victims of poseur environmentalism will always be developing countries. In order for you to put biofuel in your Prius and feel good about yourself for no reason, real actual people in faraway places have to starve to death. On April 15, the Independent, the impeccably progressive British newspaper, editorialized: "The production of biofuel is devastating huge swathes of the world's environment. So why on earth is the Government forcing us to use more of it?"

You want the short answer? Because the government made the mistake of listening to fellows like you.

Mark Steyn, "Chickenfeedhawks: Global warm-mongering", National Review Online, 2008-04-26

The Toyota Prius: the triumph of . . . marketing

The automotive chaps at The Times take a Prius out for a real-world driving test against a BMW sedan. The results weren't as clear-cut as you'd imagine:

The next day it became clear my Prius did not like motorways, at least not at 75mph into a headwind. My trip meter informed me I was now averaging about 45mpg; the Prius was not going to make it to Geneva on just one tank.

I took the precaution of buying a 10-litre can and filling it with petrol. Sure enough, the dashboard soon informed me the fuel tank was empty, the petrol engine stopped and for two surreal miles I coasted along on battery power. Only when I approached a long steep uphill stretch did I finally drift to a halt. As I filled the tank I consoled myself with my last chocolate bar.

Coasting down the mountain into Geneva my Prius averaged 99.9mpg for a full 10 minutes. It was the highlight of my journey and improved my overall average fuel economy by a full 2mpg. But it was not enough. For all my defensive driving, slippery bodywork and hybrid technology, my average fuel consumption was 48.1mpg. I’d lost to a Beemer and I was disappointed; I had never driven so slowly or carefully for so long in my life. I’m considering buying a V8 Range Rover and opening my own oil well in protest.

Lest it be said that the Prius is not intended to be used for long-distance travel, the writers arranged for a portion of the trip to be conducted in urban areas — where the Prius should shine on the fuel economy front — so that the test was more like a real-world trip than something concocted by advocates either for or against the Prius.

H/T to Mark Allums.

A (fiscal) plague on both their houses!

Steve Chapman casts a jaundiced eye over the last three presidential candidates still standing:

For some time now, the three presidential candidates have been striving to outdo each other on what Hillary Clinton calls "the commander-in-chief" test. She says that she and John McCain have passed it. McCain's response has been on the order of, "What do you mean, 'we'?" Recently, Barack Obama assembled a passel of retired generals and admirals to publicly salute him.

It's good to know they are preparing themselves for that 3 a.m. phone call. But I'm not convinced any of them is ready for the 8 a.m. call from the budget director reporting that the deficit is raging out of control. When it comes to combating the fiscal menaces we face, these three are all absent without leave.

The budget situation is already dire. In the last six years, the federal government has spent some $1.8 trillion more than it has taken in. This year, the deficit will hit an estimated $410 billion. If the economy falls into a recession, the gap will grow.

Believe it or not, these are the good old days. In the next few years, the budget will begin to show the effects of a mammoth event that has long been dreaded: the retirement of the baby boomers. Social Security and Medicare already account for one-third of federal spending, and over the next 30 years, they are expected to nearly double in cost as a share of the total economy.

Spitzer's fall may help make the case to legalize prostitution

As amusing as it has been to watch a high-flying hypocrite brought down to earth for indulging his hypocrisy, there are actually some useful ideas being aired:

I understand why Spitzer's alleged hiring of a call girl was stupid, selfish, reckless, immoral and a betrayal of his family. What I don't understand is why it was illegal.

It's not as though sex is otherwise divorced from money. If it were, hot young women would be found on the arms of poor older men as often as they are seen with rich ones. Had the New York governor wanted to buy a $4,300 bauble to seduce someone of Kristen's age and pulchritude, only his wife and his financial adviser would have objected.

It was Spitzer's effort to hide this pastime that attracted law enforcement attention. Prosecutors investigated him not because he had lipstick on his collar, but because he took steps to conceal his patronage of Emperor's Club VIP. By transferring cash to accounts controlled by fake companies, he roused suspicions of political corruption. By now, he probably wishes he had only taken a gratuity to grease a contract.

It's hard to feel excessive sympathy when a colossal hypocrite is exposed. Recently, Spitzer signed a measure increasing penalties for men caught paying for sex, who can now go to jail for as long as a year. But schadenfreude is a weak justification for laws that intrude into the bedroom.

More here.

Update, 14 March: A bit more on this same topic at Samizdata:

Recent large stories in Britain and the US keep the issue of whether prostitution should be legalised in the public eye. I think it should. The resignation this week of Eliot Spitzer, a US politician and former state prosecutor who quit after allegations about his use of prostitutes' services — despite his prosecuting them in his day job — and the recent conviction of the British murderer of five Ipswich prostitutes, convince me we should legalise it. The benefits are many:

People like Eliot Spitzer and other vicious, corrupt state officials would have fewer ways of annoying the rest of us, which is unquestionably a public good. Pimps who control prostitutes, or who attempt to do so, would have fewer opportunities to prey on such women. The spread of sexually transmitted disease would be reduced, if not eliminated because a client could shop around to find brothels that enforce hygiene checks and advertised themselves accordingly. If he caught a STD, the client could sue the brothel, just like a client can now sue a pizza joint if he or she gets food poisoning. And finally, because if an adult woman or man wants to sell sexual favours, that is their business, and no-one else's, period.

QotD: The Global Warming Creed

I believe in Gore, the Prophet All-Knowing, the Creator of the Internet, and in Global Warming, his brain-child:

Which was conceived from Global Cooling, born of his lust for power, after he suffered a stolen election and was considered dead politically.

He descended into Obesity.

The third year He rose again from the obscure, He ascended into media prominence, and sits at the right hand of Bono the Annoying, from whence he shall come to sell carbon credits to the suckers with guilty consciences.

I believe in the Mother Gaia, the holy Ecological Church, the communion of Hollywood stars, the forgiveness of consumerism, the recycling of all things, and life so miserable it seems everlasting.

Amen.

Chris Claypoole, "The Global Warming Creed", Libertarian Enterprise, 2008-03-09

QotD: Boomer Entitlement Syndrome

Susan Callaway seems to be offended when I spoke ill of the Boomers. Well get over it. Yours is the generation that has whined and begged for every free lunch that they could get from the government. Saying you weren't one of the whiners or beggars is like saying "Don't blame me, I voted for Kerry". So what. Even if you don't cash your Social Security checks every politician will still be doing all they can to win your aging votes and figuring out ways to dump the bill onto the next few generations. So what if you are voting against your generations desires, the rest of them aren't and that's the problem.

Ron Paul resonates with the young for a good reason. They are the ones who will get screwed the worst by all that Boomer pandering. They are the ones who are going to have to pick up the tab for the party and they don't like it. Unfortunately they are greatly outnumbered by their Boomer parents who instead of having kids decided to have extended childhoods of their own. Unfortunately we Gen X and Gen Y types don't get to have the same extended childhoods your Boomers got, we have to grow up and pay the bills your generation racked up.

Scott Graves, Letter to the editor, Libertarian Enterprise, 2008-03-09

T.J. Rodgers interview

Declan McCullagh interviews Cypress Semiconductor CEO T.J. Rodgers:

Why the antipathy toward McCain?

There's an article in Reason magazine about McCain. He's anti-free speech. He's a war guy. Those are about as bad as you can get from a libertarian perspective.

I got turned off by him in a personal meeting. I made a presentation to him that the government is wasting hundreds of millions of dollars in (technology-related) pork barrel spending. I showed that the pork barrel spending is not only fundamentally bad, but also harmful to the people getting the money, the semiconductor industry. When I got done with the presentation, he labeled the pork barrel spending "peanuts." He poked his finger in my chest and said that he's "going to get rid of your big fat stock options."

He's in favor of stifling free speech. He's in favor of the war. He doesn't truly care about lean government. You'd have difficulty picking between him and George W. Bush.

[. . .]

You're making libertarian points. Why aren't there more libertarians, or at least out-of-the-closet libertarians, in Silicon Valley?

First of all, I think Silicon Valley people, if you gave them the world's smallest quiz, my belief is you'd find that people in Silicon Valley are highly libertarian but they don't even know what that phrase means. It's not part of their vernacular. Silicon Valley people are highly apolitical. They're worried about their businesses, they're worried about growth, they're worried about technology. Sometimes they get involved in politics. They get involved on both sides of the fence...

If you would look at the people in Silicon Valley who identify themselves as Republicans, you'll find that they're free-market Republicans. What I think you'd find is that Silicon Valley Democrats have an economic free market base to them, and therefore look a lot like libertarians. Silicon Valley Republicans... aren't restrictive on social issues. You're not going to find any anti-gay, redneck Republicans in Silicon Valley.

Because they don't care that much about politics, they don't get beyond the nuances. But if you took the next layer of detail, you'll find that regardless of how they identified themselves, both sides are libertarian-ish in their leanings.

QotD: British terrortourists

While Britain is fast catching up to America—and leading Europe—in illiteracy, obesity, and violent crime (despite ubiquitous surveillance cameras and an ineffective ban on handguns), the Wittgenstein references in Monty Python still shape our assumptions of British cultural supremacy. But as the English social critic Theodore Dalyrymple observed in 2004, to profess an interest in high culture in today’s Britain is to be met with accusations of homosexuality.

So before President Ron Paul restores the gold standard, it should be acknowledged that the sagging dollar is providing one useful service: a long-overdue corrective to our self-image as lesser Brits. Europeans, who ranked the English as the “world’s worst tourists” in a recent Expedia poll, have long ago disabused themselves of such stereotypes. Take a look around New York, Boston, or Los Angeles, and spot the omnipresent gaggle of chavs, waddling through the Adidas shop, shouting drunken insults in local Irish pubs, converting the currency on every product within reach. England is just America writ small.

Michael C. Moynihan, "Take Them Back to Dear Old Blighty: The ugliest byproduct of the sagging dollar", Reason Online, 2008-03-06

The evolution of the hotel

Kerry Howley finds interesting things in A.K. Sandoval-Strausz's Hotel: An American History:

Hotels, he argues, were "a significant episode in the modern idea of a pluralistic, cosmopolitan society," and conservatives invested in the status quo were right to fear them. Transportation advances granted people a new mobility, and traveling Americans suddenly required social mores not predicated on years of shared community bonds.

[. . .]

Hotels were a new institutional form that upset expectations about the arrangement of daily life and alarmed defenders of domesticity. They were full of beds and liquor, associated with sex, theft, and violence. Guests interacted with no patriarch — only a relatively egalitarian ecosystem of managers, porters, and bellboys. As people began to take longer and longer hotel stays in the mid-18th century, sometimes even living in them, "an entire genre of screeds against hotel living" was born, mourning the decline of traditional gender roles in a world where cooks and maids left women hopelessly idle.

None of this did much to dampen Americans' collective zeal for travel and the institutions that would house them along the way. By the end of the 19th century, the American stranger had a new role in the social order: He was a guest.

It must be slow news season already

When stories like this one make the international media:

Freeloading hippie Mark Boyles, 28, decided to demonstrate his contempt for the modern world, materialism, and a bunch of other really terrific things by walking to Gandhi's birthplace in Porbander, India. Boyles is an acolyte of the "Freeconomy" movement, a method of living that, according to the group, "allows people to make the transition from a money based communityless (sic) society to more of a community based moneyless society." In other words, he's a middle class beggar. On the first day of his trip, according to this BBC report, he scored two free meals in the English town of Glastonbury. Hardly surprising; the town is, after all, listed as one of England's "hippie havens."

Boyles and two friends then managed, in a grubby version of Operation Overlord, to land in Pas-de-Calais, France, where the mission encountered into its first snag. According to the BBC, the wandering Freeconomist was quickly mistaken for an indigent "because he could not speak French [and] people thought he was free-loading or an asylum seeker."

QotD: Concern for the poor

I became a libertarian, politically speaking because — and I know this is going to sound sanctimonious but it is literally true — if you are really concerned about the poor people then you have to pick the system that in fact helps poor people. And the only one that has done that is democratic capitalism, period.

Ron Bailey, interviewed by Sean Higgins in "I Want to Believe?", Doublethink, 2008-02-25

Bill Buckley

William F. Buckley, Jr. died yesterday at the age of 82. Love him or hate him, he was unique in American politics. Reason's former editor Robert Poole has a farewell column posted:

I received the news of Bill Buckley's death with a great sense of loss. No, he was not a major intellectual influence on my becoming a libertarian. I have to credit Robert Heinlein and Barry Goldwater and Ayn Rand for that. But since for most of us libertarianism as an intellectual and political movement has been an offshoot of conservatism, Buckley in truth was a great enabler.

By creating National Review in 1955 as a serious, intellectually respectable conservative voice (challenging the New Deal consensus among thinking people), Buckley created space for the development of our movement. He kicked out the racists and conspiracy-mongers from conservatism and embraced Chicago and Austrian economists, introducing a new generation to Hayek, Mises, and Friedman. And thanks to the efforts of NR's Frank Meyer to promote a "fusion" between economic (free-market) conservatives and social conservatives, Buckley and National Review fostered the growth of a large enough conservative movement to nominate Goldwater for president and ultimately to elect Ronald Reagan.

There's also a PDF of Reason's 1983 interview with Buckely available for download here.

Update: Radley Balko has a few things to add:

The guy got some things wrong, but he got a lot right (in both senses of the word).

Buckley leaves an enormous legacy, but to the detriment everyone, the right left Buckley years ago. Where Buckley stood athwart the tide of history and beat it back with wit, sophistication, and argument, we today get best-selling Regnery screeds from lowest-common-denominator clowns like Ann Coulter, Dinesh D'Souza, and Glenn Beck. Where Buckley mistrusted government and aimed to slow the world down, he's been usurped on the right by the likes of William Kristol and David Brooks, men who want to use government to remake the world in their own image. Where Buckley flourished in cosmopolitan Manhattan and took delight in life's finer things, modern conservatism has grown disdainful of the marketplace of culture, commerce, and ideas abundant in urban areas (witness the last election, where many on the right weirdly smeared John Kerry as a "latte-sipper"—real Americans apparently drink Maxwell House). In fact, today's Bush/neocon-right is often contemptuous of commerce itself, sometimes calling the voluntary, unchecked exchange of goods, labor, and services—a pure free market—"ugly" and "crude."

QotD: The pitfalls of "Fairtrade" coffee

Despite Fairtrade's moral halo, there are other, more ethical forms of coffee available. Most Fairtrade coffee is roasted and packaged in Europe, principally in Belgium and Germany. That is unnecessary and retards development. Farmers working for Costa Rica's Café Britt have climbed the economic ladder not just by growing beans but by doing the processing, roasting and packaging and branding themselves.

But Café Britt is not welcome on the Fairtrade scheme. Most Café Britt farmers are self-employed small business people who own the land they farm. That is unacceptable to the ideologues at FLO International, Fairtrade's international certifiers, who will accredit farmers only if they give up their small-business status and join together into a co-operative.

There is evidence that Fairtrade is damaging quality, too. Its farmers typically sell in both Fairtrade and open markets. Because the price in the open market is solely determined by quality, they sell their better beans in that market and then dump their poorer beans into the Fairtrade market, where they are guaranteed a good price. That's worth considering next time you pop out for an espresso.

Alex Singleton, "Halo of Fairtrade casts a shadow on poverty", Telegraph.co.uk, 2008-02-24

QotD: The Boomers' Fate?

There seems to be much consternation over Ron Paul failing to win over the mainstream of the Republican Party. The answer is really quite simple, the majority of Republicans are within a few years of getting Social Security. A fiscally sound and Constitutionally honest government would have to tell those Boomers and their still living parents "Terribly sorry but you don't have a contract saying the next generations owe you a damn thing" and they bloody well know it. They may talk a good game about balanced budgets but when push comes to shove they will enslave their kids to provide for their old age.

I just wonder how long it will take for Gen X to start smothering their greedy selfish parents with pillows while they sleep. Especially when "saving" Social Security will mean our contribution will be 25% or more of our paychecks. Until the Boomers start kicking the bucket we wont get that "gimme gimme gimme" monkey off our backs.

Scott Graves, letter to the editor, Libertarian Enterprise, 2008-02-24

The essence of public health decision making

A couple of examples of the structural weaknesses inherent in allowing bureaucrats to make medical decisions:

Stationary ambulances: "Hospitals were last night accused of keeping thousands of seriously ill patients in ambulance 'holding patterns' outside accident and emergency units to meet a government pledge that all patients are treated within four hours of admission."

Some patients are more equal than others: "Officials said that allowing Mrs. Hirst and others like her to pay for extra drugs to supplement government care would violate the philosophy of the health service by giving richer patients an unfair advantage over poorer ones."

Both examples are from the British National Health Service, but they're matched by similar situations in Canada.

Paging Sisyphus! Call for Mr Sisyphus!

An interesting interview with Robert Bryce, author of Gusher of Lies: The Dangerous Delusions of "Energy Independence":

reason: How about domestic renewables as a solution to dependence on foreign oil?

Bryce: I'm not opposed to renewables. I have 3,000 watts of solar panels on the roof of my home. I understand the economics of renewables. But an incurable problem for both solar and wind is intermittency. The sun doesn't shine at night. I like to have lights and TV at night. Unless we come up with some incredibly efficient method of storing large amounts of electricity, it's not a viable source because we can't store it.

It's the same problem with wind. I consider wind the electric-sector equivalent of the ethanol hype. At a conference recently I asked a wind guy, "Without subsidies, how many projects now under way [regarding wind] would make economic sense?" He said maybe 30 percent.

reason: You sound skeptical about ethanol as well.

Bryce: The ethanol scam is the longest running robbery of taxpayers in American history. Some recent news reports, which I don't discuss in the book, include a report showing [that] corn-based ethanol releases [more] greenhouse gases than fossil fuels. That's just one indictment of the inefficiency of the whole process. It's also fiscal insanity — providing 51 cent per gallon subsides for making fuel from what's already the most subsidized crop.

In 2005 federal corn subsidies approached $9.4 billion, which is around the entire budget of the Department of Commerce, with 39,000 employees. It also takes orders of magnitude more water to make corn ethanol than [is used for] gasoline production. Given the problems in the West and Southwest with water, it's insane to think we're going to be able to produce sufficient ethanol to make a dent in gasoline use when the amount of water needed is so high.

Explanation for the kinda-obscure title of this post here.

Mergers

Grant McCracken muses over the not-likely-to-come-to-fruition MicroHoo merger, and finds that the evidence is that most mergers don't work out:

Mergers and acquisitions are fraught with difficulty and Mary was pointing out that the failure rate is sometimes as high as 60%. And this is after tough minded MBAs have examined the deal with their own particularly sophisticated, sighted, numerate version of due diligence.

When things go bad in a merger or an acquisition, the problem is sometimes not with the mechanics, not with the infrastructure of the deal. The problem is with the superstructure of the deal, the ideas, practices and cultures that must now be brought together for things to work. We are still inclined to suppose that mergers and acquisitions are straight forward, that the individuals who must now work together need merely resort to an instrumental logic to find common cause and a shared modus operandi.

But of course the truth is often otherwise. Corporations are cultural, drawing their answer to the Levittian question (what business are we in), and the Druckerian one (what customer are we for) from the vision of the founder, the history of the enterprise, the region of the country. Even the business school that supplies the C suite can make a difference here. I think it's safe to say Microsoft and Yahoo see the world differently and that a rapprochement would have been challenging.

One company that I used to work for was acquired by a similar-sized firm, and six years later the two organizations still were not working smoothly as a single entity. Most of the management from my original firm had left (in waves, rather than as a single "die-off"), and new managers were brought in, but the two firms' cultures never coalesced. When the combined firm was taken over by a third organization, almost the first thing the new owners considered doing was re-splitting the two original groups back out into separate entities again.

Government subsidies distort the market

In a post about shilling for environmentally friendly energy subsidies, Radley Balko touches on one of the biggest boondoggles of the 19th century, the building of the Union Pacific and Central Pacific railroads:

In 1862, Congress justified passing the Pacific Railroad Act as a way to forestall a secessionist movement in California during the Civil War. The government subsidized the Union Pacific and Central Pacific railroads at $16,000 per mile over an easy grade and up to $48,000 in the mountains. In addition, the government offered substantial land grants along the right-of-way. Despite these government subsidies, both companies were bankrupt in the early 1870s.

As an example of how government subsidies distort incentives, both railroad construction crews worked past each other building an extra 200 miles of parallel rail lines grades (and some parallel tracks) instead of linking up so their companies could earn more subsidy payments and land grants. The fact that government subsidies were not necessary for building a transcontinental railroad was proved when James J. Hill built the highly profitable Great Northern Railway from Minnesota to Seattle completely without them or land grants.

The UP/CP are an excellent example of how injecting government money into what should be a private endeavour will seriously distort the market, creating a huge incentive to "game the system" to maximize the unearned profits from the government, rather than by serving the public by actually running a business.

If you've read any of the histories of the Union Pacific¹, you'll very quickly discover that the company spent far more time and effort lobbying for subsidy, manoevering against potential competitors (by legislation, bribery, and political obstruction, not by actually serving their customers), and hiding the mind-boggling levels of waste, corruption, and incompetence of their day-to-day operations.

That's not to minimize the difficulties of actually building and running the railroad, which cost the lives of many men (disproportionally immigrant Irish and Chinese labourers), but the fact is that the railroad itself was a very distant second to the government largess to be diverted for private profit by the executives of the two corporations. The excesses and criminality of the various officers of the company had an even more important legacy: after the scandal broke, leaving both companies bankrupt, successive governments felt totally justified in heavily regulating all railroads, introducing economic burdens which would cripple most of them for nearly a hundred years (some of the worst regulatory burdens weren't lifted until the 1980's²).

^1. Except for the sanitized versions produced for children, which only cover the engineering achievements, not the grubby reality of the UP & CP in their early years.

^2. See the Staggers Act for information on the deregulation which belatedly allowed the revitalization of the American railroad industry.

Studies of the rail industry showed dramatic benefits for both railroads and their users from this alteration in the regulatory system. According to the Department of Transportation's Freight Management and Operations section's studies, railroad industry costs and prices were halved over a ten year period, the railroads reversed their historic loss of traffic (as measured by ton-miles) to the trucking industry, and railroad industry profits began to recover after decades of low profits and widespread railroad insolvencies.

The climate debate, all in one handy portal

Whether you're a Global Warming True Believer or an evil Climate Change Denier, you'll find lots of stuff to keep your blood pressure up at Climate Debate Daily, an aggregator of posts on both sides of the Climate Change holy war. It's run by New Zealand philosophy professor Denis Dutton (who also created the Arts & Letters Daily aggregator site).

For the record, I incline to the heretical side of that particular Jihad/Crusade/Inquisition.

New media model needed

Kevin McLauchlan had some very interesting things to say in a recent thread on copy protection (from the Techwr-L mailing list), which I reproduce here with his permission. I'm trying to encourage him to start blogging, BTW.

[. . .] what your argument fails to consider is that there was a large mainstream(ish) demand for movies, music, and other such product (including good ole text-and-pictures, otherwise known as books), in modern formats (computer and portable) that people preferred them, and that the traditional media empires were not meeting that demand. For the first few years, they weren't even aware of it.

There was really no squawk from the traditional media when the first hackers came up with the first methods of recording and presenting audio and video on computing devices, because they were doing it for their own pleasure and convenience, and that of a small circle of their geeky friends.

Much like Bill Gates ignored the internet while concentrating on his then-traditional (office and home-island users of software), the studios and publishers ignored the web and the culture that was rapidly growing it . . . and being grown by it.

When they finally did notice that there was some potential loss of revenue happening to their existing model (in which they'd prospered for decades), they reacted by whining and hollering "Don't do that!", and allowing years to slide by before introducing their own services.

When those services appeared, they were already outdated, and they annoyed people because it was profoundly obvious that their major premise was enforcement, while the minor focus (the needs and desires of customers) was given short shrift at best. That is, they have far less interest in serving their customers than in preventing rip-offs.

Let's see:
- paying customers are made to jump through hoops and are treated like dirt
- non-paying "customers" get variety, convenience, ease-of-use and responsive "providers"

I had some sympathy for producers and distributors when audio and video "piracy" meant that somebody made physical copies of tapes and DVDs and sold them for money. It was supportable that the media companies would go after the makers and sellers of such "pirate" goods. Notice that they didn't go after the consumers of such goods.

But these days, most of the copies being distributed are free. Somebody might be losing some revenue (though there are convincing arguments that it's the old formats that are losing out and the studios/distributors just didn't jump fast enough to be ready for the current formats), but nobody is directly gaining illicit revenue when another bittorrent completes. Yet notice that the industry heavyweights are going after users/consumers, now.

As for all the creative work going away if studios and 20-million-dollar-a-film actors can't get their exclusive rights enforced, not everybody thinks that's such a bad thing. Lots of craftsmen were displaced when horse-and-buggy went out of fashion. Some whined and pouted (and died broke). Some found different ways to make a living or found new industries to use their same skills (like high-end auto-makers still needed people who could work in leather and fine woods).

You might have noticed that there are increasingly high-quality "movies" being produced for YouTube distribution (among all the dreck, of course), and that's with the studio blockbusters still in theatres (and people still paying to see movies on the big screen). Lots of smart, talented people are simply bypassing the corporate model of entertainment and information, and taking their own work to the masses.

That is, the problem — too easy distribution of works in digital form — is also the solution. People who would once have been content to "distribute" their labors-of-love to just a few friends now have the ability to reach everyone on the planet who is interested, and beyond.

It's a solution from the perspective of the people who are driven to produce art and from the perspective of people who want access to art.

Have you noticed that bands and performers that are already richer than god, and who can count on selling millions of copies of their next studio-made album, are still willing and eager to take their show on the road? There are two forces making that work. One is that the performers crave a live audience. As good as it is to polish off a new CD and get paid royalties, they still feel the need to get out where real live audiences are. At the same time, "consumers" who enjoy a studio album are still prepared to shell out big bucks (often hundreds of dollars per ticket) to experience live performances.

If all the major studios and distribution labels were to close tomorrow, I'm confident that there would still be touring rock bands, and there would still be talented people in their own studios creating recordings for internet distribution. It might be a different crop of productive talented people. It might be some of the ones who are already famous and rich — those who didn't go into a big sulk about the departure of the corporate recording business.

The same would apply to film. There'd be an upsurge of live theatre, and there'd be some real gems of recorded video drama appearing among the YouTube crud. True artists and performers simply can't just stop. They are driven. Only the mostly-mercenary ones would fold up their production companies and go away. Maybe they've had their day and rightfully so.

Have you noticed that TV shows like "American Idol" and "So You Think You Can Dance" are not running out of talent? They tour the same big cities year after year, culling from the tens of thousands of people who choose to show up. Yet each year, there are more extremely gifted people among the also-rans and losers. It's not that new kids are growing up and becoming ready. The people who show up are all ages. For whatever reason, they didn't enter the contest previously. And that's just the ones who want fame and fortune (or the chance of it) via that particular route. There are tons and tons more talented artists of all kinds out there . . . I should say, out here, where we real people are. It's only the major studios and the top 2% earners among the "stars" who have a lot to lose if the world's entertainment-delivery model moves on . . . or moves back to an earlier model based on performers getting paid by the number of tickets they can sell to personal, live performances.

The same general argument applies to the written word and to other forms of art. If the concept of copyright was struck down tomorrow, some writers would stop writing. Most would keep doing what they are driven to do.

Yes, there's a shift in fortunes when there's a shift in paradigm. Some people drop out of sight. Some people adapt and continue to prosper. Some people find opportunity that wasn't there before.

There's a certain degree of success at selling MP3s, when the price is low enough. Nobody bothers to build timed expiry or number-of-playings expiry into simple recordings of songs. So people willingly pay a buck or two to download them, even though they could find free copies if they cared to look.

But the example was paying for a video download that was designed to die after 24 hours, whether it was convenient for you to view it within that time or not. That's just sick, and people have no sympathy. Theatrical and DVD releases still pay the production costs and generate profit for deserving movies. Demanding to get more than a buck or so of profit off a file that costs you nothing to serve, and using artificial methods to boost your revenue is ugly, and people shy away from it. The people who dreamed up that scheme are deliberately driving away potential customers; driving them into the open arms of the very "pirates" they vilify.

If people suddenly stop wanting the big-screen experience, then the model has finally changed, and first-run theatrical release will no longer pay the production costs of a blockbuster. Maybe the new model will no longer support $250-million dollar production costs. So be it.

It was a good ride for some people. The next wave will be a good ride for a different gang.

Maybe the new model will support only movies whose cost can be recouped by low-price, paid-for downloads, low enough in price that people will gladly pay the couple of bucks for a cupful of databits that they are going to show in their homes, on their equipment, using their electricity.

QotD: Economic Interventionism

It can even be argued that in one respect President Reagan was extremely fortunate: the problems he faced, though they had baffled liberals, were problems which gave conservatives no great intellectual difficulty. Liberals were then wont to say, indeed, that conservatives were offering simple answers to complex problems. But the problems were complex to liberals only because they insisted on misunderstanding them at a very simple level. Just as the Ptolemaic theory that the sun goes around the earth can be made to yield accurate predictions only by qualifying it with a multitude of exceptions and special cases, so the liberal belief that inflation was caused by unions and corporations seeking higher prices led to a multitude of difficulties as each intervention to hold down prices created more problems which required more interventions which in turn created more problems and so ad infinitum. And what was true for inflation also held for most areas of policy. It was the complex solutions advocated by liberals that caused the complex problems — at least as much as the other way around. No wonder liberals suffered from malaise.

John O’Sullivan, "Flashback: After Reaganism", National Review

The economics of the sex trade

An article in this week's Economist has some recent findings about the sex trade in Chicago and in Ecuador:

These studies contribute to our understanding of the suppliers of paid sex, but tell us little about their customers. The session's organiser, Taggert Brooks of the University of Wisconsin, attempted to fill this gap in knowledge. He shed light on the sex industry's demand side in his analysis† of men who attend strip clubs. He argued that habitués of strip clubs featuring nude or semi-nude dancers are in search of "near-sex" — an experience of intimacy rather than sexual release. They are aware that paid sex is on offer elsewhere, should they desire it.

Strip-club patrons are more likely to be college-educated (cue some uneasy seat shifting from conference delegates), to have had an STI, and to have altered their sexual behaviour because of AIDS, than non-patrons are. They are typically unmarried, relatively young (against the stereotype of old married men) and are characterised as "high-sensation seekers".

One of the more surprising findings was that condom use is significantly higher among prostitutes in Ecuador than in Chicago:

As in Chicago, the paid-sex market in Ecuador is tiered, with licensed brothel workers earning more per hour than unlicensed street prostitutes. These gradations might reflect different tastes: brothel workers tend to be younger, more attractive and better educated. They are also slightly less likely to have an STI. Condom use is the norm: 61% of street prostitutes surveyed used a condom in the previous three transactions. In Chicago, condoms were used in only a quarter of tricks.

Government-provided services

I've often made the case that the government is generally bad at providing services, even in the case of soi disant "natural" monopoly situations. About the only thing that governments do well is kill people . . . and even the most incompetent government can do a crackerjack job of that. This story is an example of why government-provided goods and services are a waste of time, energy and resources, compared to letting individuals and companies provide them:

A new bus-stop has been built in Lashikar Gah as part of the 'reconstruction' effort.

The report does not say whether it is a replacement for a pre-war bus-stop. Somehow I doubt it. It is very well-equipped, having its own mosque and a pharmacy, as waiting times "can be rather long".

An odd approach. In most of the world a bus-stop is a place where buses happen to stop. Of course bus-stops, like ports and railway stations all round the world provide opportunities for traders, places of worship, bars and cafes and so forth, but they seldom have them built in. Bus companies and their passengers are primarily interested in selling and buying travel. The pause at the roadside to move from foot to wheel, wheel to foot, refuel, refresh, is just procedural necessity.

Okay, you ask, what's the problem? It's a big, over-built bus station, so what is your point? This is my point:

[. . .] a government bus-stop is built to different, higher, standards. A throwaway line at the end of the report reveals just how long those waiting times are: "There are no buses yet."

So much for opening up the wine market . . .

Jacob Sullum looks at the lack of progress in opening up the domestic wine trade after the US Supreme Court decision on the topic:

In a new report, the Specialty Wine Retailers Association (SWRA) notes that liquor wholesalers have been throwing money at state legislators in a largely successful effort to maintain their government-enforced monopolies on the distribution of alcoholic beverages. Those privileges were threatened by a 2005 Supreme Court decision overturning state laws that prohibited out-of-state vintners from shipping wine directly to consumers while allowing in-state wineries to do so. The Court found that such laws violated the Commerce Clause by erecting discriminatory trade barriers. Since then the wholesalers have been urging state legislatures to comply with the ruling not by opening up their markets but by imposing uniform bans on direct shipping. According to the SWRA (whose members want the freedom to buy directly from wineries), those lobbying efforts have been accompanied by a total of $50 million in donations to state political campaigns, an amount that "dwarfs that of any other sector of the American alcohol industry as well as numerous other groups." In Texas, for example, "alcohol wholesaler political contributions were greater than the political contributions of all gambling and casino interests, retail interests, food interests and all business services . . . combined." This generosity, says the SWRA, "coincides with the enactment of alcohol wholesaler-supported policies in nearly every state that protect the wholesaler."

Yet another proof of the dangers of regulation to a free market. Adam Smith wasn't thinking of the wine trade when he wrote "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." People of the same trade are even more effective in this sort of conspiracy when they can get the government to do their dirty work for them.

Why mandating higher MPG sooner won't work

Shikha Dalmia explains why mandating higher miles-per-gallon on car makers isn't the panacea everyone seems to assume:

This is an impossible task. The federal standards will be tough enough for automakers to deliver without compromising on space, safety, power and (above all) low prices — all things that consumers value more than gas mileage. There is simply no technology now available that can combine everything that consumers want with the stipulated gas mileage. If there was, automakers wouldn't need a mandate — they'd run, not walk, to put it on the market.

But why are California's goals so much tougher, even though the federal rules allow just four more years to another 1.2 mpg? Because cars have a long production cycle — models now in the planning stage won't be available until 2014.

So there's simply no time to come up with new designs that will do the job. That means the only way automakers could comply with California's deadline is by withholding from consumers the higher-emission vehicles they want in states that insist on it.

In other words, they'd have to pull the vast majority of their vehicles from those markets, not only SUVs and light trucks, but even most sedans.

Consider Toyota, the darling of the greens: It now makes maybe two vehicles — manual-transmission Yaris and hybrid Prius — that meet California's standards. Toyota's Camry, the top-selling car in America, gets only 25 mpg in combined city and highway driving.

Indeed, the net effect of the California standard would be to impose either small compacts or hybrids on all new-car buyers — even though hybrids costs $3,000 to $5,000 more than their non-hybridized versions and have a much shorter lifespan.

QotD: Economics, government style

This is terrific logic. Americans should be bothered with useless, unsolicited junk mail so that the USPS can continue to pay otherwise unneeded postal workers to deliver it. Makes sense to me.

I thus propose a federal "Agency for Digging Holes in Americans' Front Yards." Then, because of the holes-in-people's-front-yards problem that will inevitably result, I propose a second "Agency for Filling In Yard Holes."

These two agencies will create thousands of new federal jobs. And as we all know, new jobs are good for the economy.

Radley Balko, "Public Choice in Action", Hit and Run, 2008-01-06

QotD: The tone of the campaign

It strikes me as a little-remarked phenomenon in this election that, for the first time since maybe 1988, the Democrats are running a serious candidate with an essentially Naderite worldview on the evils of Corporate Greed. I haven't paid much attention to the Blue Team so far — the Red crack-up being so much more entertaining — but whenever I do I hear some Democrat espousing economic-policy ideas (hatin' on corporations, hi-fivin' Lou Dobbs on trade) much further to the left of Howard Dean in 2004, Bill Bradley in 2000, and Bill Clinton in the 1990s.

With the one-day Hucka-BOO-yah on the GOP side, the big winner in Iowa tonight seems to be illiberal economic populism.

Matt Welch, "Million-Dollar Haircut; Ten-Cent Head", Hit and Run, 2008-01-03

Oil prices

Megan McArdle links to a very useful chart at WSJ Online, saying:

One of the things that I was struggling to get across at a dinner a few weeks ago is how discontinuous prices on inelastic goods can be. That is, a few percentage points increase in demand against a relatively fixed supply doesn't produce a few percentage points increase in price: it can produce huge spikes. That's not intuitive; we feel as if prices and demand should grow at approximately the same rate. But people in the world have a lot of spare income they can use to bid up the price of oil; the speed with which its price is increasing is a measure of just how useful the stuff is.

Part of the problem is that most media folks are too young to personally remember the first two oil crises, so that the current situation is unique in their collective experience. They communicate that in so much of their coverage of the oil market and the political ruckus influencing it.

How not to fix a banking crisis

Jeff Taylor introduces some cold water reality to a fantasy castle-in-the-sky "fix" to the sub-prime mortgage crisis:

"It is probably in their best interest to walk away. They have no equity," Whalen says of the hapless borrowers.

The possibility of their underwater borrowers actually taking a walk terrifies the banks, however. Banks would have no choice but to write down and make real phantom losses lurking just off their books. What to do? How about pretending that the loans aren't actually bad. How do you do that? Pretend that the borrowers can pay them back. How do you do that? Pretend the teaser rate is the real rate. Presto, problem solved.

At this point, some adult would ideally step in and say, "no, that's fraud." But clearly Treasury is not that mature. And it appears the Fed has resigned itself to some form of greater idiocy coming out of Congress on the subprime front that maybe, just maybe, the teaser freezer can head off.

However, the stubborn fact remains that banks will lose money on teaser rates. Regulators and investors both know this. Who exactly are we trying to fool? Besides inattentive voters.

Of course, nobody in the highly educated, fast-paced, exciting world of banking ever noticed that lending large sums of money to people with little or no real ability to repay the principal might be a risk. Bailing them out with public funds is exactly the wrong thing to do . . . which makes it the odds-on favourite of both stricken bankers and politicians needing to be seen to be "doing something".

QotD: Fake rare wine

The extraordinary inflation of rare-wine prices — of which the Jefferson bottles are the most conspicuous example — has led in recent years to an explosion of counterfeits in the wine trade. In 2000, Italian authorities confiscated twenty thousand bottles of phony Sassicaia, a sought-after Tuscan red; Chinese counterfeiters have begun peddling fake Lafite. So-called "trophy" wines — best-of-the-century vintages of old Bordeaux — that were difficult to find at auction in the nineteen-seventies and eighties have reëmerged on the market in great numbers. Serena Sutcliffe, the head of Sotheby's international wine department, jokes that more 1945 Mouton was consumed on the fiftieth anniversary of the vintage, in 1995, than was ever produced to begin with.

Patrick Radden Keefe, "The Jefferson Bottles: How could one collector find so much rare fine wine?", The New Yorker, 2007-09-03

QotD: The economics of bioethanol

Promoters of the ethanol mandate assert that it would help the United States achieve energy independence and slow the accumulation of greenhouse gases that are driving climate change. Evaluating the scientific and economic claims being made for bioethanol can be vexing, but a few urgent questions come to mind: if bioethanol is such a good energy deal, why must refiners and consumers be forced to use it? Again, if it's such a great idea economically, why does the federal government offer a tax credit of 51 cents per gallon for blending ethanol into gasoline?

In fact, the subsidies are probably higher than that. For example, a 2006 report by the International Institute for Sustainable Development estimated that if one took into account state renewable fuel tax breaks and direct agricultural subsidies that reduce other costs, the total amount of the ethanol subsidy rises from $1.05 to $1.38 per gallon of ethanol

Ronald Bailey, "Bioethanol Boondoggle: Political viability is more important than commercial viability", Reason Online, 2007-12-04

Regulating small businesses to death

Radley Balko visits "Old Town Alexandria", which is struggling to maintain its historical look:

People who decry the Wal-Mart-ification and Gap-ificaiton of America need to realize that regulation often does more harm to local businesses than predatory pricing, loss-leader business models, or some other imagined corporate evil.

I've lived in or near Old Town for most of the last 10 years. It's not [un]common to see an independently-owned antique shop or art gallery get boarded over, only to be replaced in ensuing months by a franchise. It's not difficult to see why. Franchise operators can tap the resources of the parent company, particularly when it comes to accessing legal help with experience navigating through and working with local zoning laws and business regulations.

Local officials who simultaneously decry big box stores and national chains while doling out burdensome regulatory structures and complicated permit processes should understand that regulatory burdens hit the smaller, independent places hardest, because they're the places that have the smallest amount of discretionary cash to hire legal aid (or, if you're really cynical, to make the appropriate campaign contributions). They're on a tighter budget and, therefore, have a smaller margin of error when it comes to hassles like delaying an opening because some bureaucrat determined their signage is a couple of inches out of compliance.

There's a larger lesson in all of this, too. Those who push for federal regulations to rein in "big business" often don't realize that the biggest of big businesses don't mind heavy federal regulation at all. They have the resources to comply with them, not to mention the clout in Washington to get the regulations written in a way that most hurts upstarts and competitors.

Big businesses know that a heavy regulatory burden is the best way to make sure small- and medium-sized businesses never rise up to challenge them.

IT industry latest envirocriminals

According to a report from New Scientist, the IT industry is the latest in a long series of environmental criminal organizations, plotting the demise of Mother Gaia:

"Computers are seen as quite benign things sitting on your desk," says Trewin Restorick, director of the group. "But, for instance, in our charity we have one server. That server has same carbon footprint as your average SUV doing 15 miles to the gallon. Yet, whereas the SUV is seen as a villain from the environmental perspective, the server is not."

The report, An Inefficient Truth states that with more than 1 billion computers on the planet, the global IT sector is responsible for about 2% of human carbon dioxide emissions each year — a similar figure to the global airline industry.

The energy consumption is driven largely by vast amounts of customer and user data that are stored on the computer servers in most businesses. The rate at which data storage is growing surpasses the growth in the airline industry: in 2006, 48% more data storage capacity was sold in the UK than in 2005, while the number of plane passengers grew by 3%.

Of course, the solution is to scrap all those inefficient, Gaia-raping computers and go back to the practice of keeping all data on paper, tabulated by hand. Think of all the millions and millions of people who will be able to get jobs as office clerks, archivists, shipping/receiving clerks (to handle the vast increase in paper shipments), paper mill workers, and lumberjacks this wonderful innovation would benefit.

Let's just ignore the false correlation between air travel growth and data storage capacity growth, shall we? It's about as meaningful as comparing the rate of growth of any two radically dissimilar things.

After posting this, I might suggest the magazine change its name to New Credulist.

H/T to James Lileks.

Change your sexual orientation, get 10% off your flight

Jon, my virtual landlord, sent along this link, which shows how carefully companies need to position their discount offers.

Alaska Airlines and Horizon Air decided to offer a 10% discount to gay travellers who booked their flights through a particular page on their website (at the time this was reported, the page was titled "Gay Travel", but it had changed to "New York City on Sale" soon afterwards.

I have no problem at all with airlines or other businesses offering discounts to individuals or groups, but this is an example of how not to do it. How much does offering the discount to people based on their sexual orientation (or declared sexual orientation, which isn't quite the same thing) differ from offering a discount based on the colour of their skin? Would that not cause serious objections from government and private organizations? Could Alaska and Horizon have managed to find a way to increase their business that didn't run the risk of alienating the a significant number of their existing customer base?

Toronto council wastes money . . . in other news, water is wet

I was amazed to find this column in the Toronto Daily Worker Toronto Star today:

Toronto city councillors do seem tragically hooked on spending needlessly and foolishly — despite constantly crying poor.

The mismanagement of the Union Station file being a recent example.

The private sector wanted to fix up the place, pay the city an annual fee and make some money off the venture. That deal fell apart. GO Transit wants to buy it, but the city isn't willing to deal. So now a city-inspired fix-up plan has hit $388 million and counting — and hopelessly dependent on cash from the federal government.

Another example. Budget committee voted Wednesday to borrow $700,000 to purchase food carts so the city can then rent them out to food vendors. Why not let the vendors get their own carts? Because the city wants to control the trade, keep entrepreneurs (conglomerates, John Filion says) from cornering the market.

Why the city has created this business to compete against restaurants is another question. But let's say it's good to be selling a variety of food from the sidewalks. Why must city hall get involved in the purchase, maintenance and distribution of the carts?

If Royson James isn't careful, he'll find himself the "token right-winger" in the TorStar newsroom! He may never do lunch in this town again!

All joking aside, this is the kind of thing you very rarely find in the local media: an article that isn't demanding yet more government spending and more government control over businesses and the lives of private citizens. Huzzah, Mr. James.

It's tough to disagree with the sentiments here:

Councillors should be hanged, one a day, at noon, in Nathan Phillips Square. Charge admission. We'll net enough money to pay off most of our civic bills.

To the tumbrils with them!

QotD: Where factoids come from

Decades ago, in the days when I labo(u)red in the Central Laboratory at the bottle factory, one of my collegues was dispatched to a conference on air pollution. Upon his return, he related the contents of a paper there presented.

I don't remember the details, but recall the main thrust of it.

In those days, there were numerous claims that "air pollution costs every man, woman, and child in the United States $137.63 every year" or some such number. The paper in question addressed the source of that widely published figure.

It developed that around 1890, a Pittsburgh (The Smokey City) newspaper had printed an article which reported the cost of cleaning the exterior of each of several office buildings during the previous year.

A a year or so later, someone else totaled those figures, divided by the number of buildings reported, multiplied by the number of office buildings in the Golden Triangle and reported "Air Pollution Cost to Pittsburg Businesses".

Still later, someone took that figure, divided by the population of Pittsburgh, multiplied by the population of the Allegheny County, and published "Cost of Air Pollution for Allegheny County in 1910".

Later, someone divided that by the number of steel mills in Allegheny County, multiplied by the number of steel mills in the state and called the result "Pennsylvania's Cost of Air Pollution".

Later, someone multiplied that figure by the number of states east of the Mississippi to arrive at "Cost to Eastern United States Due to Air Pollution".

Along around 1925, someone adjusted the figure to account for inflation.

In the 1930's someone divided the 1925 figure by the population of the states east of the Mississippi to arrive at an "every man, woman, and child cost of air pollution".

Someone else compared the unadjusted pre-1925 figure to the adjusted 1925 figure, divided the difference by the population of the eastern states to obtain "Increase per capita in Cost of Air Pollution in a Single Year".

Just after WW2 (the big one), the 1930's "every man, etc.." figure was adjusted for inflation, multiplied by the population of the United States, divided by the number of states, and published as "Cost of Air Pollution to Each State".

Finally, after a few more such manipulations over the years, the then- current cost of $137.63 was published.

As noted in the beginning, that's not exactly what the paper said, but the general idea is there. Along the way it was noted that, for example, an alleged total cost for Pittsburgh in 1900 had been divided by the 1914 population of Pittsburgh to get a cost per capita, then multiplied by the 1920 population of Pennsylvania to get a total for the state, even though the population numbers changed from year to year.

The paper's conclusions were:

1) There is a cost incurred by air pollution.

2) No one knows what that cost is.

3) If it is $137.62 per capita, that's just good luck.

4) That the quoted "Cost of Air Pollution . . ." should be scrapped at once.

Robert Netzlof, posting to Yahoo Group "Railroad_Modeling_Still_Makes_Me_Grumpy", 2007-11-21

QotD: The start of the Christmas season

Why does the Christmas celebration start earlier every year? The commercial reasons are obvious; many retailers do a significant portion of their business during Christmastime, so the sooner the sleigh bells ring, the happier stores are. This year, retailers are said to be worried that gasoline and home-heating prices are poised to soar, so they hope holiday shoppers will spend before that happens. But there is a deeper reason Christmas starts earlier each year: We want to live in the Christmastime world, and this has nothing to do with religion. In the Christmastime world, children are happy, family is gathered round, and all the year's exhausting and stressful overwork has at least led to a pile of presents. Candles are lighted, and we listen for a sound in the distance. Just as our ancient ancestors must have dreamed of living always in the moment of the harvest, we want to live as long as possible in the moment of the holidays — regardless of faith, since Santa comes to everyone. Christmastime also evokes the strongest positive memories of most people's childhoods — of presents, singing, anticipation, and the adults forcing themselves to get along. The Christmas weeks are the time we believe all is right with the world, whether or not we actually go over the river and through the woods to grandmother's house. We want to enter the time of believing all is well, so every year we push up the start date.

Gregg Easterbrook, "TMQ: Cover Them!", ESPN Page 2, 2007-11-20

This nicely explains it

A post at Samizdata exactly captures my own feelings:

In recent times I have attacked the Economist for pretending to be pro free market whilst, when one reads it closely, not really being so. Articles like the one on the Australian elections mean I can no longer fairly make this charge. The Economist having now 'come out' as an openly leftist publication.

I've subscribed to The Economist for over 20 years, but I'm letting my current subscription lapse unrenewed. For the last few years, I've been less and less happy with both the editorial and news reporting aspects of the newspaper. They still pretend to support free markets, but so many of their articles in recent years have been apologies for more state involvement in the economy, more state control of private areas of endeavour, and generally more statism than laissez faire.

I'm going to miss reading it, but . . . I'm really missing The Economist of several years ago . . . not what they're currently publishing under that name.

QotD: Local food debunked

[. . .] locally grown food has its own environmental costs. Academics from New Zealand have produced evidence that it is environmentally friendly to produce dairy products, apples and lamb in New Zealand — where there is plenty of space to accommodate natural, energy-efficient methods of farming — and ship them around the world. Maybe the New Zealanders would say that, but it's not a crazy observation. Eating local can consume fossil fuels too: McKibben enjoyed berries in the winter because he froze them for months. Local tomatoes are grown in northern climes in gas-heated greenhouses. And local doesn't necessarily mean "natural": local apples can be stored for months — in storage sheds filled with nitrogen.

The local food movement would argue that local food is about more than just the environmental cost of transportation. Fair enough. But the connection between local food and some of its supposed benefits is pretty tenuous. If it's fresher food, cheery farmer's markets and decent conditions for farm workers that we want, let’s address those aims directly without this fetish for localism.

There's a twist in the tale, too. Two-thirds of the social costs of the food distribution system have nothing directly to do with the environment at all: They are attributable to accidents and congestion. More than half of those costs are caused by driving to the shops. My socially responsible advice to you, then, is not to worry about from how far away your food came, but to walk — not drive — to the supermarket.

Tim Harford, "Frequent Flier Food", Forbes, 2007-11-15

How big government influences big business

Radley Balko shows why telephone companies doing the federal government's bidding isn't necessarily the fault of big business:

You can inveigh all you like against corporate power. But corporations by themselves can't force us to do anything we don't want to do. Only the government has the power to do that — or corporations with power on loan from the government.

The federal government is enormous. It has a massive and growing influence over what happens in the private sector. Witness (as I've pointed out many times before) the fact that the richest counties in America today aren't near the country's entrepreneurial epicenters, but in the D.C. suburbs, home to most of the country's federal employees and government contractors. Now as lefties, you may find all of this to be sweet potato pie. But know that a federal government of today's size and scope also gives whoever is controlling it enormous leverage to bend the private sector to his liking. That's great when your party is holding the reins. Not so good when it isn't.

Sure, in an ideal world, all the telecos would've consulted their lawyers, realized that what the Bush administration was asking was illegal, and boldly told the White House where to stick its nosy information requests. But come on. Incentives matter. Such a move may have been principled, but it would have been foolish. Corporations are obligated to their shareholders to protect their bottom lines. Pissing off the people in power who with a swipe of the pen can swing hundreds of millions of dollars, either to you or to your competitor — well, that's just not good for the bottom line.

In a truly free economy, this obligation to shareholders is a good thing. Because in a free market, shareholder interests are generally in line with customers' interests. Piss off your customers, they take their business elsewhere, and you're shareholders are angry.

Unfortunately, in a market where the government is likely to be one of a particular industy's biggest customers, shareholder and (non-government) customer interests start to clash. You see, the telecos made a calculated decision. Billions of dollars in federal contracts over the long-term, combined with the other value they saw in in winning favor with the Bush administration and the Republicans in Congress (a favorable turn of phrase in the Federal Register, for example, can mean millions) was in their estimation more lucrative than protecting the privacy of their non-government customers in the short-term.

Shouldn't that tell you something about just how frighteningly large and influential the federal government has become? The telecos concluded it's better for their collective bottom lines to risk pissing off all of their other customers than to risk pissing off this one.

QotD: The net

What's happening here? What is it about the network that makes it so potent? Simply this: the network, in every form, is anathema to hierarchy. The network represents the other form of organization, not a contradiction of hierarchy, but, rather, a counterpoint to it. I've rewritten Gilmore's Law to reflect this:

"The net regards hierarchy as a failure, and routes around it."

For the fifty-five hundred years of human civilization, hierarchy has always had the upper hand. Now the network, amplified by all those wires and routers, is stronger than hierarchy, and battle has been joined. But this isn't going to be some full-on Armageddon, a battle between the Empire and the Alliance; this is the Death of a Thousand Cuts. The network is simply kicking the legs out from under hierarchies, everywhere they exist, for as long as they exist, until they find themselves unable to rise again. What it really come down to is this: we are assuming management of our own affairs, because we are now empowered to do so. It doesn't matter if you're a maize farmer in Kenya or a video producer in Queensland; these mob rules apply to us mob.

Mark Pesce, "Mob Rules (The Law of Fives)", hyperpeople, 2007-09-28

At least Colby agrees with me . . .

Colby Cosh finally admits to feeling similar concerns about the widespread belief in official Chinese economic figures:

Are the spectacular Chinese economic growth numbers of the post-Deng era reliable? The West has been tricked into bad policy decisions before because economists foolishly trusted Communist growth estimates. The George Mason economist Bryan Caplan has just voiced what I've been thinking since the early 1990s (which is admittedly a long time to wait for data to be falsified)

[. . .]

The two-headed creature so often talked of as "Chinanindia" (I think at this point we can just start calling it "Chindia") has taken over from Japan in our imaginations as the next "obvious" successor to the economy supremacy of the West. Japan turned out to be the wrong horse to bet on, and still hasn't fixed all of its macroeconomic issues. And it is often forgotten that even by official numbers China's economy is still much smaller than the U.S.'s and is dwarfed by the combined size of NAFTA and the EU.

Of course, I've been riding this hobby horse occasionally since 2004.

Micro microeconomics

You can tell how well an economy is performing by certain (trailing) indicators: how well low-level service jobs are performed. When the economy is doing well, these jobs are being filled by less skilled, less competent, less motivated workers. When the economy is doing poorly, these jobs are being staffed by people who are often seriously over-qualified for the work, but need the money. I've often jokingly referred to this as "Russon's Law of Economics", always in the context of suffering through terrible service at a store or restaurant.

On that basis, I'd have to say that the Ontario economy is performing far better than the official numbers indicate: service and entry level jobs are being performed as badly as I've ever seen. For example, in the office complex at work, there's a coffee shop offering the usual variety of hippy-dippy frappy latté options. It's becoming a joke between me and the manager that they can't get my own order right twice running (unless he or the assistant manager does it). I've had several unidentifiable beverages offered to me that then have to be thrown out and re-made properly. And, of course, the staff turn over at a fairly high rate (I've been going in there for three months, and over that time, only the manager and assistant manager are still there).

That's not too surprising . . . coffee shop jobs aren't the sort of thing that people aspire to as career moves. But it's not just coffee shop jobs that are showing this kind of downward drift in skill and attention. My employer has been trying to get a set of business cards printed — for months — and the printer seems to be staffed by illiterate and incompetent shaved baboons.

In this run, there are four managers who need new business cards. The information is sent to the printer electronically, and they set the cards and fax back proofs for us to examine and approve. We went through nine proofs before we could sign off on them.

Now think about this for a second . . . a business card has only a few key elements: the company name, the person's name, the title, the address, the email address, and the telephone numbers. Even if you got each of them wrong, it shouldn't take more than one more proof to fix things, right?

I can only assume, on the evidence presented in the successive proofs, that they were throwing away the draft each and every time and starting over from scratch . . . because each proof showed new and different errors!

I wasn't keeping track of the errors (because I never thought it would take so long to fix them), but the first time out, the company name was missing from three of the four cards. The next time, that error recurred, but now they'd used the same telephone number for all four cards. The time after that, still no company name on three of four, but now a different — wrong — number was used for the cell phone numbers on all the cards. And so on, and so on.

The actual printed cards finally showed up yesterday, and there's still a minor glitch on my own card, but it's close enough to correct that it's not worth the time and effort to try to get it fixed.

What's even scarier is that this is the fourth printer we've used, and (according to the person who deals with the printers) the other three were worse.

Oh, yes. The economy is doing just fine . . .

QotD: The Farm Question

Here's how the American free enterprise system works. You have an idea for a business. You find the money to start it up. You try to give customers something they want at a price low enough to keep them happy but high enough to earn a profit. Either your plan works, allowing you to make a living, or it doesn't, indicating you should find a different line of work.

Unless, of course, you are a farmer, in which case all this may sound unfamiliar. A lot of American agriculture operates in an environment where none of the usual rules apply — where the important thing is not catering to the consumer, but tapping the Treasury. It's a sector that, ever since the Great Depression, has been a ward of the government, both coddled and controlled.

By any reasonable standard, federal agriculture policy is past due for a major overhaul. But judging from the latest farm legislation moving through Congress, not much is going to change.

Back in the 1930s, when the economy was a wreck, the survival of capitalism was in doubt and Oklahoma was blowing away, you could understand the impulse for Washington to intervene on behalf of farmers. But the days when agriculture meant a lifetime of toil for a meager living are just a memory. Today, farmers monitor soil conditions by computer, drive air-conditioned tractors and have a higher average income than nonfarmers.

Yet many of them continue to enjoy treatment other industries can only dream about. Imagine the government rigging the market to assure high prices to people selling concrete or cameras. Dairy farmers and sugar growers get exactly that, courtesy of the Department of Agriculture. Farmers who plant a host of other crops receive compensation anytime their prices fall below a fixed minimum.

Steve Chapman, "Take the Federal Out of Farming", Reason Online, 2007-10-25

Sushi: 19th century McDonald's equivalent

Katherine Mangu-Ward reveals the dirty secret behind sushi:

For traditionalists in 19th-century Japan, a new sushi place was a sign the neighborhood was going to hell. In 1852 one writer grumped about the proliferation of sushi stalls in booming industrial Tokyo. The McDonald's of their day, the stalls offered hungry factory workers a quick, cheap meal of fish and sweetened, vinegared rice. If the fish wasn't top of the line, well, a splash of soy sauce and a dab of spicy wasabi perked up a serving of fish gizzards nicely, with some antimicrobial benefits to boot.

Today that writer's spiritual descendants dwell on food chat boards like Chowhound, where calling a new Japanese place "inauthentic" or deriding it as "strip mall" or "food court" quality is the kiss of death. When we think of high-end, "authentic" sushi today, we envision rich, fatty slices of smooth tuna and creamy salmon arranged on a pristine plate — the height of elegant Japanese cuisine. But sushi wasn't always elegant, and salmon and tuna are relatively recent additions to the menu. In that sense, sushi's appearance in food courts worldwide is more a return to the dish's common roots than a betrayal of authenticity. Sushi has always been in flux, with new ingredients and techniques added as convenience demanded. Globalization has sped up that process exponentially, bringing novelty to an old food and bringing traditional food to new places. The story of sushi is the story of globalization writ small — very small, on tiny slivers of raw fish.

Sad, but not surprising

I thought it'd been a long time since I received a catalog from Laissez Faire Books . . . they're shutting down operations:

The catalog has for decades been the best way to keep up on the thankfully ever-growing flood of books of interest to libertarians. While in an Amazon and abebooks age, the need for one special place to go to to obtain sometimes obscure books may be smaller, LFB and its catalog editors' ability (special hat tip to libertarian legend Roy Childs, who edited the catalog in the late '80s and early '90s and read and understood more libertariana than any random 20 ordinary libertarians) find and compile in one place and intelligently review and contextualize,books for the libertarian community will be sorely missed.

As one of the comments said (I hope tongue-in-cheek): "SamB: Goddam big business book sellers running out these small mom and pop laissez faire book stores! The government should do something about this!"

QotD: Prices

Price is the single most important item of information that's necessary for individuals to act effectively within that part of our civilization we call the market. Price tells every market participant what to offer, how much of it to offer, and at what level of quality. Yet orthodox Marxism forbids the very activities that generate that all-important information.

The idea, of course, is that the benevolent State should establish "fair" prices, so the lovely Proletariat won't get screwed by evil capitalist pigs. But no single individual or institution can establish price (although that never keeps them from trying), it is established by facts of objective reality, playing against an aggregate of all the economic decisions each of us makes every day, practically every hour, in the process of living and working, buying and selling, bidding in the market for what we need or want, accepting bids on what we make or do.

This doesn't require any sort of formal auction process. If, for instance, something about the idea of high-quality gourmet earthworms in marinara sauce is unappealing, people simply won't buy them — no matter how little you charge — the message conveyed by price is that you should stop making the stuff and leave the poor little earthworms alone.

L. Neil Smith, "The End", Libertarian Enterprise, 2007-10-14

"This is my railroad"

One of the most interesting railroad promotional films ever made: This Is My Railroad, Part 1 and Part2. It's portentious, hokey, and triumphal, yet tells more about both the Southern Pacific and the regions it served than anything I've ever seen. If you want to know why the 1940's and 50's were the golden age of railroads, this film will give you a bunch of clues.

One of thousands of public domain short films now available from the Prelinger collection at the National Archive.

H/T to Jeff Scarbrough.

QotD: Shibboleths of the 60's

I'm not unsympathetic to those who favor a constitutional amendment prohibiting all baby boomers from public office. It's amazing to me how many institutions remain entirely in thrall to the received wisdom of 40 years ago — scarcity of "resources", world "overpopulation", the growing "inequality" between the rich countries and the "Third World".

None of these things exist. The UN now says the planet's population will peak in mid-century, and in many parts of the developed world it's already in decline: the problem Germany faces, for example, is not "sustainable growth" but sustainable lack of growth. Meanwhile, the last three decades have seen the emergence of what Professor Xavier Sala-i-Martin calls "a new world middle class" made up of over 2.5 billion people in developing lands who now have a standard of living near enough that of the west. So about half the folks in the so-called "poor countries" are, in fact, doing pretty nicely. As Virginia Postrel put it, if you take the planet as a whole, in 1998 "the largest number of people earned about $8,000 — a standard of living equivalent to Portugal's."

Mark Steyn, "Thinking Globally", National Review, 2007-09-21

QotD: The uses of inflation

At a conference this weekend, talking (once again) about the gold standard, I was struck by the fact that the things economics writers take for granted often sound horrifying to ordinary people.

In this case, the trouble came when I said that it's a good thing that the Federal Reserve errs on the side of having a little bit of inflation, and that in fact inflation in small amounts is probably good for the economy. The reaction of the assorted nice, normal people I said this to was about what you'd expect: they looked as if I'd suggested recreationally vivisecting their cat.

And yet, this isn't really all that controversial. A little bit of inflation lubricates the problem of sticky wages and prices: which is to say, that prices and wages are quicker to adjust upward than downwards.

To liberals, this generally sounds great: once you get a wage gain, it's yours to keep! The problem is, in an economic downturn, or a sectoral slump, the cost of your keeping that wage gain is that oftentimes, someone else gets the lovely parting gift of a layoff.

Megan McArdle, "In praise of (a little) inflation", Asymmetrical Information, 2007-09-17

Copyright less valuable than fair use?

According to a report in Information Week, the economic return from fair use may be significantly greater than that from copyright:

Fair use exceptions to U.S. copyright laws account for more than $4.5 trillion in annual revenue for the United States, according to a report issued on Wednesday by the Computer and Communications Industry Association.

"Much of the unprecedented economic growth of the past 10 years can actually be credited to the doctrine of fair use, as the Internet itself depends on the ability to use content in a limited and nonlicensed manner," CCIA president and CEO Ed Black said in a statement. "To stay on the edge of innovation and productivity, we must keep fair use as one of the cornerstones for creativity, innovation, and, as today's study indicates, an engine for growth for our country."

By one measure — "value added," which the report defines as "an industry's gross output minus its purchased intermediate inputs" — the fair use economy is greater than the copyright economy.

Recent studies indicate that the value added to the U.S. economy by copyright industries amounts to $1.3 trillion, said Black. The value added to the U.S. economy by the fair use amounts to $2.2 trillion.

The fair use economy's "value added" is thus almost 70% larger than that of the copyright industries.

"Fascinating," says the guy who uses quotations for more than 50% of his weekly wordcount on the blog . . .

H/T to the ever-diligent researchers at Slashdot.

QotD: Private stupidities versus public ones

Personally, I'm on the record as believing that companies quite often do stupid things. The difference between companies and the government is that thanks to market discipline, companies that do stupid things eventually have to stop, because they run out of money. Government programs that don't work, on the other hand, have a seemingly indefinite shelf life. The US government seems to be doing almost every stupid thing it has ever done, and to be planning to continue doing those stupid things forever. In the past sixty years we've had three serious attempts that I can think of that even partially grappled with the problem of programs that weren't working: the Carter/Reagan deregulations; the Reagan tax simplification; and the Clinton welfare reform. Of those, the first is intact, the second has been gutted, and the third is slowly eroding. This is not a promising track record for people arguing that the government should do more stuff.

Megan McArdle, "Success is in the eye of the beholder", Asymmetrical Information, 2007-09-12

Dick Wetherbee likes tax

. . . well, he likes one particular tax:

Congress is debating whether it should tax cigarettes more in order to help children's health care. This child would love it. Tax 'em to the moon.

Right this minute I can buy cigarettes for 30 pesos a carton in Merida. A tad less than 30 US cents a pack at today's exchange rate.

There is a beach bar in Chelem where you can lie in a hammock, drink rum and coconut water and wait for a flat calm day. A moderately powered 18 footer on such a day can make the run to Cockroach Bay in less than 12 hours. An 18-foot fiberglass boat is practically invisible to radar. Only the motor makes a blip. The wake shows up on satellite but, generally, no one checks it in real time.

Right now, I know where you can get two 225 mercs for $1500. Solid (used) 18 ft center console hulls go for $2-3k all over Florida.

At present, few people go to prison for smuggling cigarettes. That will change. The bad guys will discover there is money to be made and it will be time for little guys to get out of the business. I figure about a 2-year window for those who love adventure and like to make a few bucks but would prefer to stay out of prison.

QotD: War Economy

More than any other single period, World War I was the critical watershed for the American business system. It was a "war collectivism," a totally planned economy run largely by big-business interests through the instrumentality of the central government, which served as the model, the precedent, and the inspiration for state corporate capitalism for the remainder of the twentieth century. That inspiration and precedent emerged not only in the United States, but also in the war economies of the major combatants of World War I. War collectivism showed the big business interests of the Western world that it was possible to shift radically from the previous, largely free-market, capitalism to a new order marked by strong government, and extensive and pervasive government intervention and planning, for the purpose of providing a network of subsidies and monopolistic privileges to business, and especially to large business, interests. In particular, the economy could be cartelized under the aegis of government, with prices raised and production fixed and restricted, in the classic pattern of monopoly; and military and other government contracts could be channeled into the hands of favored corporate producers. Labor, which had been becoming increasingly rambunctious, could be tamed and War Collectivism in World War I bridled into the service of this new, state monopoly-capitalist order, through the device of promoting a suitably cooperative trade unionism, and by bringing the willing union leaders into the planning system as junior partners.

Murray N. Rothbard, "War Collectivism in World War I", 1972

Lomborg in NYC

John Tierney talks to Bjorn "The Skeptical Environmentalist" Lomborg on a walk around New York City:

The effect of the rising temperatures is more complicated to gauge. Hotter summer weather can indeed be fatal, as Al Gore likes us to remind audiences by citing the 35,000 deaths attributed to the 2003 heat wave in Europe. But there are a couple of confounding factors explained in Dr. Lomborg’s new book, Cool It: The Skeptical Environmentalist’s Guide to Global Warming.

The first is that winter can be deadlier than summer. About seven times more deaths in Europe are attributed annually to cold weather (which aggravates circulatory and respiratory illness) than to hot weather, Dr. Lomborg notes, pointing to studies showing that a warmer planet would mean fewer temperature-related deaths in Europe and worldwide.

The second factor is that the weather matters a lot less than how people respond to it. Just because there are hotter summers in New York doesn’t mean that more people die — in fact, just the reverse has occurred. Researchers led by Robert Davis, a climatologist at the University of Virginia, concluded that the number of heat-related deaths in New York in the 1990s was only a third as high as in the 1960s. The main reason is simple, and evident as you as walk into the Bridge Cafe on a warm afternoon: air-conditioning.

The lesson from our expedition is not that global warming is a trivial problem. Although Dr. Lomborg believes its dangers have been hyped, he agrees that global warming is real and will do more harm than good. He advocates a carbon tax and a treaty forcing nations to budget hefty increases for research into low-carbon energy technologies.

But the best strategy, he says, is to make the rest of the world as rich as New York, so that people elsewhere can afford to do things like shore up their coastlines and buy air conditioners. He calls Kyoto-style treaties to cut greenhouse-gas emissions a mistake because they cost too much and do too little too late. Even if the United States were to join in the Kyoto treaty, he notes, the cuts in emissions would merely postpone the projected rise in sea level by four years: from 2100 to 2104.

Sneering at early adopters

A post at Asymmetrical Information pointed to a post at Marginal Revolution, which had this lovely comment on it from "Matt":

The thing that annoys me most about all this is that most iPhone early adopters didn't uneasily spend $600 on the phone. They gladly spent it. They paid to break their contracts with their existing provider. They lined up in front of stores and camped out to spend $600 on the iPhone. People actually paid for spots in line just to have the chance to spend $600 on the iPhone. By any economic account, Apple under-priced the iPhone when it launched. And now these people have the audacity to "feel totally screwed". Forgive me if I'm not sympathetic.

Couldn't have put it better myself. (I may allow myself a discrete smirk, however.)

The economic double-standard

It's often noted that governments often exempt themselves from having to comply with the laws that they pass . . . so this example should be no real surprise:

The workers who clean Baltimore's Camden Yards baseball stadium are planning a hunger strike to protest their $7 per hour wages. The stadium is the largest employer of the city's homeless day laborers. The kicker, though, is that the Maryland legislature recently passed a "living wage" bill, setting the minimum at $11.30 per hour. But while the bill covers any business with state contracts in the Baltimore area, the state government is exempt, and Camden is owned by the state of Maryland.

Such double standards aren't new to the living wage debate. The labor activist group ACORN is largely credited with jump-starting the national living wage movement. But ACORN itself has a notoriously shabby record when it comes to paying its own workers. In fact, not only did the group once sue the state of California to exempt itself from the very living wage it helped the state to pass, ACORN actually used free market critiques of the minimum wage in its brief (ACORN argued that if it had to pay existing workers more, it wouldn't be able to hire more workers).

You see, if we let evil capitalists pay people less, that's exploitation, but if we morally superior types pay people less, then that's compassion at work. See the distinction?

QotD: The Fashion Industry

Snazzy but thrifty dressers no longer have to wait for knockoffs of the latest fashions, The New York Times reports. Now that photographs of Fashion Week models are available immediately for analysis by software that allows overseas factories to produce simulations of designer clothing within a couple of months, the knockoffs can get to stores before the originals do. You might think this development would lead designers to rethink the practice of unveiling their latest creations in early September and delivering them to stores in February, nearly half a year later. Or to consider reducing the huge price gap between their clothing and the stuff that looks just like it. Instead they are whining about the theft of their intellectual property and citing their competitors' efficiency as yet another reason to establish a copyright in clothing design.

Jacob Sullum, "The Knock Against Knockoffs", Hit and Run, 2007-09-06

Economic illiteracy at the Associated Press

Kerry Howley has some fun fisking an AP report on the sinister world of remittances:

Hard to know where to start here. The use of Hawala networks for terrorist funding is not a "downside" of the remittances sent by working immigrants; it is a distinct phenomenon that happens to also involve informal means of money transfer. The actual members of that "vast permanent army of economic exiles" are not necessarily permanent, bear no relation to the military, and are only exiles in the sense of self-imposed absence. Much of the remittance cash is coming from places like Singapore and Saudi Arabia, where the immigrant population is subject to constant, state-controlled, churning.

[. . .]

The U.S. "lost" $41.1 billion? If I buy a toothbrush in China with money I made in D.C., does the treasury lose that money? We’d better stop Americans from investing abroad — think of all the money the U.S. is losing. (It's not completely clear to me whether the AP is referring to foregone tax revenue, or to forgone spending in the domestic economy, or something else. In either case, "loss" is an odd way to put it.)

Do you remember when . . .

. . . not that long ago, all the investment articles in the business section of the newspaper, saying that we'd overbuilt our telecommunications infrastructure, and that there was not enough demand to pay for all the bandwidth that was becoming available? That coin has now flipped:

The Internet needs a massive investment to keep up with the demands of YouTube fans, billions of e-mails and wireless access, a university study states.

If the network that carries Internet traffic were a highway, it would be as if every car owner, "rushed out and traded in their cars for massive 20-wheel trucks," stated the report from University of California-San Diego Professor Michael Kleeman, a senior fellow at the USC Annenberg Center for Communication.

In the report, titled "Point of Disconnect," Kleeman writes that there needs to be a massive expansion of network capacity in the United States, and even though network operators are making those investments, it still may not be enough to keep up with demand.

Of course, everyone who followed the advice to dump telecommunications stocks took a bath on the transaction, but that's one of the risks of any kind of investing: if you don't know what you're investing in, you'll end up lining the pockets of those who do know.

"We're lowering prices because of the costs of piracy"

Over at Slashdot, the denizens are having lots of fun mashing the piñata:

HMV Canada Cuts Music CD Prices

umStefa notes a CBC story reporting that the largest music retailer in Canada, HMV, has slashed prices on CDs and is attributing the move to demand by customers for lower prices. The back catalog of popular artists will see price cuts of up to 33%; the cuts average 20% across the board. The Canadian version of the RIAA is spinning the news as being a direct result of music piracy.

The slashdotters have been having lots of fun whacking away at the embedded notions:

PunkOfLinux: Because, as we all know, customers who want CD's at a decent price are OBVIOUSLY pirates...

Otter Escaping North: You know - I'm living in Canada, never used p2p or anything like that to download music...don't consider myself a pirate at all. Happy to pay for the materials I want. Upon hearing HMV is slashing prices - I rejoice and head to the website.
The White Album is still forty-five freakin' dollars!
Piracy causes lower prices then, does it? I guess I just haven't been doing my part.

Gr33nNight: So in other words, if people keep pirating, then CDs will be cheaper. Sounds like a win-win to me.

teh loon: Spinning the news as software piracy won't help their agenda - I'm quite sure no consumer is going to feel sympathy for the RIAA's loss of potential profits. If anything, it'll encourage piracy - CDs are already overpriced as it is.

Sometimes the simplest answer is . . . wrong

James McWilliams has an epiphany in the New York Times:

As concerned consumers and environmentalists, we must be prepared to seriously entertain these questions. We must also be prepared to accept that buying local is not necessarily beneficial for the environment. As much as this claim violates one of our most sacred assumptions, life cycle assessments offer far more valuable measurements to gauge the environmental impact of eating. While there will always be good reasons to encourage the growth of sustainable local food systems, we must also allow them to develop in tandem with what could be their equally sustainable global counterparts. We must accept the fact, in short, that distance is not the enemy of awareness.

The most eye-opening figures were earlier in the article:

It all depends on how you wield the carbon calculator. Instead of measuring a product’s carbon footprint through food miles alone, the Lincoln University scientists expanded their equations to include other energy-consuming aspects of production — what economists call "factor inputs and externalities" — like water use, harvesting techniques, fertilizer outlays, renewable energy applications, means of transportation (and the kind of fuel used), the amount of carbon dioxide absorbed during photosynthesis, disposal of packaging, storage procedures and dozens of other cultivation inputs.

Incorporating these measurements into their assessments, scientists reached surprising conclusions. Most notably, they found that lamb raised on New Zealand’s clover-choked pastures and shipped 11,000 miles by boat to Britain produced 1,520 pounds of carbon dioxide emissions per ton while British lamb produced 6,280 pounds of carbon dioxide per ton, in part because poorer British pastures force farmers to use feed. In other words, it is four times more energy-efficient for Londoners to buy lamb imported from the other side of the world than to buy it from a producer in their backyard. Similar figures were found for dairy products and fruit.

In other words, it not only makes economic sense, but it also makes environmental sense to sometimes ship something from the other side of the world rather than obtain it locally.

H/T to Daimnation.

QotD: Taxation and Regulation

To begin with, you must understand clearly that all taxation is regressive. It's all about proportion. Just as, say, a nickel sales tax on hamburger bites deeper into the economic flesh of the poor than into the relative adipose of the rich, so smaller companies are always hit harder by taxes than big companies with a better-padded bottom line.

Moreover (and this is a very important key to understanding what happened and why) big companies can afford bigger, slicker legal and accounting departments to save the corporation tax money or get them out of tax trouble if necessary. If government decides to go after a big corporation, its officers are far likelier to get their backsides forcibly removed and handed to them in court. (Or said officers may just be offered lucrative salaries to leave government and join the corporation.) Simply from an institutional standpoint, then, it's easier and safer to go after Mom and Pop, who are likely to be stuck with their brother-in-law accountant and the lawyer who drew up their wills.

Possibly even more important, all regulation is regressive, too. It costs a small company a much greater fraction of its assets to comply with government's dictates — most of them unconstitutional — than it does a big corporation with its teeming hordes of office drones.

I saw a dramatic display once of a quarter's worth of paperwork that the government required of the 3M corporation. The cardboard boxes it filled formed a sort of meandering garden wall about hip high and fifty or sixty feet long. It was truly horrific, and fundamentally wrong.

But my point here is that 3M could afford the resources (about a third of their overhead, they estimated) to deal with this kind and degree of asininity, whereas similar requirements, loaded onto the already breaking backs of small or even middle-sized companies could easily crush or kill them. At about the same time (the late 1960s), it was noted that four out of five new businesses go belly-up within a year.

And who, we may now ask rhetorically, do we thank for that? The same "progressives" today who shake their little Marxoid fistlets at Wal-Mart and bemoan the passing of the neighborhood grocery store. The same wasters who polluted the economic environment with regulatory toxins until the smaller denizens of the market were unable to survive and the only organisms left were the dinosauroid giants they love to hate.

L. Neil Smith, "'Progressives' or 'Regressives'?", Libertarian Enterprise, 2007-08-19

Fake volunteerism, overseas edition

I've often wondered about the various charitable organizations who send students to third-world countries to do construction or other "valuable" work. According to a major British charity, the projects are frequently a waste of time, effort, and money:

One of Britain's leading charities has warned students not to take part in gap-year aid projects overseas which cost thousands of pounds and do nothing to help developing countries.

Voluntary Service Overseas (VSO) said that gap-year volunteering, highlighted by Princes William and Harry, has spawned a new industry in which students pay thousands of pounds for prepackaged schemes to teach English or help to build wells in developing countries with little evidence that it benefits local communities.

It said that "voluntourism" was often badly planned and spurious projects were springing up across Africa, Asia and Latin America to satisfy the demands of the students rather than the needs of locals. Young people would be better off simply travelling the world and enjoying themselves, it added.

One of Victor's friends was recently on a trip to Africa for this sort of thing, and she came back all fired-up to get all her friends to go and do similar things. It's a shame that that sort of enthusiasm can be wasted — or worse, cause more harm.

H/T to Johnathan Pearce.

Public transit boondoggles

There's a post up at Hit and Run, talking about the problems with high-profile, low-return-on-investment projects like light rail:

A front-page story in yesterday's New York Times noted that politicians' transportation vanity projects drain money away from the sort of maintenance work that apparently was needed on the Interstate 35W bridge that collapsed in Minneapolis last week. I was pleasantly surprised to see the Times put light rail lines in the same category as boondoggles like Alaska's Bridge to Nowhere [. . .]

The scenario is very common — just about every city larger than 500,000 has probably built, planned to build, or been wined-and-dined by potential bidders for such projects. The projects are almost always economically ludicrous (but not as far-out as publicly funded sports venues for professional teams), basing their revenue projections on literally unattainable levels of use and minimizing or ignoring the crowding-out of other activities.

Light rail projects are very popular with politicians, because every politician wants to leave "a legacy" of their time in office. That means they want to spend as much of your money as possible to ensure their own "immortality". Light rail projects are popular with the public because they appear to offer a way to reduce congestion and speed up transit times . . . for other people . . . in other words, get some of those slowcoach commuters the heck out of my way by making them give up their cars and use a new light rail system instead.

QotD: Ethanol is not the answer

Ethanol doesn't burn cleaner than gasoline, nor is it cheaper. Our current ethanol production represents only 3.5 percent of our gasoline consumption — yet it consumes twenty percent of the entire U.S. corn crop, causing the price of corn to double in the last two years and raising the threat of hunger in the Third World. And the increasing acreage devoted to corn for ethanol means less land for other staple crops, giving farmers in South America an incentive to carve fields out of tropical forests that help to cool the planet and stave off global warming.

So why bother? Because the whole point of corn ethanol is not to solve America's energy crisis, but to generate one of the great political boondoggles of our time. Corn is already the most subsidized crop in America, raking in a total of $51 billion in federal handouts between 1995 and 2005 — twice as much as wheat subsidies and four times as much as soybeans. Ethanol itself is propped up by hefty subsidies, including a fifty-one-cent-per-gallon tax allowance for refiners. And a study by the International Institute for Sustainable Development found that ethanol subsidies amount to as much as $1.38 per gallon — about half of ethanol's wholesale market price.

Jeff Goodell, "Ethanol Scam: Ethanol Hurts the Environment And Is One of America's Biggest Political Boondoggles", Rolling Stone, 2007-07-24

QotD: Productivity and Freedom

What is productivity? Simply getting more output from the same or less input. Dahl showed in his talk the institutional context in which productivity improvement flourishes. His findings will gladden the heart of any libertarian, and anyone else who wants a prosperous future for the billions of people on this planet who are mired in poverty. He began by asking why South Asians and Cubans are more productive outside of India and Cuba? Why do Russians have the highest per capita income of any ethnic group in the U.S., but very low per capita income in Russia? Why are Mexicans five times more productive in the U.S. than in Mexico?

The answer is that productivity flourishes when people are free, safe, and justly treated. Dahl calls this the framework for prosperity. "This principle holds not only for nations, but for any organization or institution that seeks to unleash its potential to achieve improvement and growth," declared Dahl.

Ronald Bailey, "Peace and Prosperity Through Productivity: Can economic growth solve all the problems in the world?", Reason, 2007-08-02

Health care and the UAW

There's an excellent — and eye-popping — article on the upcoming negotiations between the UAW and the big three US automakers. I didn't realize just how much is at stake just on the healthcare issue:

Before the 2005 "givebacks," the Detroit Three companies picked up the entire health-care tab for all their hourly workers — active, retired, dependents and, incredibly, even laid-off workers till they found other jobs. Workers were not required to pay any premiums, deductibles or co-pays-except for routine physical exams and prescription drugs. The 2005 deal left these benefits virtually untouched for retirees with pension incomes below $8,000. But for the first time ever it began requiring more well-off retirees to cough up $252 in annual premiums for family coverage and another $500 in total annual deductibles. In short, for a grand total of $752 in out-of-pocket annual costs, UAW retirees and their spouses get full medical coverage for life. Given the huge retiree population that the Big Three support — GM has three times more retirees than active workers — this has saddled them with a combined unfunded health-care liability exceeding $100 billion.

By contrast, 90% of retirees in other American companies don't get any employer-provided coverage after 65, when they become Medicare-eligible. Such couples, according to an analysis by Fidelity Investments last year, are typically on the hook for $10,000 in out-of-pocket annual costs for Medicare co-pays and other expenses not covered by the program, or 10 times more than UAW couples.

QotD: The End of the Recording Industry

The recording industry as we know it is as good as dead, having overdosed on a toxic cocktail of arrogance and stupidity. Its failure to embrace downloadable music at a critical juncture — ca. 2001, when a mutually beneficial deal with Napster was the only option that made sense economically — will go down in history as the business equivalent of Napoleon sending his armies into Russia.

In the market, the quickest way to commit suicide is by badgering your clients, rather than listen to their needs; by willfully crippling your products, rather than enhance them; by stubbornly defaulting to litigation, rather than innovation.

So sue me (ha!): I no more shed a tear over the industry's last gasps than I would over the demise of coal-fired trains. Truthfully, I'm rather entertained by the spectacle of seeing formerly high-flying record executives twisting in the wind.

Rogier van Bakel, "The Music Industry: Tonedeaf and Near Death", Nobody's Business, 2007-07-02

Daycare and the public interest

Nicholas Rosen has some interesting things to say, in partial response to a discussion on the Bujold mailing list:

Then there was a case I read about some years ago in Reason magazine. It seems someone wanted to open a childcare center, and some kooky neighbor objected to her getting a license. The neighbor didn't want another child-molestation horror in her neighborhood, and a city councilman went along with her, so the would-be childcare provider couldn't get a license. (It later emerged that many of the cases of alleged child molestation at daycare centers were utterly bogus, and even if some were not, the immense majority of daycare centers are not fronts for gangs of child molesters.) Here was a city government preventing a willing provider from offering child care to parents who wanted to hire her, all for no good reason, while politicians and others were complaining about the lack of affordable child care, and the Need for Government to Do Something.

There may be a case to be made for having government provide welfare, especially to children, who are not at fault for their parents' laziness or incompetence or bad luck. The trouble is that when government undertakes to do too much for people, people often lose their sense of responsibility and determination to provide for themselves and their families, leading to increased levels of social pathology and family breakdown. You can, for example, try reading Theodore Dalrymple's Life at the Bottom for an account of this.

Daycare is one of those discussions that can't help but move into politically dangerous ground: there's never enough quality care available to meet the need, and what there is is often too expensive for those in greatest need of it. It regularly becomes an issue in Canadian elections, although the proposed changes or new programs would far too often make the situation worse (the good news is that they are rarely implemented once the election is over: costs and complexity trump the "we must do something" urge very quickly).

Many children are cared for during the working day (and often well beyond the usual working hours) in informal daycare with friends and neighbours. At least three families on my street provide this kind of service on a full or part-time basis, for example. It may not be perfect, but it meets the needs of the parents, and clearly is beneficial to the providers (or they wouldn't do it). Yet these unlicensed operations are the ones most likely to be shut down by regulation or government mandates.

Some people — both in and out of government — pretty clearly feel that parents are the worst people to be put in charge of any one else's children, and many of the proposed reforms would put additional barriers in the way of this kind of service. It may sound great to a ministerial committee to mandate that only adults holding a post-secondary certification in child care should be allowed to take care of children they are not related to, but there are not (and will not be) enough holders of ECE certificates or equivalents to cope with the children who would need to be taken in if such a rule was put into place.

Similar things would happen if rules which are designed for commercial daycare facilities were also mandated for home daycares. The cost to retrofit would be far in excess of the perceived benefit, and in many cases would not be allowed under municipal building codes. (Of course, under some municipal rules, informal daycare is already wandering into regulatory gray areas.)

QotD: Political Economics

Leading the charge was the once and future presidential candidate and Ohio Democratic Rep. Dennis Kucinich. He shot off a letter to the SEC (along with Rep. Henry Waxman (D-Ca.)) asking the agency to hold up the Blackstone IPO while Congress puzzled out the best way to demagogue the issue.

Kucinich and Waxman fretted that small investors could be harmed, simultaneously worrying that trading Blackstone on the stock market was "exposing unsophisticated investors" to risk, while "depriv[ing] them of control over the management of the funds and of many of the protections provided by fiduciary duties typically owed to them by management."

To review: Investors are too stupid to know when they're getting screwed, but also deserve a chance to control the "management of the funds." In fact, the biggest hit small investors are likely to take is if they buy Blackstone and then Congress tanks the price by imposing a specifically targeted tax.

Katherine Mangu-Ward, "Idiot Investors? Congress protects people from making money on the stock market", Reason, 2007-06-25

L. Neil Smith on the oil industry

L. Neil Smith has some issues with the way the oil industry is conducting itself:

Let's review, and along the way, examine some details I didn't go into before. Despite those who hold a contrary view (some among us, perhaps unduly influenced by Ayn Rand, never seem to have absorbed the unpleasant fact that corporations are not our friends and don't give a rap about freedom) I do not for an instant believe that the current price of gas — over four dollars in some places, with predictions going as high as six — has anything at all to do with natural market forces.

The commonest maundering you hear when this topic is discussed, is that there's a lack of refinery capacity, brought about by a couple of disastrous refinery fires a few years back. If this is true, then the oil industry isn't simply evil, it's impossibly stupid for not having included such a contingency in its plans. Moreover, as my wife points out, they can throw up a new office building in three months if they really want to. What's so much mysteriously harder about rebuilding a refinery?

The simple, ugly fact is that, while ordinary, productive-class Americans are going to the poorhouse, just to buy gas enough to get their kids to school, themselves to work, and go to the grocery store, the oil companies are raking in record profits — as who wouldn't, selling the world's second most abundant liquid for four dollars a gallon?

When state funding diminishes

Grant McCracken gets it exactly right here:

But $975 million is not the real cost. No, the real cost is much higher This is because when we fund culture this way, we actually diminish it. The opportunity cost is, in other words, phenomenal. I reckon this cost is roughly equal to the Pirates, Spiderman, and Oceans trilogies combined, but then I'm a trained professional working in the controlled circumstances of a New England laboratory. (Don't try these calculations at home.)

Sure, it sounds paradoxical. Spending more gets you less? Funding culture dismantles culture? But dynamism teaches us, that cultures are like marketplaces, the less you intercede the more they flourish, the more you intercede, the less they do.

[. . .]

I'm not saying that Canada could have established it's own cultural ascendancy, if only the state had spent less. I am saying spending more virtually guaranteed its present obscurity on the world stage. (And before someone writes in to complain about all the great music coming out of Montreal, let me point out this was made without state subvention too.)

Armies fight the last war. States embrace the last idea. There was a time when the model of state sponsorship worked. My travels in Europe might as well have been a tour of opera houses, each more glorious than the last, extravagant evidence that cities and states tied their identities to the musical accomplishment of local sons and daughters. (The Paris house, I was interested to note, was funded by private subscription.)

The state is no better at predicting the direction of artistic endeavour than they are at picking economic "winners". Most state spending on cultural items disproportionally benefits the economically better-off, too. How many folks working ordinary office jobs go to the opera? Listen to classical music? Watch the ballet?

Artistic welfare for the rich? Isn't that just as morally questionable as economic grants to wealthy firms? You can't even really say that it's the struggling artists who benefit from this kind of spending . . . it's the already successful ones who garner most of the return.

QotD: Fairtrade doesn't automatically mean "good"

I tried a 'fairtrade' wine. It was Ochre Mountain Sauvignon Blanc FAIRTRADE, Chile 2006, and was utterly appalling. It was nasty, sharp and acidic, with nothing at all behind it. It was filthy stuff, and I was careful not to get any of it on my hands. Whoever made it has achieved the difficult feat of making a bad Chilean wine. I suppose they think the 'fairtrade' tag will sell it anyway. Fortunately I didn't waste £12.95 on a bottle. I had a glass at £3.65. The five friends with me were so intrigued by my description of its awfulness that they all took a taste, and that got rid of it pretty quickly.

Madsen Pirie, "Utterly appalling", Another Food Blog, 2006-09-05

QotD: Lifeboat economics

Are shoes subject to the ordinary laws of supply and demand? Try telling that to a child in a snowstorm who doesn't have a pair! Are flashlights a widget? Even been in a blackout without one? — there are times when you'd pay a thousand dollars for a flashlight. If you're homeless, Pizza Pops aren't a widget. They might mean as much to a bum under a bridge as a defibrillator does to a pork-fed executive collapsed in a marbled bank lobby. To a fellow who's just been laid off from the only job he's trained for, food, shelter, clothing, even money itself, all have non-widgetary nature.

So all hail the new lifeboat economics, which instantly replaces orthodox price mechanisms with the scrawlings of an idiot child in the presence of any good that might conceivably be immediately necessary to life, health, or safety. Is there any reason this intrepid nescience should be limited to health care? If we can't plan for an ambulance ride, how can we plan for anything? (Maybe, he said in an ominous whisper, there are no widgets at all.)

Colby Cosh, "Whatever they are, I'm pretty sure they're manufactured from straw", ColbyCosh.com, 2007-06-07

QotD: The music retail industry

[I]f the record companies could be persuaded to stop suing their customers for 10 minutes, it might dawn on them that their best chance for survival conceivably lies in buying interests in "stores" like the Sam's flagship and giving the music away for free — in an environment where the customer, while he's filling up his terabyte thumbnail hard drive, is kindly given the opportunity to buy overpriced coffee, beer, books, audio equipment, digital storage and concert tickets. But instead they seem content to die from what amounts to a hunger strike against the existence of the Internet.

Colby Cosh, "Gone the way of the horse and buggy", National Post, 2007-06-01

There's Green, and there's stupid Green

The Register reports on a "successful" trial project for greener street lighting in Westminster:

Westminster City Council is doing its bit to save the planet by installing energy-saving street lamps in every thoroughfare in the borough, the BBC reports.

The bold initiative follows a "successful trial" of the £1,000-a-pop Furyo Lanterns on Harrow Road which saved "on an average day", enough juice to light a house for two days and cut carbon emissions on the test highway by 0.28 tonnes over three weeks.

Sounds like a pretty good thing, right? Lower energy costs, no loss in street light lumens, it's a slam-dunk.

Oh, but wait . . .

So far so good. However, the Beeb says that if Westminster replaces all of its 29,000 street lights, it will save "up to £20,000 every year". Since the cost of the new, whale-hugging illumination is £29m, it will therefore recoup its outlay in a mere 1,450 years.

That's not quite an enticing return on investment.

QotD: Green London

This magazine [the Financial Times] recently presented a rather touching portrayal of Ashton Hayes, a village in Cheshire with the aim of becoming "carbon neutral" — that is, emitting no unnecessary carbon dioxide at all, and perhaps making up for all that troublesome breathing by planting a few trees. That will take some work because the villagers' current emissions of carbon dioxide are about 25 per cent higher than the national average. In an effort to cut this to something more respectable, the villagers are urging each other to switch off unnecessary electrical items, insulate their lofts and trade in big cars for small ones.

This is all laudable stuff, so it feels a little mean to point out that the villagers could dramatically reduce their carbon footprints by bulldozing Ashton Hayes and moving to London. Yes, London: the "big smoke", the richest region in the European Union, is a city whose environmental statistics make it look dangerously like some hippie commune.

Tim Harford, "Undercover Economist: Urban neutral", FT.com, 2007-05-18

Modern China

Guy Sorman talks about the state of China:

The Western press is full of stories these days on China's arrival as a superpower, some even heralding, or warning, that the future may belong to her. Western political and business delegations stream into Beijing, confident of China's economy, which continues to grow rapidly. Investment pours in. Crowning China's new status, Beijing will host the 2008 Summer Olympics.

But China's success is, at least in part, a mirage. True, 200 million of her subjects, fortunate to be working for an expanding global market, increasingly enjoy a middle-class standard of living. The remaining 1 billion, however, remain among the poorest and most exploited people in the world, lacking even minimal rights and public services. Popular discontent simmers, especially in the countryside, where it often flares into violent confrontation with Communist Party authorities. China's economic "miracle" is rotting from within.

I've had my own concerns about the real issues of the new Chinese economy.

Tulipmania

Tulipmania has, apparently, been oversold:

We think we know the story of "tulipmania": the 17th-century Dutch dropped fortunes on tulips, ruined their economy, even killed themselves over the bulbs. In short, tulipmania is remembered as the first market bubble. It has been used as an analogy for subsequent ones, most recently during the dotcom boom. However, Anne Goldgar tells us at the start of her excellent debunking book: "Most of what we have heard of it is not true." For instance, Goldgar couldn't identify a single person bankrupted by tulipmania. In this dense academic work — with longueurs for readers who aren't themselves tulipmaniacs — she tells a new story.

Yeah, sure. Next thing you'll be telling me that Lemmings don't commit mass suicide by throwing themselves off cliffs!

The Gender Gap, economically speaking

Mark Perry takes a skeptical look at the much-used factoid about women being paid less than men:

6. Most studies that control for all factors that affect earnings show that motherhood and marriage explain almost all of the "pay gap." For example, research shows that:

a. There is no pay gap among single, full-time workers age 21 to 35, who live alone.

b. Among people ages 27 to 33 who have never had a child, the earnings of women are about 98% of men's.

c. Never-married women in their 30s who have worked continuously earn slightly higher incomes than their male counterparts.

d. Men spend only 1.6% of all potential work years out of the workforce, while women spend 14.7% of potential work years away from work.

e. A woman's lifetime earnings are lowered 13% by having her first child, and 19% by having her second.

Bottom Line: Here is what the AAUW didn't report: Median annual earnings of men and women age 25 to 34 with bachelor's degrees in the same field are roughly equal. In other words, there is no "pay gap," once you control for ALL factors that affect earnings, and compare apples with apples.

H/T to Paul Tuns.

QotD: Environmental Indulgences

In a couple of hundred years historians will be comparing the frenzies over our supposed human contribution to global warming to the tumults at the latter end of the tenth century as the Christian millennium approached. Then as now, the doomsters identified human sinfulness as the propulsive factor in the planet's rapid downward slide. Then as now, a buoyant market throve on fear. The Roman Catholic Church sold indulgences like checks. The sinners established a line of credit against bad behavior and could go on sinning. Today a world market in "carbon credits" is in formation. Those whose "carbon footprint" is small can sell their surplus carbon credits to others less virtuous than themselves.

The modern trade is as fantastical as the medieval one. There is still zero empirical evidence that anthropogenic production of carbon dioxide is making any measurable contribution to the world's present warming trend. The greenhouse fearmongers rely on unverified, crudely oversimplified models to finger mankind's sinful contribution — and carbon trafficking, just like the old indulgences, is powered by guilt, credulity, cynicism and greed.

Alexander Cockburn, "Is Global Warming a Sin?", The Nation, 2007-05-14

QotD: Wal-Mart

[W]ealth is not the same as power. In 2000, Wal-Mart might have been richer than Peru, but set beside the government of even that dysfunctional country, it looked pretty feeble. Wal-Mart had no powers of coercion: it could not tax, raise armies, or imprison people. In each of the countries where it operation, it had to bow down to local governments. Previous giants such as ITT or the East India Company could muster real political power; Wal-Mart was simply rather good at retailing.

John Micklethwait and Adrian Wooldridge, The Company: A Short History of a Revolutionary Idea, 2003.

Somehow, I'm not convinced

Ronald Bailey looks at the implications of a recent study of economic motivations:

Robin Hood took from the rich and gave to the poor. A recent study by a team of researchers headed up by University of California-San Diego political scientist James Fowler suggests that we may all have Robin Hood tendencies. Experimental economists and psychologists from around the world have been watching how people play various economic games as a way to probe the bases of human cooperation. One of the more interesting discoveries is that in economic games some people - altruistic punishers - will take fairly big hits to their winnings in order to reduce the ill-gotten gains of cheaters. Games with altruistic punishers elicit more cooperative behavior among players. In addition, other researchers have found that players will happily spend some of their own winnings in gambling games in order to reduce the "undeserved" winnings of other players.

In re-analyzing some earlier studies, Fowler and his colleagues suggested "that egalitarian motives are more important than motives for punishing non-cooperative behaviour." In other words, people are really more interested in enforcing income equality than they are in punishing cheaters. To tease out motives, Fowler and his colleagues devised a game in which there was no possibility of reciprocity or cooperation. Their hypothesis was that people would spend some of their incomes to equalize the incomes of other players.

I don't dispute that a certain tendency towards egalitarian outcomes may well have been a survival trait in early human development, however I'm not as convinced that the findings (as summarized in the article, anyway) are as applicable as Fowler and team appear to think.

One thing that struck me about their study was that it was — as such studies commonly are — based on the observation of a group of college students. There's plenty of reasons for this being a frequently used group to study: they're generally available during the hours the study's data-collection would normally be easiest to accomplish, they're generally of the same age-cohort, and they're generally willing to be guinea pigs.

On the down-side of using college students as subjects: they're not as representative of the general population. Socially and politically, they're both more likely to be economically well-off and also more likely to be liberal in their views. A sample drawn from this kind of group will have stronger biases toward communitarian outcomes than a more representative sample.

Bailey summarizes:

Assuming that these research findings are valid, how did this innate drive toward enforcing income equality come about? It's hard to see how an inborn drive could arise in Pleistocene hunter gatherers such that people spend their scarce resources to reduce other people's resources promotes either individual or group survival. Or is enforcing equality really all that different an activity from punishing non-cooperating cheaters? Perhaps early in human evolution, large differences in income actually correlated with cheating and thus automatically merited punishment. Another puzzle is if humans are instinctively egalitarian, how did early hierarchical civilizations in which the incomes of priests and kings were significantly higher than those of peasants come about at all? Finally, finding that humans have an innate tendency toward enforcing a norm of income equality would explain the persistent attraction of communism, progressive tax rates, the demand for universal government-supplied health care, minimum wage laws and other such destructive modern leveling ideologies and policies.

Historically, have there been many examples of communitarian groups lasting much longer than the first contact with non-communitarian communities?

Update: Check the comments thread here for more thoughts on the study.

QotD: Asymmetrical Information

In 1970, American economist George Akerlof wrote a paper called "The Market for 'Lemons'", which established asymmetrical information theory. He eventually won a Nobel Prize for his work, which looks at markets where the seller knows a lot more about the product than the buyer.

Akerlof illustrated his ideas with a used car market. A used car market includes both good cars and lousy ones (lemons). The seller knows which is which, but the buyer can't tell the difference — at least until he's made his purchase. I'll spare you the math, but what ends up happening is that the buyer bases his purchase price on the value of a used car of average quality.

This means that the best cars don't get sold; their prices are too high. Which means that the owners of these best cars don't put their cars on the market. And then this starts spiraling. The removal of the good cars from the market reduces the average price buyers are willing to pay, and then the very good cars no longer sell, and disappear from the market. And then the good cars, and so on until only the lemons are left.

In a market where the seller has more information about the product than the buyer, bad products can drive the good ones out of the market.

Bruce Schneier, "How Security Companies Sucker Us With Lemons", Wired.com, 2007-04-19

Why have an army at all?

Joe Jacobs, in a letter to the Toronto Star asks the question,

Realistically, why do we need a military at all? It's not like we need to be able to protect ourselves from the Americans. If President George W. Bush wanted to invade Canada and take all of our water and other resources, he could do it tomorrow. How would we possibly stop him? And if any other country invaded or attacked Canada, the United States would respond because we are in its "sphere of influence."

Given this, it is absurd that we should spend some $15 billion annually simply to be an adjunct to the U.S. military. Just imagine what we could do with that money if it was invested in education, the environment, taking care of seniors or building a national child-care system.

If we didn't have an army, what would prevent the Americans, the Russians, or even the Danes from taking over part or all of the country? Well, not much, clearly: the primary purpose of any military is to defend the homeland. Without an army (even as small a one as Canada's), why would anyone even pretend to pay attention to what Canadians claim to be their territory?

Mr. Jacobs is correct that President Bush could order troops into Canada tomorrow, and there would be little or nothing we could do to stop him. Why not? What benefit is it to his government to leave a loose cannon (no, not a cannon; perhaps a loose bong?) like a totally defenceless Canada on the northern border.

Does Mr. Jacobs actually think that we can live as literal freeloaders on the American military (as several Republican politicians have already accused us of, over the last 20 years or so)? What price does he think we would pay in exchange for giving up one of the primary determinants of nationhood? Would our largest trading partner just let us carry on as if nothing had changed?

I strongly doubt it. Canada is constrained by the need to maintain our peaceful trading relationship with the huge US market we serve. A month-long interdiction of the US-Canadian border would shatter our economy, throwing hundreds of thousands of workers on to the streets. It probably wouldn't even take a month for the economic pain to strike very deeply: we are disproportionally dependent on selling our raw materials to US customers . . . and if they stopped buying from us, we'd have damned few options open in the short term. Even dumping everything on the open market would require transportation that we're not set up to organize overnight.

Mr. Jacobs may be sanguine at the notion of Canada becoming a literal "frozen banana" republic, but it's not a future most of us would be happy with. At least, I hope that most Canadians feel somewhat the same way. Recent polls do not leave me too hopeful, in the long run.

QotD: Taxes

Sub-headline from an article about a survey on taxes: "An MSN-Zogby poll says that many Americans think they're paying too much in taxes even though research shows the average tax burden is light compared with other developed countries."

Interesting. I've also heard that for some reason, paraplegics would like to get the use of their limbs back, even though other people are totally paralyzed from the neck down. Oh, and people who have lost an eye would like to get their 3D vision back, despite the existence of blind people. What is wrong with these people?

Glen Whitman, "Non Sequitur City", Agoraphilia, 2007-04-12

The Chinese economy

Everyone must have heard many different variations on how incredible the Chinese economy is: spectacular growth, innovations galore, etc., etc. And there's much truth to it — China has been industrializing at a mind-croggling pace. At least, the visual evidence says so. The economic data coming out of China is, to be kind, not as dependable as similar data from most other countries.

I realize it's considered bad form to quote yourself, but I still think the same way as when I wrote this and this.

[From August, 2004]: While there is no doubt that China is a fast-growing economy, the most common mistake among both investors and pundits is to assume that China is really just like South Carolina or Ireland . . . a formerly depressed area now achieving good results from modernization. The problem is that China is not just the next Atlanta, Georgia, or Slovenia. China is still, more or less, a command economy with a capitalist face. One of the biggest players in the Chinese economy is the army, and not just in the sense of being a big purchaser of capital goods (like the United States Army, for example).

The Chinese army owns or controls huge sectors of the economy, and runs them in the same way it would run a division or an army corps. The very term "command economy" would seem to have been minted to describe this situation. The numbers reported by these "companies" bear about the same resemblance to reality as those posted by Enron or Worldcom. With so much of their economy not subject to profit and loss, every figure from China must be viewed as nothing more than a guess (at best) or active disinformation.

Three years on, I must retract a tiny bit there . . . Enron's and Worldcom's figures, while deliberately misleading, were refutable (and the culprits taken to court).

[From October, 2004]: Much of the problem is that even now, the Chinese economy is not particularly free: the official and unofficial controls on the economy provide far too many opportunities for rent-seeking officialdom to play favourites and cripple antagonists (and for once, "cripple" is not just a bit of hyperbole). Any numbers provided by the Chinese authorities can not be depended upon, and should probably only be viewed as an indication of what the Chinese government wants the outside world to believe.

Even in a relatively free economy like Canada, the underground economy can be huge, with plenty of economic activity happening out of reach of the taxman. In China, where everybody was raised in an environment where providing the "wrong" answer to your leader could get you imprisoned (or executed) as an economic criminal, the numbers upon which the bankers and financial officials depend can only be described as extremely unreliable.

Samizdata links to a brief Tyler Cowen post which includes this quote:

...of the 3,220 Chinese citizens with a personal wealth of 100 million yuan ($13 million) or more, 2,932 are children of high-level cadres. Of the key positions in the five industrial sectors - finance, foreign trade, land development, large-scale engineering and securities - 85% to 90% are held by children of high-level cadres.

That's even higher than I expected. But it's an excellent example of what I originally wrote about back in 2004: the economy isn't free, and the beneficiaries are disproportionally those who are politically well-connected. Caveat investor.

The hydrogen future: a non-starter

Ronald Bailey quotes at length from Robert Zubrin's article providing the facts and figures debunking the idea that hydrogen is the solution to energy problems:

Neither type of hydrogen is even remotely economical as fuel. The wholesale cost of commercial grade liquid hydrogen (made the cheap way, from hydrocarbons) shipped to large customers in the United States is about $6 per kilogram. High purity hydrogen made from electrolysis for scientific applications costs considerably more. Dispensed in compressed gas cylinders to retail customers, the current price of commercial grade hydrogen is about $100 per kilogram. For comparison, a kilogram of hydrogen contains about the same amount of energy as a gallon of gasoline. This means that even if hydrogen cars were available and hydrogen stations existed to fuel them, no one with the power to choose otherwise would ever buy such vehicles. This fact alone makes the hydrogen economy a non-starter in a free society.

And even if you are among those willing to sacrifice freedom and economic rationality for the sake of the environment, and therefore prefer hydrogen for its advertised benefit of reduced carbon dioxide emissions, think again. Because hydrogen is actually made by reforming hydrocarbons, its use as fuel would not reduce greenhouse gas emissions at all. In fact, it would greatly increase them.

John Scalzi on getting out of poverty

John Scalzi, in another of his reader-suggested articles, discusses the ways and means of escaping from poverty:

The second anecdote involves my wife — who to be sure is not in poverty, but bear with me. When Krissy and I met, she had her high school diploma and that was it. Anyone who knows me knows I think my wife is smarter, more sensible and better organized than I am, because she is — I have met very few people who are as flat-out competent as my wife. But because she had only a high school diploma, she was locked into a series of jobs that were, to put it mildly, wildly below her abilities, and wildly below what should have been earning. It didn't matter that she was clearly capable enough and intelligent enough for other jobs; those jobs weren't open to her because employers listed a college diploma as a criterion. Fortunately, her current employer recognized her brains and paid for her to complete her college education, so they could put her in a job that required a BA. Now she has a quite nice job with a perfectly good salary. What has changed about Krissy? Not her intelligence, her competence or her abilities. What's changed is now she has a piece of parchment that says "bachelor of arts" on it.

It sucks that by and large smart, capable people are locked out of good jobs because some HR dweeb has decided to use a college degree as a filtering device. In perfect world this wouldn't be done. This is not that world. Getting a college degree does not assure one will lift out of poverty — I know lots of starving post-grads — but does mean one's options are much wider. Poverty in the United States is very often about a lack of options, and a lack of good choices. Giving one's self the ability to have more options in one's life matters. Beyond the simple fact of the college degree, the process of education can offer other useful things — placement services, access to internships, the implicit task and time management training that comes from attending classes on a schedule, etc — all of which will come in handy in the real world. But at the end of the day it's really simple. Education provides options.

Excellent advice, and remarkably close to what we've been telling Victor: a university degree isn't a guarantee of wealth, but the lack of one is a big handicap to overcome. Nowadays, with so many companies doing their recruiting on the web, if you don't have a degree, your application never even makes it to a living human being. The kinder ones at least let you know that you don't meet their requirements, but others just silently send your application to /dev/null. They get enough applicants who do meet their initial criteria that they don't even worry about those that don't. They don't have time or resources to do additional intelligent filtering on applicants who might otherwise be suitable, but who don't have a degree.

Toronto to export garbage at retail level

Well, that's not what the official intent of the proposed $15 per month garbage collection fee, but it will be one of the most likely outcomes.

Toronto homeowners could soon be paying an average fee of $15 a month to have their garbage hauled away. But Mayor David Miller is pledging he'll cut property taxes by the same amount.

Households that toss the most trash also would pay the highest bills, as a way of encouraging composting and recycling, according to a city staff proposal that would overhaul the city's garbage-collection system.

Garbage collection, especially in a large urban area like Toronto, is one of the classic "free rider" problems. Everyone benefits by having municipal garbage collected and taken away (regardless of whether the service is public or private), and few of us would want to revert to a no-collection scheme: it's a public health concern. How to allocate the costs of these services is always a problem, because of the free riders: those who pay little or nothing toward the costs, but receive benefits regardless.

Many municipalities have gone with various forms of garbage bag tags: each household receives a set number of tags, which must be attached to the bag for the bag to be collected. This works fine . . . as long as the number of tags issued is proportional, and that extra tags are not over-priced. And also, that the scheme isn't being used as a political weapon to force behavioural changes on the participants.

Most people, most of the time, will be willing to go along with bag tags (or some other equivalent pay-as-you-pitch scheme), but some won't. When we lived in Toronto, for example, we would frequently discover that one or more of our neighbours had added their trash to ours . . . pushing us over the limit for what would be picked up. So we were left, literally, holding the bag.

At one point, we actually saw someone doing this. The person was walking past our house, and dropped a garbage bag on our lawn, and was out of sight by the time we got out to the street. Fortunately for us, there was an addressed envelope in the bag, so we were able to track down and return the bag to its origin. What was truly puzzling was that the bag came from an apartment building about a block away . . . where the garbage was collected communally. This person had gone to the trouble of taking the garbage bag from the building . . . probably even walking past the garbage chute, out onto the street, then carried it past half a dozen other houses before selecting our lawn as an appropriate resting spot.

This person wasn't even being personally inconvenienced, yet chose to impose her externalities on us. Multiply that by all the folks who'll prefer to just find a quiet area along the road to dump their trash, rather than pay for having it collected. Pickering, Markham, and Mississauga are certainly going to discover a significant increase in the amount of dumped trash along their borders with Toronto.

Scott Adams' latest economic theory

Scott Adams, creator of the Dilbert-based economic empire, has come up with a new economic theory, which appears to be unrefutable:

We can test the validity of this theory by seeing how well it predicts behavior. For example, the Boner Theory of Economics predicts that eventually all shoe salespeople jobs will be filled by men with foot fetishes. The only reason it’s not completely true already is that the managers filling those jobs haven’t realized they are overpaying. I wonder how many interviews have gone like this:

Manager: "The job involves kneeling in front of women and touching their feet. Are you okay with that?"

Applicant: "Um . . . er . . . yes."

Manager: "The pay is $10 per hour."

Applicant: "I can only afford to pay you $8 per hour."

Manager: "We pay you. You don’t pay us."

Applicant: "Can we start over with the negotiating?"

QotD: Equalization

The flawed assumption behind equalization is that wealth is generated somewhat at random and that complex transfer payment formulas merely correct for this "maldistribution" of wealth.

"Publius", "From the Mind of Sheila Copps", Gods of the Copybook Headings, 2007-03-19

QotD: eBay Sellers

Clearly, [they] do not frequent EvilBay where every thing the seller has not seen before is R@RE, anything more than five years old is VINTAGE, and if not broken in pieces, MINT.

Supreme Ruler of the Universe Bob Netzlof, posting to Yahoo group "StillGrumpy", 2007-03-13

QotD: Peak Oil

Within the last decade, technology advances have made it possible to unlock more oil from old fields, and, at the same time, higher oil prices have made it economical for companies to go after reserves that are harder to reach. With plenty of oil still left in familiar locations, forecasts that the world's reserves are drying out have given way to predictions that more oil can be found than ever before.

In a wide-ranging study published in 2000, the U.S. Geological Survey estimated that ultimately recoverable resources of conventional oil totaled about 3.3 trillion barrels, of which a third has already been produced. More recently, Cambridge Energy Research Associates, an energy consultant, estimated that the total base of recoverable oil was 4.8 trillion barrels. That higher estimate — which Cambridge Energy says is likely to grow — reflects how new technology can tap into more resources.

"It's the fifth time to my count that we've gone through a period when it seemed the end of oil was near and people were talking about the exhaustion of resources," said Daniel Yergin, the chairman of Cambridge Energy and author of a Pulitzer Prize-winning history of oil, who cited similar concerns in the 1880s, after both world wars and in the 1970s. "Back then we were going to fly off the oil mountain. Instead we had a boom and oil went to $10 instead of $100."

Jad Mouawad, "Oil Innovations Pump New Life Into Old Wells", New York Times, 2007-03-05

Our dystopian future?

Brad Warbiany takes a moment to glance into his crystal ball and finds . . . shite:

After the 2001 recession, when the government was coming off small surpluses, we had very low interest rates, and the political will to cut taxes, we were able to protect against a major economic crisis. We don't have the same situation now. The government is running enormous deficits (and has added several trillion to the debt), the politicians are debating raising taxes, and interest rates likely won't be able to hit the rock-bottom levels we had in 2002.

What does this mean? I don’t think we can spend our way out of this. I don't see any way for us to have liquidity in a stagnant housing market and a tight credit market. In a tighter credit market, with rising interest rates, the cost of borrowing to cover deficit spending will not be feasible for the government. I don't see an engine for economic growth appearing to cover the recession. There's only one way for this liquidity to arrive, and that's for the government to print money. Loads and loads of money. Helicopter drops of money. And the result is stagflation. This is quite possibly the worst thing our government can do, but I don't trust any politicians to take the tough medicine — I expect them to print money.

Further, if things get bad, you can expect a quick increase in the level of socialism in this country. In an effort to placate both American big business and American voters, you'll see the government take over health care. As a result of the inflation government will cause, you'll quickly see them try to institute price controls and wage controls, like the 1970's. All the while, they'll blame scapegoats like outsourcing companies, while their own inflationary policies are causing the problem.

Before you jump to the assumption that this is the worst of his economic and social fears, the next paragraph starts with "Wait, though, it gets worse."

It's always easy to find the dark and depressing side of the current economic picture . . . regardless of the time you live in. I'm not hugely optimistic about the immediate future, economically speaking, but (to borrow a phrase) there's a lot of ruin in a country, especially one as big and dynamic as the US. Canada, being smaller and less entrepreneurial, is somewhat more brittle, and can take relatively less reassurance from world events (but with the vast majority of Canadian exports going south, any downturn that impacts the US will have even more immediate effects on the Canadian economy).

That being said, I'm not hoarding tinned goods and ammunition in my basement. This time next year, I may be regretting this oversight, but on balance, I don't think the situation is anywhere near as grim as Brad does.

What do you mean "what colour is the sky in my world"?

China's economic prospects

Samizdata Illuminatus has some interesting thoughts on the recent economic disruptions emanating from China:

In spite of a widespread belief in China's embrace of free-market capitalism, enormous economic distortions characterise modern China's economy. For example, why is it that, relative to China's economic footprint, the Chinese stock market is rather pathetically stunted — especially in light of the vast savings pool the Chinese people have accumulated? As mentioned in the above article, the Chinese are great savers and they tend to deposit these savings into bank accounts because alternative investment opportunities are limited compared to those offered to a Western investor. Consider the following:

Why does the Chinese investor not sink his surplus funds into foreign commodities? Because he is restricted from doing so.

Why does he not invest in Chinese stocks? Because he (probably correctly) views the Chinese stock market as being distinctly ropey.

In light of these state-imposed distortive realities, what does one do with one's savings? One puts them in the bank, of course. Predictably, the banks are awash with deposits. Under these circumstances, the principles of fractional reserve banking have been taken to the extreme in China, allowing the central government to durably zombify huge segments of the otherwise bankrupt state-owned industrial sector by forcing the "big four" state-owned banks to continuously loan depositors' money to these failed state enterprises, in the full knowledge that these loans will never be repaid.

Of course, you'd expect me to be bearish on the Chinese economy, based on things I've posted before.

RCOB moment

Kerry Howley linked to this TCS Daily article which gave me my first RCOB moment of the week:

A ban was initiated at the Hilltop Children's Center in Seattle. According to an article in the winter 2006-07 issue of "Rethinking Schools" magazine, the teachers at the private school wanted their students to learn that private property ownership is evil.

According to the article, the students had been building an elaborate "Legotown," but it was accidentally demolished. The teachers decided its destruction was an opportunity to explore "the inequities of private ownership." According to the teachers, "Our intention was to promote a contrasting set of values: collectivity, collaboration, resource-sharing, and full democratic participation."

The children were allegedly incorporating into Legotown "their assumptions about ownership and the social power it conveys." These assumptions "mirrored those of a class-based, capitalist society — a society that we teachers believe to be unjust and oppressive."

You know what the saving grace is? The school is private. That means that the parents of the kids being indoctrinated are — or at least should be — fully aware of the politico-economic orientation of the teaching staff. It's also located in Seattle, which is rapidly gaining pole position in the race to be the champion of eminent domain proceedings.

In a way, the most heartening thing in the article was this passage:

Not all of the students shared the teachers' anathema to private property ownership. "If I buy it, I own it," one child is quoted saying.

You tell 'em, kid! Of course, you're now subject to full-time re-education camp for the rest of your childhood, but I admire your spunk.

Accounting and the military

Jack Granatstein reveals some of the real data behind the mind-bogglingly big numbers of military contracts:

The first is something called the accrual system of accounting. In the past, Canadian governments bought a truck for $25,000 and charged that sum to a department's budget. The costs of gas, oil, and maintenance five, 10, and 20 years down the road were charged to future budgets. In accrual accounting, perhaps more reasonably, the costs of operating the truck 20 years into the future are charged to today's budget. That $25,000 truck now becomes a $125,000 charge on this year's budget funding.

This matters. Consider the four C-17s the Harper government has agreed to buy. Each of the huge transports costs about $250-million. The accrual cost, again in round numbers, is $4-billion. Many Canadians remain unaware of the change in accounting methodology, and government rules (or practice) do not appear to permit explanation. So a $1-billion purchase of necessary equipment appears to many as a $4-billion boondoggle. It's not, but it's a hard sell for all of us whose eyes glaze over at the mention of accountants' rules. The answer, of course, is to explain defence purchases (and purchases in every other government department, as well) by making it clear that the total lifetime package is included in the announced sum.

Part of the difficulty in grasping this is that most of us, in our private lives, do not do anything of the sort in our own household budgets . . . we think of the sticker price of your car as "the cost", ignoring the finance costs of a car loan, the regular maintenance, the insurance, the license stickers, and all the other sundry other costs of car ownership. If we did think in this way, we'd all be much more careful in how we spent our money!

The other part of the problem is that the information is presented in the media as if a line of Brinks trucks were taking money from all the "good" areas the government also funds and physically moving all those loonies in through the gates of CFB Boondoggle and handing them over to General Simon Legree.

Catastrophic insurance dilemma in Florida

After last week's attempt by Mississippi to repeal one of the laws of economics, Florida is having to come to grips with a remarkably similar concern:

What should be done when a lot of people have built houses, businesses and infrastructure worth tens of billions of dollars where Mother Nature doesn't like them to be? This is the question that Florida is grappling with. Private insurers, burned by huge payouts for damages caused by two recent big hurricane seasons, are pulling out the state. This would seem like a market "signal" for people to get out. But Florida's state government is ignoring this "signal" and is instead creating a risk pool and a state-owned insurance company to cover property owners who can't find or afford private insurance.

While the Floridian response is somewhat more sensible than that of Mississippi, it's still going to end in tears. As Ronald Bailey points out, the federal government has spent huge sums in Louisiana and Mississippi to start recovering from the hurricane damages from Katrina, and there's still a lot of money that will need to be spent in the near future. Florida is hoping to cover potential claims in the tens of billions range, from a fund which currently holds less than a billion dollars. A fund which is composed of premiums collected from participating private insurance firms . . . who are starting to pull up stakes and leave the area.

QotD: Global Warming

Climate Cassandras say the facts are clear and the case is closed. (Sen. Barbara Boxer: "We're not going to take a lot of time debating this anymore.") The consensus catechism about global warming has six tenets: 1. Global warming is happening. 2. It is our (humanity's, but especially America's) fault. 3. It will continue unless we mend our ways. 4. If it continues we are in grave danger. 5. We know how to slow or even reverse the warming. 6. The benefits from doing that will far exceed the costs.

Only the first tenet is clearly true, and only in the sense that the Earth warmed about 0.7 degrees Celsius in the 20th century. We do not know the extent to which human activity caused this. The activity is economic growth, the wealth-creation that makes possible improved well-being — better nutrition, medicine, education, etc. How much reduction of such social goods are we willing to accept by slowing economic activity in order to (try to) regulate the planet's climate?

George Will, "Inconvenient Kyoto Truths", Newsweek, 2007-02-12

Misunderstanding economics

Jon sent me a link to this Toronto Star story, which displays an astonishingly poor grasp of economics:

The storm stretched from Montreal to Kingston and caused $1.6 billion in damage. To this day, there are houses that still have not been repaired.

Yet, the Ice Storm of 1998 is the biggest single event in Canadian history to boost the Gross Domestic Product, a simple totalling of all goods and services in the economy that is the most-used measure of the economy.

It's this irony — that rebuilding in the wake of devastation is good for the economy — that is in large part fuelling an ambitious attempt to produce an alternative to the GDP, one that balances economic growth against a much larger and more comprehensive set of numbers to tell us if we are truly better off. It's called the Canadian Index of Well-being [. . .]

First off, this "irony" is rather un-ironic. The GDP is a measurement of the approximate value produced in a year (the big clue is the word "product", yes? Check Wikipedia's entry). If you somehow managed to destroy every item of value in the entire country, then anything produced to replace the missing items shows up as part of the "product". The fact that it's replacing lost goods isn't captured by the GDP . . . because the GDP pays no attention to existing value. That's not part of its mission.

The writer's grasp of basic economics makes me suspect that he'd think it was a good idea to pay people to go around breaking windows . . . because of all the new business it would create for glazing companies and window installers. (See the Parable of the Broken Window for the original story.)

One thing the GDP has going for it is that it is measuring similar things in a constant manner: goods and services produced as recorded by the dollars for which they are exchanged. This proposed new measurement would include "ER wait times, rates of cancer and other diseases, body mass index, smoking rates, life expectancy, infant mortality and low birth rates, even rates of depression and suicide." With disparate data sources like that, you can pull any interpretation out that you might like . . . it's not a measurement of anything; it's a numerical toxic waste dump.

This doesn't mean that the attempt to measure non-dollar-denominated benefits is doomed to failure, but that you need to select the data to use for your measurement in as transparent and meaningful a way as possible. I could construct an "index of lifestyle health" by charting the number of Tim Horton's outlets in a given area, divided by the number of cigarette packs sold, and then multiplying by the number of hot tubs were listed in housing ads, but it wouldn't tell you anything useful at all.

Mississippi traps State Farm

The state of Mississippi reacted rather badly to the announcement that State Farm Insurance was going to stop issuing new home and business policies in that state. Dan Melson tries to point out the economic issues at issue:

Mississippi to State Farm: You Can't Win, You Can't Break Even, and We're Not Going To Let You Leave The Game

So the Mississippi Attorney general wants to make it tougher and more expensive to buy auto insurance as well as homeowner's insurance? [. . .]

But when you make them pay for things which were explicitly not insured, don't you think they're entitled to second thoughts about whether to do business in that state? State Farm is not a charitable organization. They are entitled to charge enough to make a profit — otherwise there is no reason to be in business. If they decide they cannot do that within the environment in a given state, they are entitled to decide to leave. If they can't do it at all, the correct decision is to go out of business.

Add hefty punitive fines for not wanting to pay out claims for things which weren't insured, and it's a miracle that anyone is willing to issue homeowner's insurance in Mississippi.

Insurance is supposed to be a private safety net for individuals and businesses who encounter unforeseen and unpredictable loss. When the government steps in to try to force an insurer to provide coverage for a loss which can be predicted, it is undermining the whole basis of the insurance industry. In much of the southern United States, the government has been meddling in the insurance field for so long that it's difficult to figure out just what any rational company would do in that area (and it would take a very brave and/or foolhardy company to start doing new business in that region).

At the basic level, when you take out an insurance policy, you're making a bet. You're betting that you will need to be compensated for damage and the insurance company is betting that you won't. If the odds look bad to the insurance company, they'll demand a much higher premium (the odds) to offset the increased chance of having to pay out on their side of the bet. Government mandates on who must be given insurance and at what rates is exactly like a third-party muscling in on your private betting to say that the insurance company must give you better odds — in spite of the chances being against their best interests. After that, you may find that there are many fewer choices for you (and everyone else in your area) when you need to place another "bet".

QotD: Sustainable Development

[M]ost environmental "principles" (such as sustainable development or the precautionary principle) have the effect of preserving the economic advantages of the West and thus constitute modern imperialism toward the developing world. It is a nice way of saying, "We got ours and we don't want you to get yours, because you'll cause too much pollution."

Michael Crichton, State of Fear, 2004.

QotD: Fashionable Fears

I think for anyone to believe in impending resource scarcity, after two hundred years of such false alarms, is kind of weird. I don't know whether such a belief today is best ascribed to ignorance of history, sclerotic dogmatism, unhealthy love of Malthus, or simple pigheadedness, but it is evidently a hardy perennial in human calculation.

Michael Crichton, State of Fear, 2004

QotD: Back-to-Nature

My own observation is that most of the bellyachers about the ugliness of our cities and singers of paeans to the unspoiled wilderness stubbornly remain ensconced in these very cities. Why don't they leave? There are, even today, plenty of rural and even wilderness areas for them to live in and enjoy. Why don't they go there and leave those of us who like and enjoy the cities in peace. Furthermore, if they got out, it would help relieve the urban 'overcrowding' which they also complain about.

Murray Rothbard, Egalitarianism as a Revolt Against Nature, and Other Essays, 1974

Jane Galt on the Victorian Age

Jane Galt has some interesting things to say about the Victorian intersection of economics, innovation, and (of all things) woodworking:

Now, I come from a family with a fairish amount of Victorian detritus floating around, and I know how the machine age resulted in the invention of a whole lot of barely marginally useful crap, just because there were a lot of newly rich people and middle class people around, and a lot of new machines that could mass produce stuff for the newly rich people. One of the reasons that there is so much hideoeusly ornate late Victorian furniture is that the Victorians invented wood-turning machines, and started putting decorative spindles on everything.

And, perhaps more interesting for many people, dining etiquette:

The Victorians liked to show off their new wealth with massive dinner parties, one of the objects of which was to show just how much silver you had. There was a fork, knife, or spoon for everything, and special tongs for asparagus besides. Many of these things were at best marginally more useful than an ordinary fork, knife or spoon, and some of them were actively less useful. Useless silver was their version of the Quesadilla maker or the $5,000 coffee machine.

[. . .] (Incidentally, the cultural horror of using the wrong fork is completely ridiculous. The Victorians made it dead easy: start outward and work in, unless a specialty item like a lobster pick is served with the course. Anything located at 12 o'clock is for dessert. If you get the wrong fork under this system, they have set the table wrong, entitling you to sneer.)

This is still one of the bigger differences between British restaurants and North American ones: silverware. (I can't speak for Continental restaurants, as I've never been across the Channel . . .). In a British restaurant of any standing, you get sufficient cutlery to handle the food you've ordered without having to use your dinner knife as a butter knife and a first-, second-, and even third-course utensil. Lately, I've noticed improvement in this, but it's still common in North American middle-class eating establishments to be expected to use the same knife and fork through several dishes. Not that I dine in fancy places that often, I assure you.

Some of the Victorian extravagance on silverware can be usefully carried on into the next century . . . but over half of the "innovations" belong only in museums, not in the dining room.

QotD: Capitalism

Ossified societies guard positional goods more, not less, jealously. A flourishing economy, on the other hand, creates what biologists call "a tangled bank" of niches, with no clear hierarchy between them. Tyler Cowen, of George Mason University, points out that America has more than 3,000 halls of fame, honouring everyone from rock stars and sportsmen to dog mushers, pickle-packers and accountants. In such a society, everyone can hope to come top of his particular monkey troop, even as the people he looks down on count themselves top of a subtly different troop.

To find the market system wanting because it does not bring joy as well as growth is to place too heavy a burden on it. Capitalism can make you well off. And it also leaves you free to be as unhappy as you choose. To ask any more of it would be asking too much.

"Happiness (and how to measure it)", The Economist, 2006-12-19

QotD: Inflation

It is not merely that inflation breeds dishonesty in a nation. Inflation is itself a dishonest act on the part of government, and sets the example for private citizens. When modern governments inflate by increasing the paper-money supply, directly or indirectly, they do in principle what kings once did when they clipped coins. Diluting the money supply with paper is the moral equivalent of diluting the milk supply with water. Notwithstanding all the pious pretenses of governments that inflation is some evil visitation from without, inflation is practically always the result of deliberate governmental policy.

Henry Hazlitt, The Inflation Crisis and How To Resolve It, 1978.

Latest OWR now online

The first 2007 edition of the OntarioWineReview is now available. In this issue, Michael has a good rant about the abomination that is wine in Tetra-Pak containers:

Just like Peter Finch in the movie Network, "I'm mad as hell and I'm not gonna take it anymore". The LCBO seems to be forcing its will on the people and in typical Canadian-sheep-like fashion we are going to put up with it . . . again. Well it's time to take a stand. What am I so hopping mad about? Tetra-Paks, and the more I learn, the more incensed I get, and I'm thinking you should be too. Sure Tetra-Paks have their place in society for juice boxes, soups and soy milk — but keep your cotton-pickin' Tetra-Paks off of my wine. You've probably noticed that the LCBO is shifting into high gear promoting this "alternative packaging" as the great saviour in wine packaging — lighter, more versatile, more consumer friendly, and recyclable.

[. . .] Terence Corcoran tells us in his article "Monopoly Wine to Come in a Box" dated December 9th, 2006 in the National Post. "The idea that this is a waste-reduction plan is a trick concept. Glass is heavier than Tetra Pak, so replacing one with the other will reduce waste by weight. But glass, properly sorted and processed, is recyclable. Tetra Pak is not." That's because of Tetra-Pak's make up which is 75% paperboard, 20% food grade polyethylene plastic and 5% aluminum — which makes it light and unbreakable, but for recycling purposes it's a cost nightmare to separate out the materials. Even the new recycling program announced in September and touted by the Premier of the province as dragging Ontario "out of the dark ages" is actually, according to Corcoran, part of the sham to get you to buy Tetra-Paked wines: "This new 20-cent deposit system is actually the product of the LCBO's plan to make a major shift away from bottled products and towards boxes . . . [the LCBO] is mounting a major international effort to get vintners to repackage wines in boxes." The LCBO is also hoping you will see the new deposit-system as another form of taxation on booze and will refuse to pay it, opting instead for the lower cost of Tetra-Wine.

Corcoran puts forth another reason for the LCBO's love of Tetra-Paks, which has nothing to do with environmental concerns. Profits are the main reason for these wine-drink-in-boxes, at the expense of consumers tastebuds. "the LCBO now has business relationships with two box plants." Thus a vested interest in you and I buying and consuming Tetra-Paked wines.

There is another down-side to having a monopoly supplier of wines and spirits here in Ontario: if they get a massive brain-fart (like, for example, wine in Tetra Paks), there's no alternative for most consumers . . . you just go along with whatever the LCBO has decided will be good for you. Or, more accurately, what's good for the LCBO.

QotD: Economic Sabotage

A few days ago, Perry de Havilland suggested the rather cute idea of erecting statues of the US Senators who cooked up the Sarbanes-Oxley accounting law, on the grounds that this law has encouraged many firms into listing their businesses outside the United States and holding Initial Public Offerings (IPOs) outside Jefferson's Republic. London's stock market has benefited from this, as have bourses such as the Amsterdam Euronext, for instance. I do not know whether some of the impact of S-O has been exaggerated — this may be the case — but there is no doubt that from a regulatory point of view, the United States is not quite the model of laissez-faire capitalism that its supporters or indeed opponents imagine it to be. In fact, the US has been becoming a regulatory hell-hole for some time, such as with the recent crackdown on online gambling, to take one example.

Johnathan Pearce, "Another wrecker of US capitalism steps down", Samizdata, 2007-01-03

QotD: Subsidized Art

I oppose arts subsidies not only because arts subsidies are thieving from people who do not want art thank you very much, although it is that of course. I also oppose arts subsidies because I really like art and I think arts subsidies damage art, by separating artists from audiences and by separating nob audiences from yob audiences, the aristocracy from the groundlings. With arts subsidies, you get High Art in one tent — precious, clever, obscure, self-regarding and pretentious, and expensive; and Low Art, brain-dead trash, in the other bigger tent. Without arts subsidies, they all go into the same tent and you get, well: Shakespeare basically. Shakespeare, nineteenth century classical music, the great nineteenth century novelists, twentieth century cinema (before that too got to subsidised into Posh and Trash), twentieth century pop music, all that is artistically vibrant, fun and profound.

Brian Micklethwait, "An artistic argument for the Olympic Games", Samizdata, 2006-12-15

QotD: Capitalism

A great thing about capitalism is that people pay for the consequences of their own stupidity. So staying on the topic of Russia as per my last article, I have no sympathy with Shell Oil now that they are getting shafted by the Russian state after making vast investments in that country. The word of the Russia government (even more so than most governments) is worth less than nothing. As a result, anyone who makes agreements with that government and puts big money into a place which has for years clearly been a kleptocratic sink hole is the author of their own misfortune when things inevitably go pear-shaped.

Perry de Havilland, "A great thing about capitalism is...", Samizdata, 2006-12-12

QotD: The Nature of Government

It has been said that politicians are in the business of bribing people with their own money. That is, at their direction, government at various levels employs physical force or the threat of force — exactly like any other bandit — to take away about half of what the average individual earns, and then doles it back out in niggling bits and pieces, while extracting an enormous middleman's fee for the "service".

Unlike a decent, honest bandit, however, government does the same thing with people's freedom, employing its "monopoly of force" to suppress individual liberty, and then "generously" allowing people to get little bits of it back, in return for their compliance with its edicts.

The middleman's fee in this case is the erection of a vast and powerful police state whose Mussolinoid minions strut about in body armor, displaying — and often using — weapons illegally forbidden to everybody else, pushing people around, violating their rights, spying on them, listening to their conversations, reading their mail, and denying them the most intimate physical privacy, examining their body fluids and probing their anatomical cavities as if they were merely livestock.

L. Neil Smith, "Back to Basics, Part Two", Libertarian Enterprise, 2006-12-03

Sue the bastards!

It's a common cry, when a corporation is widely seen as acting "above the law" or "exploiting the poor" or is merely seen as "too big". John Bambenek discusses the economic problem with jury awards for massive damages against corporations:

The idea that suing a company for some injustice (many imaginary and some, sadly, very real) to make them pay is false. It's a creation of trial lawyers who like collecting 40% of those big multimillion dollar settlements. The dirty little secret is that society pays an increased amount for products to sustain that system. No matter what you think about a hack artist doctor or a negligent fast-food restaurant owner, they never pay for these lawsuits, society does.

You get as much as you put up with as a consumer. If you want businesses to behave morally, consumers need to put that into their economics decisions. Until they do, businesses will continue to minimize costs and maximize profits.

QotD: Environmental Panic

Every dogma has its day, and we've lived long enough to see more than one "consensus" blown apart within a few years of "everyone knowing" it was true. In recent decades environmentalists have been wrong about almost every other apocalyptic claim they've made: global famine, overpopulation, natural resource exhaustion, the evils of pesticides, global cooling, and so on. Perhaps it's useful to have a few folks outside the "consensus" asking questions before we commit several trillion dollars to any problem.

"Global Warming Gag Order Senators to Exxon: Shut up, and pay up" The Wall Street Journal, 2006-12-04

A bright new day . . . for unions?

There was a brilliant article in The Economist last month, which I meant to link to earlier . . . except that I lost track of that issue of the magazine. Until now. It's a brief look at Sara Horowitz's attempt to make the union movement relevant to freelance workers. This is something I've been arguing in favour of for years (and not just because my employment pattern closely resembled freelancing).

If unions fail to innovate to meet the needs of workers in non-traditional industries, they're doomed to shrink until they only represent government employees. The key is to represent the individual worker not the job: make union benefits portable from job to job and you'll have a major drawing card for employees who find it too expensive to purchase benefits individually or who work for employers who provide too skimpy a set of benefits.

Of course, that requires a major re-alignment of existing unions from their long-standing belief that individuals really don't matter, only the jobs themselves matter. I'm afraid it'll be a long time before that shift can happen.

QotD: Resource scarcity

We make ourselves better off, then, not by increasing the amount of resources on planet earth — that is, of course, fixed — but by rearranging resources we already have available so that they provide us with more of what we want. This process of improvement has been going on ever since the first members of our species walked the earth. We have moved from heavy earthenware pots to ultrathin plastics and lightweight aluminum cans. To cook our food we have shifted from wood-intensive campfires to clean, efficient natural gas. By using constantly improving recipes, humanity has avoided the Malthusian trap while at the same time making the world safer and more comfortable for an ever larger portion of the world’s population.

In fact, increasing, rather than diminishing, returns characterize many economic activities. For example, it may cost $150 million to develop the first vial of a new vaccine to prevent Lyme disease. Yet every vial after that is essentially free. The same is true for computer programs: it may cost Microsoft $500 million for the first copy of Windows 98, but each subsequent copy is merely the cost of the disk on which it is stored. Or in the case of telecommunications, laying a fiber optic network may cost billions of dollars, but once operational it can transmit millions of messages at virtually no added cost. And the low costs of each of these inventions make it possible for the people who buy them to be even more productive in their own activities — by avoiding illness, expediting word processing, and drastically increasing the tempo of information exchanges.

What modern Malthusians who fret about the depletion of resources miss is that it is not oil that people want; they want to cool and heat their homes. It is not copper telephone lines that people want; they want to communicate quickly and easily with friends, family and businesses. They do not want paper; they want a convenient and cheap way to store written information. In short, what is important is not the physical resource but the function to be performed; and for that, ideas are the crucial input.

Ronald Bailey, "The Law of Increasing Returns", Cato Institute, 2000-03-18

QotD: Robbing Peter to pay Paul

[. . .] this brings me back to the recurring theme of people (on the "right" as much as the "left") who ignore empirical evidence of many decades, even centuries, that government is not our friend. It is seldom that any one entity, person or corporation gets to be "Paul" all the time. Sooner or later, you are forced to be "Peter." And sometimes you get Petered good and hard, if you catch my drift.

However, through the magic of tax withholding, most people seem to have no idea how much the government is Petering them. Nor do they understand how much the hundreds of thousands of government regulations bleed them almost as much. And most of them think that corporate income taxes are a good idea, making sure they "pay their fair share." This is another of the great mysteries of our current condition: how can people be so ignorant of economics and the world around them that they don't realize that if the government places a more-or-less uniform burden upon businesses, said businesses will pass that cost along to the consumers! We all know that shit flows downhill, and that money talks. This point is easily as obvious, so why is it that people seem oblivious to it?

Chris Claypoole, "Taking from Peter to pay Paul", Libertarian Enterprise, 2006-11-26

QotD: Milton Friedman

If you're a libertarian and are unaware, by now, that the world's premiere free market economist, Milton Friedman, died last week, it must be because you live in a cave or use the same Internet service I do.

We have much to thank "Uncle Miltie" for (my younger readers may not know that the nickname was first applied to the wildly popular 1950s comedian Milton Berle, a contemporary and competitor to Sid Caesar). Friedman and his wife Rose probably did more than anyone to popularize the concept of markets unconstrained by anything except the laws of nature that happen to apply to them. He was a big part of an intellectual revolution so huge, and so threatening to those — like the Bush family — who exist only to control the lives of others, that it gave accidental birth to the hideous reaction we are living through today.

L. Neil Smith, "Of The Dead Speak Nothing But Truth", Libertarian Enterprise, 2006-11-26

Thank goodness the government stopped this illegal . . .

. . . sale of gasoline below cost:

This month, King Soopers and City Market (both owned by Kroger) were forced by a federal jury decision to cut out a program called Buy Groceries/Get Gas — which offered consumers modest savings on gas purchases.

Two "independent" gasoline stations in Montrose brought the suit and were awarded $1.4 million in damages. The jury found the big stores had violated Colorado's Unfair Practices Act, illegally selling gas below cost.

Yes, King Soopers was selling gasoline too cheap. It's illegal.

So let's quickly review an old economics adage: Charge too much and you're price gouging. Charge too little and you're predatory pricing. Charge the same as your competitor and you're in collusion.

We should all be grateful to those bold politicians, who realized that it should be illegal to sell an essential product like gasoline below cost! And even more, to the noble and public-spirited competitors who grassed them to the authorities!

Had it been left unchallenged, who knows how low these economic hoodlums would have been willing to go?

How illegal distribution created an $80 billion market

Anime hit it big outside Japan, due, in large part, to becoming an underground phenomenon:

The global sales of Japan's animation industry reached an astonishing $80 billion in 2004, 10 times what they were a decade before. It has won this worldwide success in part because Japanese media companies paid little attention to the kinds of grassroots activities — call it piracy, unauthorized duplication and circulation, or simply file-sharing — that American media companies seem so determined to shut down. Much of the risk of entering Western markets and many of the costs of experimentation and promotion were borne by dedicated consumers.

QotD: Teenage Spending

Richer teenagers spend more money on everything, including booze, fags and weed. Yet this is not purely an effect of extra spending power. The source of the money counts too. A teenager who earns an extra $1,000 through a job is 1.1 per cent more likely to smoke and 1.6 per cent more likely to drink and 0.6 per cent more likely to use marijuana. But when the same sum comes from pocket money, the effects are more than five times greater: a teenager with an extra $1,000 annual allowance is 6.2 per cent more likely to smoke, 9.6 per cent more like to drink and 4.5 per cent more likely to use marijuana.

It is not clear whether this difference is because part-time workers have less time to indulge, whether they come from different backgrounds (some effort is made in the research to allow for this) or whether there is a difference in character between the workers and the pocket-money scroungers. Still, the conclusion is clear enough: cut off pocket money for teenagers and lower the minimum wage at once. It's the only way to keep our teenagers living clean lives.

Tim Harford, "The Undercover Economist: Round numbers", FT.com, 2006-09-22

QotD: Social Security

Talking about social security is like attending a cocktail party full of accountants: everyone spends the whole time doing disgusting things to innocent numbers.

Jane Galt, "Social security sleight of hand", Asymmetrical Information, 2006-10-11

QotD: Perverse incentives

I'm normally all in favor of taking advantage of market incentives, but things like this can backfire too. I recall reading a study about a nursery school that started fining parents for picking up their kids late. This actually led to more late pickups, because arriving late stopped being seen as discourteous to the people running the school, and instead was seen as a luxury parents could buy.

Julian Sanchez, "Have You Stopped Beating the Poor Yet?", Hit and Run, 2006-10-10

QotD: Government Healthcare

When confronted with the question of single-payer health care, Democratic economists often seem to suddenly act as if all the normal rules they take for granted about markets had been repealed. Pharmaceutical companies apparently do not respond to incentives, and so will continue to invent drugs even if we drive down the price to the marginal cost of producing the pills. Also, unlike other markets, competition between different providers is bad: we should have just one pill for every condition. And the government does an excellent job of identifying and filling consumer needs, so that its success at funding basic research will translate directly into inventing good drugs. Also, apparently there are never any suboptimal equilibria in monopsony markets, so that if the US decreases its funding for research, the French will altruistically pick up the slack. This even though the lack of new drugs will not be politically traceable to the decision to force pharmaceutical companies to price at marginal cost.

Jane Galt, "Yes, Virginia, there are tradeoffs", Asymmetrical Information, 2006-10-06

QotD: The Airline Business

Flying is being turned into an experience in which passengers, even though they are paying customers, are treated as near-criminals. It is no excuse for the airlines to shrug their shoulders and blame all of this on the security services. They must think of imaginative ways to make travelling as pleasant as possible in the current worrying security environment. If they do not do so, then frankly they can expect little sympathy from me if they subsequently experience financial troubles.

Johnathan Pearce, "Thoughts about how airlines can ease the pain of security clampdowns", Samizdata, 2006-08-11

Economists who blog

There's a brief article in this week's Economist (behind the subscriber wall, I'm afraid), talking about some notable blogging economists:

Why do economists spend valuable time blogging?

"Clearly there is here a problem of the division of knowledge, which is quite analogous to, and at least as important as, the problem of the division of labour," Friedrich Hayek told the London Economic Club in 1936. What Mr Hayek could not have known about knowledge was that 70 years later weblogs, or blogs, would be pooling it into a vast, virtual conversation. That economists are typing as prolifically as anyone speaks both to the value of the medium and to the worth they put on their time.

Like millions of others, economists from circles of academia and public policy spend hours each day writing for nothing. The concept seems at odds with the notion of economists as intellectual instruments trained in the maximisation of utility or profit. Yet the demand is there: some of their blogs get thousands of visitors daily, often from people at influential institutions like the IMF and the Federal Reserve.

Of course, economists are not all created equal in their writing ability and skill at explaining technical concepts for a lay audience. One of the strengths of the staff at The Economist is their ability to write clear, understandable articles which manage to convey a fair amount of technical detail without becoming completely incomprehensible to non-economists among the readership.

Aging related to social class?

Alayne McGregor sent these two links to the Lois McMaster Bujold mailing list. I'm sure the findings will be unpopular, if only because they fly in the face of long-held beliefs in certain economic quarters. the BBC reported:

People in lower social classes are biologically older than those in higher classes, according to research.

A study of 1,552 volunteers revealed a low social status can accelerate the ageing process by about seven years.

The UK/US team analysed key pieces of DNA called telomeres which are thought to correlate to biological age.

The scientists, writing in the journal Aging Cell, believe the stress associated with belonging to a lower social class may be to blame.

And the Guardian said this:

Scientists have uncovered evidence of a new class divide: the lower our social standing, the faster we age.

The claim follows the surprise discovery of accelerated ageing among working class volunteers, leaving them biologically older than those higher up the social ladder.

Genetic tests showed that being working class could add the equivalent of seven years to a person's age.

And moving down in the world by marrying someone from a lower social class also added years to a woman's biological age, scientists report today in the journal Aging Cell.

The economics of hybrid cars

A recent article by Shikha Dalmia at the Reason Foundation website finds that hybrid cars are less economical than their conventional counterparts:

But despite all these drawbacks, hybrids are at least better for the environment than say . . . a Hummer, right? Nope.

Spinella spent two years on the most comprehensive study to date — dubbed "Dust to Dust" — collecting data on the energy necessary to plan, build, sell, drive and dispose of a car from the initial conception to scrappage. He even included in the study such minutia as plant-to-dealer fuel costs of each vehicle, employee driving distances, and electricity usage per pound of material. All this data was then boiled down to an "energy cost per mile" figure for each car (see here and here).

Comparing this data, the study concludes that overall hybrids cost more in terms of overall energy consumed than comparable non-hybrid vehicles. But even more surprising, smaller hybrids' energy costs are greater than many large, non-hybrid SUVs.

For instance, the dust-to-dust energy cost of the bunny-sized Honda Civic hybrid is $3.238 per mile. This is quite a bit more than the $1.949 per mile that the elephantine Hummer costs. The energy cots of SUVs such as the Tahoe, Escalade, and Navigator are similarly far less than the Civic hybrid.

This, on top of the news that hybrid sales, "every month this year have been down compared to the same time last year. Even sales of the Toyota Prius — the darling of the greens — have dropped significantly." It definitely won't please the folks who are happily giving the finger to the H2.

Airbus versus Boeing

Michael Jennings has an interesting post up at Samizdata, talking about the ongoing duel between Airbus and Boeing:

The Farnborough Air Show is on near London this week. In the commercial jet market, things have changed dramatically since the Paris Air show last year. A year ago Airbus had their first flying displays of their very large new A380 airliner, and for the fifth year in a row Airbus received more orders for airliners than did Boeing. Through a combination of more modern aircraft, more modern production lines and (perhaps) state subsidies, Airbus has come from a distant position in the market to market leadership.

However, this year Airbus fallen to a distant second in the market, having received only 117 orders this year to Boeing's 480. The A380 is behind schedule, the first airlines to receive it will be getting it six months late, and Airbus has scarcely recieved an order for it in the last couple of years. (Total orders are presently for 159). Boeong has received orders for 400 of its new mid-market 787 aircraft (and orders for Airbus' A330 and smaller A340 variants have dried up completely) and is also significantly ahead of Airbus in the upper mid-market segment containing Airbus' A340-600 aircraft and Boeing's 777-300.

A very interesting view of the whole major aircraft market, and the potential changes for the two major players.

Why Warren Buffett supports the Estate Tax

I'd often wondered why Warren Buffett, the world's second richest man, was such a big supporter of the estate tax (the government's proof of the concept that you can't take it with you). This might help to explain it:

The estate tax weighs heavily on those who have asset-rich businesses, typically family businesses that have taken years to break even and accumulate value. When the owner dies and the children take up the reins, the estate tax comes into play, sometimes costing as much as the business itself. The heirs are then forced to sell the business before losing any more money. This is how Buffett came to own Dairy Queen and the Buffalo News, among other businesses, as they were being sold at lower prices than their actual value. In the latter case, Buffett bought the paper for less than what it would wind up making him each year.

Beyond providing Buffett with a bumper crop of businesses to purchase, the estate tax also provides him with customers. Any financial advisor will tell you that the major component of a sound financial plan is composed of asset allocation, not blue chip trades on the stock market. And that is why they recommend you purchase some life insurance to shelter your money from large taxes such as the estate tax. And why not purchase that life insurance from Buffett's very own insurance company, GEICO?

Our great philanthropist doesn't benefit if the estate tax is repealed — he loses on cheap deals, affluent customers, and spread his own "common man" mythology. Unfortunately, too few realize that Buffett is so self-interested. As he talks about how much he dislikes inordinate wealth, he has done his damnedest to make sure no one else achieves it.

Soccer stadium to be built in Toronto

The federal government has confirmed the previous Liberal government's commitment of $27 million towards a new soccer stadium in Toronto:

Finance Minister Jim Flaherty caught soccer fever Tuesday, formalizing the government's share of building a stadium to house Canada's first Major League Soccer franchise.

He said the federal government will kick in up to $27 million, as promised last fall, for the construction of the open-air venue, located on the city's waterfront. The $62.9 million facility is due to be completed on May 1, 2007. The timing of the financial agreement coincides with the FIFA World Cup underway in Germany.

Flaherty said he hopes Canada will be able to compete in the next tournament, taking place in South Africa in 2010.

Canada is currently ranked 83rd in the world.

As a soccer fan, I'm happy that Toronto is going to be getting a major league soccer team. As a taxpayer, however, I'm much less happy: the three levels of government should no more be putting up money for a soccer stadium than they should be paying for any other kind of private enterprise. If there's enough fan support for a team, then there'd be enough private funding to build the stadium. If it can only be done by forcing non-soccer-supporting taxpayers to contribute part of their taxes to the deal, then it shouldn't.

This is no more than corporate welfare for sports teams. Since all three levels of government are involved, all Canadians are paying — even if the total amount is relative peanuts — for something to benefit Toronto's soccer fan community and especially the owners of the new team. How is this fair, equitable, or just?

Canadian Oil

According to a recent newspaper report, most Americans don't know that Canada supplies more oil to the United States than anyone else:

A new poll suggests that only a tiny minority of Americans — four per cent — know that Canada is the largest supplier of crude oil to the United States.

But the survey also suggests that 88 per cent of Americans have a favourable view of Canada and that 41 per cent would be willing to pay even higher gasoline prices to replace oil from unstable regions.

Of course, it'd be fascinating to find out how many Canadians knew that little fact, too.

QotD: Economic Motivations

If you're the owner of a women's shoe store, and you want to hire someone that will work for cheap and still love his job, you want a guy with a major foot fetish. That guy will never call in sick. He might need to take frequent breaks during the day, but it's a small price to pay for such motivation. The foot fetish guy will always work for less pay than the guy who's thinking "Eww, I have to touch feet all day." Over time, the free market system would drive out all the non-foot-fetish guys.

Based on the same economic theory, I predict that someday our entire military will be gay. If people are shooting at you, it goes down a lot easier if you're huddling in a foxhole with a chiseled 20-year old and you can use lines such as, "Bruce, we might die today. But before we go . . ."

Scott Adams, "Shoe Salesman Economic Theory", The Dilbert Blog, 2006-06-16

Digital music . . . a raw deal for the artists?

A Slashdot thread on the economics of digital music linked to this more detailed study of the situation:

King of comic rock, Weird Al Yankovic says digital is a raw deal for artists like himself. When asked by a fan whether purchasing a conventional CD or buying a digital file via iTunes would net Yankovic more pocket money the artist answered on his website.

"I am extremely grateful for your support, no matter which format you choose to legally obtain my music in, so you should do whatever makes the most sense for you personally. But since you ASKED... I actually do get significantly more money from CD sales, as opposed to downloads. This is the one thing about my renegotiated record contract that never made much sense to me. It costs the label NOTHING for somebody to download an album (no manufacturing costs, shipping, or really any overhead of any kind) and yet the artist (me) winds up making less from it. Go figure."

While it's an exaggeration to say that it costs nothing for a downloaded song, the costs for a download sale are significantly lower than for a physical media sale. The different return to the artist, however is real:

If your deal with your record company is like The Alman Brothers, then you're getting something like $315.50 for those same 1,000 songs (83.3 CDs worth). That works out to $0.31 cents per song, instead of the $0.045 on a digital download.

Ouch! It turns out you were being more than kind to that fan by telling him to buy either format he wanted, you're losing $0.265 cents per song! . If all of your fans bought through iTunes rather than buying CDs at the record store you'd be looking at an overall reduction in income of 85%!

QotD: Capitalism

[I] start every class I give on history or economics by showing an imagined chart extending from one side of the room to the other in which income per head bounces along at $1 a day for 80,000 to 50,000 years . . . and then in the last 200 years explodes, to the $109 a day the average American now earns. Your ancestors and mine were dirt-poor slaves, and ignorant. We should all make sure that people grasp that capitalism and freedom, not government "programs", have made us rich.

Dierdre McCloskey, "Bourgeois Virtues?", Cato Institute, 2006-06-02

A different angle on minimum wage laws

Dale Amon finds an interesting aspect of both minimum wage laws and illegal immigration:

I realized this morning there is a way in which politicians can hide much of the pain [of minimum-wage induced inflation] indefinitely: illegal immigration. Think it through. Raise the minimum wage in an environment where there is cheap, willing labour, undocumented and outside the system. What is the rational employer response? Raise wages for legal employees and export the costs to the undocumented workers. Illegal immigrants are not voters so this is a win-win situation to both the ruling class and those who keep them there. The voters get a higher real wage and living standard because the inflationary cost has been shifted. The pain has been exported outside the political game.

Statist politicians cannot do anything about illegal immigration because if they stop it, the deferred inflation will cause prices to rise enough to erase the excess income of their constituents. Employers will have to either drop low end jobs or else raise prices to support them. Voters will not be happy and it is well known the wallet is a bigger determinate of election outcomes than just about anything else. So, QED, illegal immigration is now a structural requirement of the centralized Western bureaucratic state.

That's a connection I'd never thought of myself: I wonder how close to the truth it is . . . especially in the United States, where the illegal immigrant debate is generating such huge amounts of heat.

QotD: Illegal immigrants versus slaves

Let's see. With immigration, we have willing employers paying willing workers a mutually agreed-upon wage. The workers came here voluntarily. Indeed, some risked their lives to be here. The workers are free to switch jobs, live where they please, and do as they please with their money. Employers may pay low wages, but if the'yre too low, they'll lose the best workers to other employers — even in the case of illegals. There are no chains. No whipping posts. No brands.

Now — and I can't believe I even have to do this — let's talk about fucking slavery. See, Mr. Riehl, with slavery, Africans were kidnapped from their homes, from halfway across the world. They were packed into ships against their will, like meat. They were beaten and bred like animals. They were murdered if they resisted. They were bought and sold as if they were mules. They were routinely ripped from what little semblance of family they were permitted to have if their "employer" wished to sell them. Slaves who escaped (i.e., "looked for other employment") were whipped, shot, or lynched. And all of this went on for generations.

Yes. Of course. Immigrants are exactly the 2006 equivalent of slaves. Or the next best thing to slaves.

Radley Balko, "Dan Riehl: Ignoramous", TheAgitator.com, 2006-05-25

QotD: Legalization of Drugs

[. . .] in a situation of [drug] legalization, the government would regulate drugs, and massively profit through tax revenues. That is the last thing that anyone should want.

In Pennsylvania, where I live, the state is currently the only authorized distributor of wine, liquor, and gambling services. It's hard even to come up with a decent bottle of champagne or a reasonable game of cards (hard, but, thank God, not impossible). Most states are extremely dependent on income from the tobacco settlement and from taxes on cigarettes.

The government is already the primary purveyor of vice in our great nation, and it's a small step from here to a government that's your primary pornographer, pimp, and narcotics dealer. I would not object to this at all if they delivered these key services efficiently. But no.

If you think we've got a wasteful bureaucracy now, just wait until the American state is the cocaine kingpin. The government can't even deliver hurricane aid, much less heroin to all the Americans who need it.

Crispin Sartwell, "Save the Dream", Creators.com, 2006-05-10

Are you a tax payer?

Indian Cowboy takes an analytical approach to the question of who really pays taxes:

Personally, I'm of the opinion that you're only a 'taxpayer'if the amount you pay in taxes approximates per capita government expenditure (Which is being charitable, considering that close to 40% of our budget goes toward various forms of social welfare). In other words, you put in about as much as you take out. Any less and you're a tax recipient, any more and you're a tax donor. So today I'm going to look at a couple things: First, how much are people actually paying. Then, how much are they getting back. And finally, I'm going to ask you just how 'fair' it is that some people pay nothing for something, while others pay a whole lot more, for a whole lot less.

Patent trolling to be limited?

Jon and I were discussing the whole patent troll area the other day, so when I saw this thread on Slashdot, I figured I had to link to it:

Forbes is reporting that the Supreme Court has just limited the power of patent trolls to obtain permanent injunctions against infringers as a matter of course. The court has ruled that the principles of equity apply, meaning that a court considering slapping an injunction on the infringer must consider how much damage is really being done . . . which in the case of EBay's Buy It Now feature, isn't much, since the company that owns this so-called patent only has it for the purposes of suing other people." From the article: "The high court's decision deals a blow to patent trolls, which are notorious for using the threat of permanent injunction to extort hefty fees in licensing negotiations as well as huge settlements from companies they have accused of infringing. Often, those settlements can be far greater than the value of the infringing technology: Recall the $612.5 million that Canada's Research in Motion forked over to patent-holding company NTP to avoid the shutting down of its popular BlackBerry service.

Patent trolls can sometimes be said to have a beneficial role in the economy, but most of them seem to exist only to extort money from successful businesses.

QotD: Obesity

So forget fast food, TV, computer games, and the Internet. The truth is simpler (and at the same time, more compicated) than that. For the first time in its million year history — in fact, I'm a member of the first generation to find itself, full time, in this position — most of our species has too much to eat, rather than too little.

For this, Auntie Evolution did not prepare us. (Eventually she will, of course, as those whose blood vessels don't clog up with lard have marginally more offspring than those whose blood vessels do — or should I have said, "margarinally"?) Auntie Evolution prepared us for lengthy stretches of famine, alternating with occasional periods of starvation.

L. Neil Smith, "Candy From Babies ", Libertarian Enterprise, 2006-05-07

A couple of links from the Freakonomics blog

The Freakonomics team, Stephen J. Dubner and Steven D. Levitt, provide a couple of interesting links:

• Jane Siberry's economic experiment
• Every Breath You Take (Economist's mix) (explanatory post here)

Oil prices

Jon sent along this link with a suggestion that I might find it bloggable:

If oil were a commodity like any other, the free-marketers would be right. But it's not. Most oil reserves are controlled by governments, many of which conspire through the OPEC cartel to manipulate the market. These governments aren't the kind that any sane person would want to see in control of such a vital asset. Their power can only be countered by action from our own government.

Let's just run that assumption past again: "Their power can only be countered by action from our own government". Why is this? Because only governments can deal with other governments? No, that can't be it: mere individuals can deal with their own and foreign governments at all levels. Because companies are naturally corrupt, and only Simon-pure, incorruptable government officials can be trusted? Even in government-loving Canada, that line would get you a belly laugh at best. So why?

Of the top 14 oil exporters, only one is a well-established liberal democracy — Norway. Two others have recently made a transition to democracy — Mexico and Nigeria. Iraq is trying to follow in their footsteps. That's it. Every other major oil exporter is a dictatorship — and the run-up in oil prices has been a tremendous boon to them.

It's funny that both Jon and I mis-read that statement to imply that Canada wasn't considered a "well-established liberal democracy"! And the Fascists have only been in power for a few months!

Of course, the key word is "exporters". This table explains the difference: Canada is number eight on the producers list, but not in the top 14 exporters. I did find it interesting that Canada and Mexico are the top two exporters of oil to the United States (combining for more than twice as much as Saudi Arabia), but that doesn't compare with the huge total production of the Saudis.

Nova Scotia fails basic economics, again

Nova Scotia's government, having solved all the problems available, have now decided to regulate the price of gasoline and diesel:

Nova Scotia will regulate gasoline and diesel fuel prices, beginning July 1.

Service Nova Scotia Minister Richard Hurlburt said Wednesday the responsibility for setting prices for fuel will be left to the province's Utility and Review Board after a hearing process this fall. Service Nova Scotia and Municipal Relations will act as the interim regulator until the review board process is in place.

"Nova Scotians want more stable gas prices and they want to know those prices are justified," Hurlburt said in a release.

"Nova Scotia will soon be the only province east of Ontario that does not regulate gasoline and that's a reality we have to respond to."

Because, of course, you have to keep up with the neighbours, right?

After this, the Nova Scotia government will be requiring the rivers to run uphill (just like in New Brunswick, eh?).

QotD: Gas Prices

For all the whirring of political machinery at home, $75-a-barrel oil will not be wished away by manipulating additives or guaranteeing free ponies to voters. (As of this mid-morning writing, oil has been dropping for two days, and now sells for $71.05 per barrel). As Bradley notes, the United States is facing down Iran, Russia's oil industry has been consistently underperforming, and Iraq is a basket case in the oil export market. Some of these situations are related to American policy, but most of them share an important factor: state control of oil production, a more critical factor than gas-guzzling Americans or the hobgoblin of Chinese demand. "Nature's cupboard has not gone bare," Bradley says. "This is a classic lack of capitalist institutions. It's the role of entrepreneurship to anticipate demand, and that's what you're not seeing. The problem is on the supply side, not the demand side."

The solution there is to let the price continue to rise, which would either encourage more greedy, jowly fatcats to get into the production game or encourage consumers to reduce their oil consumption. Instead, Bush, having diagnosed America's oil addiction, proposes a weird solution: trying to get the addicts a better price for the drug. The oil spike of 2006 is a Seinfeld news cycle, a story about nothing.

Tim Cavanaugh, "Oil Addicts Run Starving Hysterical Naked", Reason, 2006-04-27

Let It Bleed pays tribute to JKG

Bob does a reverential waltz past the coffin of economist John Kenneth Galbraith:

From the website johnkennethgalbraith.com, which I offer for giggles: "Galbraith will turn ninety-seven in October, and it is unlikely that many professional economists in their thirties, forties, and perhaps even their fifties have read him with much care. By contemporary standards, Galbraith was more an economic sociologist than a technical economist ... Had Galbraith devoted more effort to gathering empirical evidence to support his views and to finding ways to test them statistically, his influence on economics would have been greater. Galbraith bears the responsibility for failing to do this." [emphasis added] "Empirical evidence to support his views"! Ha! You slay me! He's been quoted in Bartlett's, for God's sake - what more do you people want?!

QotD: Gas Prices

The Tax Foundation helpfully reminds us that over the last 25 years, the gas and oil industry has paid far more in taxes than it has reaped in profits.

Not that it should matter. Let's assume a gas company, gas station owner, or refinery owner is selling his product at inflated prices. So what? Until it lands in your gas tank and you pay for it, it's his damned property. I've never understood why politicians feel the government should have the power to determine the price at which one person must sell his own property to somone who wants to buy it.

Radley Balko, "Gas", TheAgitator.com, 2006-04-27

QotD: Economic Scapegoats

When people in public offices start bleating about a conspiracy of private firms to screw the public, it is usually a sign that said public official is trying to spread a profound misunderstanding of market forces, or is an idiot, or is trying to name a scapegoat to shore up public support. In the case of President George W. Bush — not exactly the brightest light in the harbour — it may be just be a combination of all three.

Johnathan Pearce, "The price-fixing fallacy as applied to oil", Samizdata, 2006-04-26

QotD: Illegal Immigration

Illegal immigration seems to have spawned a dreary debate about the merits of Mexicans, when it should be drawing attention instead to a very different matter: how to build on the luster and wonder of the American dream.

Immigration is not the pox neo-Know Nothings make it out to be. Begin with the astounding influx of illegal immigrants, the vast majority of whom hail from Mexico. While the population includes an eye-popping number of crooks, drug-dealers and would-be welfare sponges, it also provides a helpful prop for sustaining American economic growth and cultural dynamism.

Princeton University sociologist Douglas S. Massey reports that 62 percent of illegal immigrants pay income taxes (via withholding) and 66 percent contribute to Social Security. Forbes magazine notes that Mexican illegals aren't clogging up the social-services system: only 5 percent receive food stamps or unemployment assistance; 10 percent send kids to public schools.

Tony Snow, "Immigration is not the pox neo-Know Nothings make it out to be", Jewish World Review, 2006-04-10

QotD: Costs of Healthcare

I hate sentences that start "the basic problem is . . .", but in health care, the problem is pretty basic, which is that we all want top of the line health care, regardless of cost, but we don't actually want to pay for it. Of course, we do pay for it . . . through tax dollars, foregone salary, and so forth . . . but that's largely invisible. When we're presented with the whacking great sums that it costs to provide that insurance, we screech in pain. Just ask anyone who's left a corporate job and had to buy their own health insurance.

Jane Galt, "Healthcare, Part II", Asymmetrical Information, 2006-03-26

QotD: The Interstate Commerce Commission

Nobody even remembers what the Interstate Commerce Commission used to do. But you've probably been in the old ICC building on Constitution Avenue in Washington. It had a choice spot in Washington. Important agency, important location, big building. This was a key federal agency. And it spent its time hearing arguments about whether this truck line ought to be able to carry cigarettes in the same trucks as it carried textiles or whether the rates that were being charged to carry pretzels were adequate. People have trouble remembering that today.

Marc Levinson, quoted by Virginia Postrel in "The Box that Changed the World", Dynamist Blog, 2006-03-23

QotD: French Political Economics

France is still in the grip of precisely the political mentality that has prevailed here since the Middle Ages. As the protesters themselves cheerfully declare: It's the street that rules. Today's mobs, like their predecessors, are notable for their poor grasp of economic principles and their hostility to the free market. Only wardrobe distinguishes these demonstrations from those that led to the invasion of the national convention in 1795, when first the mob protested that commodity prices were too high; when the government responded with price controls, it protested with equal vigor that goods had disappeared and black market prices had risen. Similarly, the students on the streets today espouse economic views entirely unpolluted by reality. If the CPE is enacted, said one young woman, "You'll get a job knowing that you've got to do every single thing they ask you to do because otherwise you may get sacked."

Imagine that.

Claire Berlinski, "Paris Burning, Once Again", Washington Post, 2006-03-26

QotD: Productivity

[. . .] research shows productivity to be surprisingly independent of time logged at the office. A study released in January by the London School of Economics found that the biggest, most global and best-managed companies tend to be those offering employees the best work-life balance — flexible hours, job sharing, time banking and working from home. British Telecom is a perfect case study. One of the U.K.'s most competitive companies, it has been on flextime since the 1980s, with 70,000 of its total 102,000 workers (from chief executive to secretarial assistants) participating. Indeed, internal company studies show that flex work tends to be some 25 percent more productive than office work. The policy has not only saved the company £10 million yearly in fuel costs, it has also given it a 99 percent return rate for working mothers. (Compare that to the U.K. national average of 47 percent.) Given the cost of hiring and training new workers, that puts another £5 million a year in the company coffers. Most important, says BT's director of people networks Caroline Waters, "our policy gives us a leg up in the talent wars. Women are in a position where they are making choices, and we have to create the kind of environment they want to work in."

Rana Foroohar, "Myth & Reality", Newsweek, 2006-03-07

QotD: Working Women

It sounds impossible, but it's true. For all the myths of equality that Europe tells itself, the Continent is by and large a woeful place for a woman who aspires to lead. According to a paper published by the International Labor Organization this past June, women account for 45 percent of high-level decision makers in America, including legislators, senior officials and managers across all types of businesses. In the U.K., women hold 33 percent of those jobs. In Sweden — supposedly the very model of global gender equality — they hold 29 percent.

Germany comes in at just under 27 percent, and Italian women hold a pathetic 18 percent of power jobs. These sad statistics say as much about Europe's labor markets, lingering welfare-state policies and corporate leadership as they do about its attitudes toward women. It's not that European women are stuck in the house. (After all, 57 percent of women in the EU 15 work, less than the U.S. rate of 65 percent, but not dramatically so.) The real problem is that Europe has been consistently unable to tap the highest potential of its female workers, who represent half of college graduates in most countries. Women, it seems, can have a job — but not a high-powered career.

Why is this? Simply put, Europe is killing its women with kindness — enshrined, ironically, in cushy welfare policies that were created to help them. By offering women extremely long work leaves after children, then pushing them to take the full complement via tax policies that discourage a second income, coupled with subsidies that serve to keep them at home, Europe is essentially squandering its female talent. Not only do women get off track for long periods, many simply never get back on. Nor have European corporations adapted to changing times. Few offer the flextime that makes it easier for women to both work and manage their families. Instead, women tend to get shuffled into part-time work, which is less respected and poorly paid. Those who want to fight discrimination find themselves hamstrung by laws favoring employers.

Rana Foroohar, "Myth & Reality", Newsweek, 2006-03-07

The minimum wage argument

Jane Galt tackles the pro and con arguments around raising minimum wage levels:

There's a sort of nostalgia halo around policies like the minimum wage. Minimum wages and unionization were high in the 1950's; income inequality was low; therefore if we implement the former, we will produce the latter result. But it seems at least as plausible that unionization and the high minimum wage were the result of high demand for labour, which also caused income inequality to shrink. If this is true, enacting the minimum wage, or getting the NLRB to beat up on companies, will be no more effective at bringing back those halcyon days of income compression than resurrecting Burma Shave billboards across the land . . . and considerably less entertaining.

We are finally starting to get a hazy idea about which poverty programmes solve more problems than they create. Given the huge questions about its effectiveness, and its obvious inferiority to programmes such as the EITC, it's hard to understand why raising the minimum wage is even in the standard liberal policymaker's toolbelt.

QotD: The Generation Debt

Kamenetz, a 2002 Yale graduate, is the latest spokesperson for a paroxysm of anxiety among "emerging adults." But you don't have to accept Kamanetz's absurd thesis — that a group of people among the healthiest, wealthiest, and most educated in human history deserve your pity — to get angry about the way their prosperity has been manhandled. The term Generation Debt is nothing if not apt: Young Americans come of age in a world where heaps of their as yet-unearned cash has already been promised away. They are embodied I.O.U.s to Medicare, to Social Security, to extended obligations in foreign countries with unclear objectives and no end in sight. A glance at the latest projections for, say, Medicare Part D is fair game for some righteous anger.

There is a delicious anti-boomer screed to be written, slamming the generation that has so greedily helped itself to its children's future earnings. This, sadly, is not that book.

Kerry Howley, "Poor Little Rich Kids", Reason, 2006-02-27

Economics joke

From Radley Balko's Agitator last year:

Three guys are in a jail cell. They start to talking and find out that they're all gas station owners.

The first one says, "I set my prices at a couple of cents higher than my competitors. I'm in here for price-gouging."

The second one says "I set my prices at a couple of cents lower than my competitors. I'm in here for predatory practices."

The third one says "I set my prices at the same price as my competitors. I'm in here for collusion!"

As Radley says in his wrap up: "It's funny 'cause it's true."

"We absolutely want to see it go into public hands"

As we all know, it's impossible to have private enterprise run things like roads and bridges, because they could deny access to the public:

Some are worried that new private owners could let the bridge — it's actually two connected bridges — deteriorate, or could hike tolls. Current tolls, collected only on northbound traffic, are $6 per car, more for trucks, but officials on both sides of the border wouldn't mind if the tolls were scrapped altogether.

"We absolutely want to see it go into public hands," said Fort Frances Mayor Dan Onichuk. "It's the main channel for northwestern Ontario for Canadians going into the States and vice-versa."

Ontario NDP leader Howard Hampton agreed the bridge should be in public hands, and said he too was worried tolls could be hiked to the point that they hurt both tourism and the forestry sector in the northwestern part of the province.

"You can kill a lot of jobs and that kills a lot of economic activity," he warned.

Clearly this is a situation that can't be allowed to continue: why, a private owner might raise the tolls! Unlike the current private owners . . . who've owned the bridge since it was built in 1908.

QotD: Social Assistance

The dependent population does not like the state and its agents, indeed they hate them, but they soon come to fear the elimination of their good offices even more. They are like drug addicts who know that the drug that they take is not good for them, and hate the drug dealer from whom they obtain their drug, but cannot face the supposed pains of withdrawal.

Theodore Dalrymple, "Is 'Old Europe' Doomed?", Cato Unbound, 2006-02-06

QotD: Military Equipment Purchases

For sake of comparison, the US-built Milverados cost $65,000 each, the Austrian-built G-wagon $150,000 each. In the early 1980s, the Candian Forces wanted to buy German-built Iltis at a cost of $26,500 apiece. But, purchasing policies intended to support Canadian industry resulted in German tools being moved to a Bombardier plant in Quebec instead. Each licence-built Bombardier Iltis ended up costing DND $84,000.

Stephen Priestley, "Canadian Forces Light Utility Vehicle — the milCOTS 'Milverado'", DND 101, 2006

Guest Editorial: Union and Management

Today's QotD provoked Brendan McKenna to write the longest comment I've ever had on the blog. Because most readers don't follow the links to comments, I'm reposting this as an article in its own right:

No one seems to think about the big picture any more . . . so you have these perks of the unionized job. So you've got your pension, you've got your medical benefits, and you've got your wages. Right. Then you have a situation: we're bankrupting the company . . . shit.

Well what do we do here? Half - maybe 55% of me would say this: make a concession to a wage or benefit reduction and smarten up or you WONT HAVE A JOB AT ALL when the firm dies. It reminds me of old growth forestry- there was this brilliant statement made to me once (can't remember who made it) that there was a membership out west scrapping with environmentalists over a plot of old growth wood- the last in the region (or something to that effect). The lumberjack membership was arguing that their members were suffering because they weren't allowed to cut those trees down and there was no work (no $$$). The environmentalists said that they couldn't cut down these trees because they were all that were left (or something). Then some one said this: "at present you don't have jobs because you cannot deforest this plot of lumber. Problem. If you were to deforest this area you would still be without a job because the trees would be GONE".

What do we do?

Then the remaining 45% of me would say this: the union cannot make a concession because if it does it loses its power with the employer and the respect of its membership. If it makes a concession, a precedent is set and (theoretically) there is nothing stopping the employer from biting down on the collective and forcing a shitty contract. One of my favourite laws of negotiation is: "if one concession is made, more concessions WILL follow". Secondly the 45% socialist in me would say that the employer is to blame. Let me explain: by letting wages or benefits- the membership package- get out of hand the employer has been reckless. In addition, a working conditions precedent has been set and why should the collective have to accept a lower standard? is it not the duty of the employer to find ways to me the $$$ needed to pay the people who rely on them for income? This does not take into consideration the fact that industries and markets change- consumer tastes change and as an industry moves through its lifecycle towards maturity, competition will begin to stack up and price wars are inevitable, ultimately driving profits down and pinching margins razor tight. In other words, what may have been a fiscally responsible employment expense in years gone by may now be damagingly high (the present North American auto industry for example). The end picture would resemble something like this: either the company goes bankrupt and dies and the workers have no jobs or the product has become redundant, portfolio diversification was not undertaken (this would more than likely have something to do with the union in the first place), the company dies and the workers have no jobs . . .

Call me an asshole, but it seems to me that unionized environments defend ignorance, self-service, and redundancy in most cases, and discourage the evolution of an industry towards natural problem solving and a better deal (in the end) for the customer, the labourer, and the employer . . . you have companies with their coffers bled dry, sitting in bankruptcy protection and the union is still at the table making demands when there is nothing left to give. The union boss will tell you: "We'll fight for your rights!" what they are not telling you is that they will continue to duke it out with the employer on the deck as the ship goes down . . . rather than encouraging creative thought and problem solving they will continue to fight for a product or service that (in some cases) the public doesn't even use anymore. While the membership is blinded by this "my dick is bigger than yours" macho bullshit, they miss the chance to create a new idea out of the ashes of yesterday's product . . .

I don't believe there is a "correct" answer to the question brought to my mind by your post . . . what do you do when a union is killing its employer financially - who is wrong, the union or the employer - the membership or the managers? . . . this is something that has wandered through my mind for many years - more so now as I am working a unionized position. I think it would make an excellent thesis topic . . . probably been done before, though.

Anyway - I find it fascinating. Payroll expenses pile up as the unions get tougher and the bosses get stingier. It goes on and on until it balloons into a situation of sheer and utter ridiculous stupidity - where the company is forced to offer insurance to its customers against its own workers because rendering their services has become so expensive that the consumer will not be able to afford it (or justify the expense with relation to the work provided). Bell and its technicians currently foster this type of relationship. By this situation, I remain unreservedly stupefied . . .

I'm reminded of another old saying "companies get the unions they deserve." Some organizations can go for years and years without serious labour unrest or financial strife, while others seem to just lurch from wildcat strike to illegal walkout to legal strike to other "industrial action". Bad unions and bad management combine to sap the life out of a company, which is already exposed to the slings and arrows of competing with other firms. The very worst of them go under, which is bad in the short term for the employees, but good in the long term for the entire economy.

It's funny that the largest area of the working world that is unionized nowadays is the public sector.

And that the relations between public sector unions and their employers are probably the worst in the entire workforce.

Just sayin', ya know?

QotD: Sclerotic States

In the name of social justice, personal and sectional interest has become all-powerful, paralyzing all attempts to maximize collective endeavor. Nowhere is this clearer than in France, where a survey published in the left-wing newspaper, Liberation, showed that three times as many people had warm feeling towards socialism as towards capitalism. (The ambition of three quarters of French youth is to be employed by the state). Yet French defense of personal and sectional interest is so ferocious that it renders reform almost impossible, at least without violence on the streets. Workers in the French public transport system, who enjoy privileges that would have made Louis XIV gasp, strike the moment that any reduction in them is even mooted, all in the name of preserving social justice as represented by those privileges, despite the fact that striking brings misery and impoverishment to millions of their fellow-citizens, and their privileges are bankrupting the state. The goal of everyone is to parasitize everyone else, or to struggle for as large a slice of the economic cake as possible. No one worries about the size of the cake itself. Apres moi, le deluge has become the watchword not of the king alone, but of the entire population.

Theodore Dalrymple, "Is 'Old Europe' Doomed?", Cato Unbound, 2006-02-06

A fond farewell

Kate at SDA sets aside political differences to wish a fond farewell to the man who . . .

[. . .] more than any other, set into motion the policies that pulled a debt-ridden Canadian government balance sheet out of the red and set us on the road to reducing the national debt.

His policies were responsible for the sustained economic growth we've enjoyed and the historically low levels of Canadian unemployment for much of these past 12 years.

He has helped Canadians make Canada prosperous.

Hat tip to Jon, for calling this post to my attention.

Trading one problem for another?

Jon sent along a link to this article by Robert Zubrin (h/t to Instapundit), which Jon sums up this way:

However, we'll be in the same place we are now in a century: instead of being held hostage by oil producing countries, we'll be held hostage by the countries from which we import the biomass to make the alcohol.

[. . .]

What's the difference? Petroleum oil or flax seed oil — as long as you're relying on the third world for the lifeblood of your civilization, you're doomed.

Doomed!

BB&T gets it right

BB&T, the ninth-largest American bank, has announced it will no longer provide financial support for projects which depend on the use of eminent domain:

This gets us back to the other misunderstood thing about BB&T's decision. It is clearly saying to customers — and would-be customers — that the bank stands with them on re-development issues, not with the developers and government officials. As a result, the bank can be thought of as practicing its own version of stakeholder capitalism that broadens the corporate governance imperative beyond what is best for shareholders. Whole Foods contracts for wind-generated electricity for its stores to align itself with the greenie ethos of it customers. Similarly, BB&T avoids big, government-forced development projects that often roll over the bank's small business-based clientele. Decent enough policies which may, in fact, actually differentiate these companies enough in the marketplace to have a positive impact on the corporate bottom-line. That certainly seems to be the effect with Whole Foods. It is too soon to tell with BB&T.

Of course, there will not be any differentiation should other banks follow BB&T's lead. There is no reason why they could not. If credit card companies can refuse to do business with Internet tobacco-outlets, banks can skirt controversial development projects involving government condemnations and seizures of land for private development. Yet two of BB&T's bigger North Carolina-based rivals, indeed two the biggest banks in the U.S., Wachovia and Bank of America, have already declined to follow BB&T's lead.

In a more sensible world, that decision would be the odd and unusual one.

I'm suddenly finding myself a fan of a bank. I sure didn't see that one coming.

QotD: Urban and ex-Urban

Canada is different from the States in fewer ways than any of our city-borne media realize. We have the same basic Left/Right division, with the same sorts of views on both sides (both in English and French). The difference between countries is geographic — and derives from the fact that so little of Canada is habitable. We lack the vast, occupied, American outdoors. Against the wind blowing from the Arctic, we are huddled together more densely in cities. A much higher proportion of our population is therefore to be found in typical "Blue State" environments — where people have lost all contact with nature, and by increments, with the realities of life.

The over-urbanized are the willing clients of the nanny state. They are loathe to take responsibility for anything; they assume when anything goes wrong, some specialist or expert will fix it. Even when they have children they expect "child-care facilities". They are salaried people; few have ever taken a risk on their own dime. Their taxes are lifted from them at source. They are easily frightened when a Paul Martin or a Jack Layton warns that a bogeyman from Alberta is going to take their entitlements away.

David Warren, "The Urban Angle", Ottawa Citizen, 2006-01-25

QotD: The Pharmaceutical Industry

The health care market can cope with change just fine. That is, if the regulatory system lets it. The problem with vaccines isn't that you can't charge enough money for them; it's that vaccines are very useful things, which tempts governments to break the patent. It is thus perhaps wiser for pharmas to invest in a good baldness cure than something that people actually need. But this is not a market failure; it is a government failure.

Jane Galt, Asymmetrical Information, 2006-01-05

The efficiency of income versus consumption taxes

Colby Cosh, in his Macleans gig, examines the pro and con arguments for Stephen Harper's plan to reduce the GST:

Stephen Harper's proposed GST cut has been one of the most fascinating alchemical elements of this election campaign. It is normally a habit of Conservative leaders to pay close attention to the informed advice of economists and to comply remorselessly with the laws of the market that the other parties deem "savage and uncaring." Yet here we have a Conservative leader quarterbacking a tax proposal against near-uniform objections from economists. Liberals and New Democrats are taking the side of those economists, even though one of the chief economic objections to a GST cut is that it is a welcome regressive element in a tax system that is too progressive for their margin-obsessed tastes. (This is something you are not going to hear Jack Layton say out loud.) And there have been further strange sideshows, like that of the National Post's Terence Corcoran getting into a scrape with the Fraser Institute. Not something you see every day.

The caveat that most economists like all tax cuts cannot be repeated often enough: they aren't opposed to trimming the GST in isolation — they would merely prefer that the same amount of revenue came out of the income-tax system. Most of them, I daresay, will be voting Conservative anyway. Personally, I regard the thumbnail political argument that Harper presents for his GST cut — it's a highly visible form of tax relief that will, practically, be much harder to reverse later — as a knockout blow.

I'm not an economist, although I do sometimes read economics articles for entertainment value. I had to give Colby credit . . . it's not often you find the concepts of uncounted deadweight loss and inefficiencies of allocation worked into a typical election blog post.

Making fun

Jon sent a link to a cartoon at Free Will which is very amusing.

QotD: Utopia

All efforts to describe permanent happiness [. . .] have been failures. Utopias (incidentally the coined word Utopia doesn't mean 'a good place', it means merely a 'non-existent place') have been common in literature of the past three or four hundred years but the 'favourable' ones are invariably unappetising, and usually lacking in vitality as well.

George Orwell, "Why Socialists Don't Believe in Fun", 1943

QotD: The Corporation

Corporation (n): A miniature totalitarian state governed by an unelected hierarchy of officials who take a dim view of individualism, free speech, equality and eggheads. The backbone of all Western democracies.

Rick Bayan

QotD: Boxing Week Sales

I've done a few tours of duty behind a cash register. The job takes your soul, twists it like a wet chamois and runs it through the shredders they use to turn car hoods into tinfoil strips. [. . .] When I lived out east, the relationship between cashier and customer was the same as that between a German gunner and the troops disembarking at Normandy.

James Lileks, "Backfence: Beyond new store's hype, genuine smiles", Minneapolis Star Tribune, 2004-08-03

QotD: Competition

Competition provides not only useful criticism but a continuous source of experiments. It gives people . . . the ideas with which to create still more progress and encourages them, too, to come up with incremental improvements. By picking winners, stasist protectionism eliminates this learning process, which includes learning what does not work.

"Premature choice," warns the physicist Freeman Dyson, "means betting all your money on one horse before you have found out whether she is lame." Protecting established interests from new challengers is one form of premature choice. But technocratic planners also sometimes kill existing alternatives to force their new ideas to "succeed." To protect the space shuttle, NASA not only blocked competition from private space launch companies, it also eliminated its own expendable launchers. Such pre-emptive verdicts often mark public works projects. Planners pick an all-purpose winner, squeeze out alternatives, and eliminate any real chance of experiment and learning.

Virginia Postrel, The Future and its Enemies

QotD: Government Pension Schemes

An unfunded national pension scheme available to the majority of the population is much like a Ponzi scheme: a pyramid 'investment' trick that is illegal everywhere — except when operated by governments. It depends on ever more suckers paying over ever more money (in this case, compelled by taxation) to finance the unfeasible returns promised to those entering earlier.

Guy Herbert, "Crisis, what crisis?", Samizdata, 2005-12-05

QotD: Democracy

Restraining people from demanding ever bigger hand-outs of other people's money is the chief role of government in a democracy. Alexander Tytler, an 18th century Scottish historian and judge, used to insist that democracy could only last as long as people didn't realise that they could vote themselves as much as they wanted from the public treasury. Democracy has in fact survived that realisation, but only because voters have been persuaded that the other systems of government are so awful that they'll get more under democracy. And they do: in a democracy, everyone steals from everyone else, whereas in all the other systems, a small political elite plunders the population with a ruthlessness and efficiency the people as a whole can never quite manage to do to itself.

P.J. O'Rourke, "I'd love to hear a politician say: 'We'll get the second-best minds together on this'", Telegraph Online, 2005-11-13

No wonder GM is in trouble

General Motors, as we all know, is in desperate straits at the moment, but I didn't realize just how complicated their situation is. Here's an example, courtesy of Autoblog:

The so-called "jobs bank" that's mandated by the UAW, where workers go to get paid for years after being laid off, is a concept that many of us cannot comprehend. Why? Not because we wish to be cruel to union employees, but rather because it was designed with the idea in mind that an automaker's layoffs might be temporary and that workers would need to be hired back relatively quickly. If anyone who follows the domestic industry really thinks this is the case nowadays, then, well, I hope you're not driving after consuming those types of drugs, as there hasn't been much "growth" at the domestics since I've been born.

The bottom line here is that the jobs banks is adding an incredible amount of inertia to the cost-cutting process, and the 1/3rd or so of workers that will be "involuntarily separated" from GM in the latest round of cuts will likely not disappear from the payroll for several years because of this. GM is likely to confront the UAW on this one; alternatively, I think the union might stand to gain a lot of favor with the public if they could come up with solutions to problems like this by themselves. As Paul Eisenstein pleads, this would allow the union to "become part of the solution".

Not to bash the folks who will be losing their jobs, but all the times I've been laid off in my career, it's been a little-or-no-warning thing, with no guaranteed pay-off or gradual transition from "employed" to "unemployed". In one case, I had to sue my former employer for my final paycheque and outstanding vacation pay. I think my experiences are more typical of the working world than the GM workers' situation, where they have (in some cases) years of notice that the layoff is coming, and then to have additional pay after the layoff for an extended period of time.

Unions can be good for their members, but this is a textbook case of the union's power endangering the health of the employer and therefore the employment prospects for all the members.

Sony: your father's electronic equipment?

After Sony's PR disaster with the deliberate infection of their customers' computers, The Register asks some key questions about Sony's future:

• How many corporate, government, military, and scientific organizations will ban the use of any Sony CD now on any machine connected to their networks?
• How long until those bans extend to any copy-protected CD made by any music company?
• How long until those bans extend to any music CD, period?
• How many corporate, government, military, and scientific networks have been compromised by the Sony rootkit?
• Have any security breaches occurred on a corporate, government, military, and scientific network due to the Sony rootkit?
• What actions will Sony face as a result of any security breaches?
• How would those corporate, government, and scientific organizations have reacted if a group hostile to American interests had engaged in the same security violations practiced by Sony?

I know my perceptions of Sony have been very seriously impacted by this fiasco: once upon a time I wouldn't have questioned whether a piece of Sony equipment was good value for money. Now, should I ever consider buying something by Sony, I'll have to consider whether I want to encourage the sort of behaviour that current Sony management engages in. (That is, you can be certain that the rootkit nonsense was only the tip of the iceberg.)

QotD: Inflation

Believe it or not, a lot of people think that a little bit of inflation is good. Inflation helps the economy deal with sticky wages and prices. We call wages and prices "sticky" when they appear to get "stuck" at their current level, rather than moving downward when demand for goods or labor drops.

People are very reluctant to accept pay cuts, even when the company is in pretty dire straits. Sticky wages cause problems in the labor market, because they keep the supply of labour in the market too high, and the demand for it too low, meaning that you get a lot of people out of work. It can take a long time for the market to adjust back to an equilibrium state where the number of people looking for work roughly meets the number of people employers want to hire.

Inflation eases the problem of sticky wages by eroding the real value of wages, while keeping the nominal value the same, thus avoiding the psychological hurdle of taking a pay cut. Too much inflation is very bad, but a few percentage points can lube the engine of commerce. It's sort of like cologne: just because one splash is [good], doesn't mean ten is better. Unfortunately, that's a lesson it took the world's central banks a long time to learn.

Jane Galt, "Why core inflation?", Asymmetrical Information, 2005-10-25

New crime: theft of "Hybrid" badges

The city of Baltimore is planning to offer parking discounts to hybrid cars. I predict a quick increase in reports of vandalism as "Hybrid" markings are pried off cars and sold to owners of hybrid-look-alikes.

Softwood lumber

Jon passed along another interesting link, this time on the Canadian-US dispute over softwood lumber:

America has been accusing the Canadian government of heavily subsidizing softwood allowing Canadian producers to sell softwood for low prices to Americans. Think of it as a kind of double-coupon day on Canadian wood products.

This of course is a terrible thing in that American consumers do not take congressmen on important fact finding/golfing missions as US softwood producers do. America remedies this untenable situation by levying duties on the wood products coming in from Canada thereby ensuring that rather than going to American consumers, the savings go directly to the federal government where they belong.

Is Amtrak headed for the junkyard?

I was interested to see this report in the Washington Post about Amtrak:

Amtrak's board of directors has voted to split the train's Northeast Corridor service into a separate subsidiary, a move that railroad officials said would isolate the cost of maintaining the railroad's busiest line.

The subsidiary would manage service between Washington, New York and Boston. It would be owned and controlled by Amtrak but have its own president and management who would report to Amtrak's board.

[. . .]

The Bush administration has favored ending Amtrak subsidies and turning passenger rail into regional services operated by the states with federal grants. Amtrak supporters worried that separating the Northeast Corridor marked the first step in breaking up the railroad.

"If they wanted to break the railroad up, they have to do this," said Ross B. Capon, executive director of the National Association of Railroad Passengers, a group that advocates greater Amtrak funding. "They've laid the groundwork for the administration to push for a breakup."

This is probably a good move, both politically and economically. Amtrak has been a financial drain on the US government since it was first created: it's never earned a profit in over thirty years of operation. There is little economic justification for public subsidy of the system, and breaking the passenger rail system into regional entities is one way of allowing economic routes to start earning their way.

I'm not anti-rail . . . I founded a railway historical society several years ago . . . but this is a case of government doing something that should be left to the private sector. I don't know if long-distance passenger rail can ever be economical in the age of airlines and Interstate highways, but forcing taxpayers to support a system most of them will never use is neither fair nor sensible.

Hat tip to Asymmetrical Information for the link.

Vagaries of pricing or vagaries of politics?

One of the things I was not consciously aware of is that gas isn't the same from state to state:

When voters elect the latest gladhander to their municipal and state governments, the chemical makeup of the gas down at their local pump is not usually high on their list of priorities. BUT if you're an agricultural activist who wants to sell corn to the government to produce Ethanol, or an environmentalist who believes you possess the magic formula for reducing baby-killing smog in western cities, well, that's a different story. These groups are extremely effective at lobbying government at the state and local level to create a "boutique" gasoline formula to further their cause. As a result, Missouri gas isn't good enough to burn in California, whose gas cannot legally be sold in New York City or parts of Arizona.

According to Michael Ports of the Society of Independent Gasoline Marketers of Americas, "Twenty years ago, there were two blends of gasoline offered in three octane levels, and essentially one blend of diesel fuel. Today, there are more than 18 unique blends of gasoline mandated across the nation — again offered in three octane grades — and at least three different blends of diesel fuel." Okay, let's do the math. I make it . . . 59 different blends of gasoline spread out over 50 states. Just to make things that much more complicated, no one refinery produces all 59 blends of gas; nor is any refinery typically dedicated to any one grade.

This certainly explains some of the reasons for gas shortages in some areas: if it's against state law to sell gasoline that doesn't have that particular state's preferred additives, it means that gasoline is much less of a commodity than it should be. Local suppliers can't just draw on supplies from neighboring areas, so they have to raise prices to ensure that they will still have something to sell.

Are we running out of oil?

A calming voice in the current "we're all gonna freeze in the dark" media panic over oil:

According to Daniel Yergin, author of "The Prize: The Epic Quest for Oil, Money & Power", society consistently underestimates the impact of technology during times of shortage: "This is not the first time that the world has 'run out of oil.' It's more like the fifth." When we started pumping oil out of pockets in the ground, we were only able to get a small percentage of what was there. Today, we recover about a third of the oil in any given find, which still leaves two-thirds in the ground.

At $66 per barrel, it makes a lot more sense to develop and deploy the technology needed to get oil from those hard to reach places. Yergin predicts a massive surge in the ability to produce oil between now and 2010: "Many of the projects that embody this new capacity were approved in the 2001-03 period."

History backs him up; over the last 100 years, after a period of oil shortage, market forces converge to create the exact opposite: a market awash in oil. If necessity is the mother of invention, the desire to cash in on $66 per barrel oil is a beloved aunt. New oil acquisition methods, like horizontal drilling and steam injection wells, will result in more oil produced from the same places.

Of course, if the Chicken Little faction gets their way, the government response to the current shortage will make the situation much worse. Clamping down on retail prices or imposing rationing will just extend the gasoline shortage for longer. I don't like paying higher prices for gasoline (and most other things, due to the knock-on effect of higher oil prices), but that's the fastest and most humanitarian way of dealing with the temporary shortage.

Higher prices for oil will spur new exploration, encourage otherwise marginal producers to bring supplies to market, and encourage consumer and industrial conservation. Governments intervening in the market will delay or even forestall these useful developments. As in so many other ways, aside from monitoring the market for fraud, governments serve everyone's interests best by getting the heck out of the way.

Now I have to go buy another book

Kathy at Relapsed Catholic has a link to a book review by Orson Scott Card:

Well, there's a book — and a mini-movement — that is trying to cut through all the fog and insist that we face facts in all sorts of areas of American life. It's called "Freakonomics," and it gets its name from the book Freakonomics by Steven D. Levitt (economist) and Stephen J. Dubner (science writer).

This book should be required reading before anybody is allowed to vote.

Not really. I think democracy absolutely depends on the continuing right of the ignorant and misinformed to make all the core decisions in our society, and I would never place a mandatory restriction like that on people's right to vote.

But I do believe such ignorance should be voluntary. And as long as we can't get the facts on issues like this, how can we possibly become anything but ignorant and misinformed on almost everything?

Certainly the couple of examples Card uses from the book make it sound like very interesting reading indeed.

Update (after lunch): I got a copy at a nearby Chapters. The intro and first chapter are quite entertaining. I'm looking forward to reading the rest of the book.

Update the second: The authors have a blog.

More on the poverty debate

Jane Galt has a go at the current debate on poverty:

Bad peer groups, like good ones, create their own equilibrium. Doing things that prevent you from attaining material success outside the group can become an important sign off loyalty to the group, which of course just makes it harder to break out of a group, even if it is destined for prison and/or poverty. I think it is fine, even necessary, to recognize that these groups have value systems which make it very difficult for individual members to get a foothold on the economic ladder. But I think conservatives need to be a lot more humble about how easily they would break out of such groups if that is where they had happened to be born.

Peer pressure is one of those things that is difficult for someone outside that peer group to fully understand: especially peer pressure backed up by physical force or the threat thereof.

Economics at the micro level

Colby Cosh discusses the real-world situation in Fort McMurray:

Some of you may have noticed that "shortage" is in quotes there, for the sake of good economic form. In an imaginary, perfect labour market with low-to-nil transaction costs, the phrase "labour shortage" is shorthand for "cheap-ass employers." The theoretical answer to a labour shortage (and very often the real answer) is simple: offer better wages. In Fort McMurray the real world's nonzero transaction costs and the sticky-fying effects of labour regulation and trade barriers create what can be called a genuine labour shortage.

Poverty

A regular reader passed along this this link to Whatever on what being poor really means.

Being poor is people who have never been poor wondering why you choose to be so.

Being poor is knowing how hard it is to stop being poor.

Being poor is seeing how few options you have.

Being poor is running in place.

Being poor is people wondering why you didn't leave.

Update: Jon pointed out a few counterposts (linked from SDA) at The Urban Refugee and Least Loved Bedtime Stories v 2.0.

Update the second: Kathy Shaidle suggested this chapter from a work by G.C. Phelps: What the Poor are Like, in the comments to the original post at SDA.

Gasoline prices in Canada

To nobody's surprise, the price of gasoline in Canada rocketed up to an average of $1.26 per litre over the last few days. I saw prices as high as $1.36 over the weekend, and paid $1.23 yesterday at the Esso station near my office. Not all of the price increase is directly attributable to the Katrina aftermath, however:

Gasoline demand in Canada is also expected to diminish, now that the traditionally heavy driving months of July and August are over. But Stoner said that usually takes a few weeks into September before much impact is seen.

Jane Savage, president of the Canadian Independent Marketers Association, said she didn't expect gasoline prices to drop anywhere as quickly as they rose last week.

Savage said wholesale prices of gasoline, set by main refiners like Petro-Canada, Shell and Imperial Oil, went up higher and faster than could be justified by Katrina's damage.

"On the way down, wholesale prices aren't moving as fast, so there's more opportunistic profit-taking happening by the Canadian refiners because they're not moving the wholesale prices down as fast as they're moving down in the U.S.," said Savage from her Toronto office.

Of course, Canada's retail gasoline market is pretty tightly controlled by a small number of players: it's not as competitive as the US market, so the pressure to lower prices can be withstood for longer . . . until one of the oligopolists breaks ranks and lowers their retail prices. We've all seen how price increases are almost instantaneously registered at the retail level, but price reductions seem to take much longer to appear on the pump. This is largely due to the smaller market and therefore the greater ability of the major players to co-ordinate their actions.

Richard Taylor, deputy commissioner of Canada's Competition Bureau in Ottawa, said his office is keeping a close watch on Canadian versus U.S. prices to make sure that cost increases are due to market forces and not anti-competitive behaviour.

"It's a little early to tell what has happened within five or six days, but we're looking at it closely," said Taylor.

"If prices got out of whack and stay out of equilibrium for a long time, then we'd want to know why and we'd go and find out why."

Taylor said there were "very serious consequences" for price fixing, but proof would be needed.

"If it's just what the market will bear, some people call it gouging, there's nothing we can do about that," he said.

"There's no law against charging high prices in times of shortages."

That last statement may not be true much longer, as Canadians react to high gasoline prices by favouring greater state involvement in the industry (ugly shadows of the Trudeaupian National Energy Policy arise).

QotD: Equalization Payments

Perhaps the most fascinating component of [Prof. Thomas] Courchene's paper is his subtle discussion of what, precisely, equalization is for. Is it meant to render every province in Canada equally well off in general? Or is it meant only to correct inequities introduced by the provinces' different geographic and natural circumstances? Or is it meant even more narrowly, as a scheme to ensure that the federal government doesn't accidentally worsen those inequities? Or it is meant merely to discourage culturally harmful labour migration?

There is no official answer to this question, and all the possible answers lead to moral and mathematical absurdities. It's not just that we don't know whether equalization works, as Terence Corcoran observed in the Financial Post yesterday. We literally don't even know what it's meant to accomplish.

Colby Cosh, "Economist plays ethicist", National Post, 2005-09-01

Jane Galt Praises Price Gougers

In spite of the bone-headed moves by California, Hawaii, and possibly other states to imitate King Canute and try to repeal the law of supply and demand, the oil and gas industry still operates in a free-ish market. With the peak summer-time demands for gasoline, prices were already moving upwards before Hurricane Katrina came in to shut down the Louisiana refineries. Expect more upwards pressure on prices in North America until demand drops to meet the existing supply.

There's a finite amount of gasoline to be bought, and as long as demand is higher than the available supply, prices will continue to rise. This isn't "extortion" or "price gouging" or "profiteering". It's economic fact: too many dollars chasing too few goods will mean the goods will sell for higher and higher prices. It doesn't matter whether we're talking about buggywhips or parasols . . . if there's less available than is demanded, prices will rise.

Jane Galt says it much better than I can:

If you cap the price (as some people are making noises about), rationing will take the form of queuing: people will have to wait in long lines for gasoline. This sounds just fine to some activists and academics, apparently ones with a lot of time on their hands. The rest of us, who do not think it would be fun to live in the Soviet Union, recognize that, painful as it may be, prices are in general a better way to allocate scarce resources than lines.

But it hurts! I hear you moan. "What about my Labor Day driving?" Let me translate. What you're really saying when you say "I don't want to pay more for gas" is "I don't want to either use less gas, or use less of anything else". But as a society, we have to use less gas. You, or someone else, is going to have to consume less of the stuff, because we have less than we used to. If you don't want to be one of the people using less gas, then you have to be one of the people using less of everything else. Thus will the market pretty efficiently strip out driving by those who value it least.

Or to put it another way, "Yes, of course it hurts. If it didn't hurt, no one would stop driving."

Go read the whole thing. I don't like paying higher prices for fuel (and, in the long run, everything else), but better higher prices than political controls to cause permanent shortages.

A few hits at H&R

Today is a day of visiting bureaucrats in their lairs for me, so I won't be blogging much until perhaps later in the day. To keep you entertained, here are a small selection of links to Reason's Hit and Run blog:

A basic economics of scarcity primer for George Bush

The loons come out with "explanations" for the disaster

A special damnation from the Homophobes of America

When is an Ontario wine not an Ontario wine?

The answer may well be "all the time" if a proposed temporary change to the Ontario government's labelling requirements for the 2005 vintage, according to a Toronto Star report (reg. req'd.):

The goal is to prop up the VQA-approved, 100-per-cent-made-in-Ontario brands. To do that, wineries propose that they should be allowed to devote more of their scarce grapes to those higher-profile, pricier brands and less to their blended varieties.

The plan is to lower the amount of Ontariograpes required for blended brands from 30 per cent to zero. That means that a bottle of wine from an Ontario vintner could be made entirely of foreign grapes.

"We want to try and keep as much high-quality VQA (Vintners Quality Alliance) wines on the shelf as possible. It's certainly going to help us in terms of brand perception," said Norm Beal, chair of the Wine Council of Ontario, which represents dozens of wineries.

But the vintners and growers only want the change to last one year, to apply to the 2005 vintage bottles that will hit shelves early in 2006. After that, the minimum blend requirements would return to 30 per cent Ontario grapes.

As you probably know from reading the blog, I'm generally a fan of the VQA system, in so far as it promotes higher quality Canadian wines. This is less a quality issue than a regulatory one: the Ontario wineries want to retain more of the locally grown crop — which will be down significantly from previous years — for their premium VQA wines, but that means that the Ministry of Government Services must allow them to sell wines from totally foreign grapes to be sold as "Ontario" wines.

I rarely buy non-VQA wines, so it's not going to directly effect me . . . but if they don't allow the change, it will probably drive up the price of VQA wines. Colour me prejudiced in favour of the change!

A related move by the Wine Council is to ask the LCBO to make the distinction between VQA and non-VQA wines more obvious to consumers:

Currently, both VQA and blended wines sit in the "Ontario" aisle, though in separate sections.Though Beal noted that blended wines say "Cellared in Canada" on the label so as not to completely hide foreign content, he said, "It sometimes can be a little bit confusing. A lot of people don't look at the label until they get their wine home."

And the addition of local-made but entirely foreign-content wines could increase the confusion.

So the groups want a distinct "Cellared in Canada" area — which would be home to the zero-per-cent local content wines next year and the 30-per-cent wines once the proposed stopgap blend change returns to normal.

This is a good move regardless of whether the other proposal is allowed. I hope the LCBO follows through on it.

Hat tip to Jon for the link to the Toronto Star article.

QotD: Travel Writing

The poor-but-oh-so-happy sentiment pops up without fail in any crappy travel magazine version of a visit to Myanmar, Laos, or Nepal (and probably any other desperately poor and badly governed country), in which "the people" are always gleeful, generous, and colorful. I'm not exactly sure what it is about being ruled by insane dictators that makes people so damn nice, but here's an idea: If you're a Western travel writer, or, say, German tourist, and you're going to an impoverished country full of hungry people in which you clearly stand out as someone with money to spend, people might be extra nice to you.

Kerry Howley, "But the People Are So Friendly", Hit and Run, 2005-08-18

Conspiracy theory of the week

An article in this week's Libertarian Enterprise has this rather interesting assertion:

Probably the most important thing to understand about current events is that this is not — and never was — a war about oil itself, but a war about oil from particular sources, the sources controlled by the Bush family's cronies. And their excuses grow more threadbare every day. There is now a considerable body of evidence — shared with us generously by George Crispin (give him a Google) — that reserves that were once thought depleted are filling up again from underneath, as new oil is produced, not by any biological process, but by the basic pre-biological processes that eventually gave rise to life on Earth.

Just what Fred Hoyle predicted decades ago — so much for "peak oil".

Conspiracy fans, start your engines!

QotD: Value

It is not that pearls fetch a high price because men have dived for them; but on the contrary, men dive for them because they fetch a high price.

Richard Whately, Introductory Lectures on Political Economy, quoted on the Library of Economics and Liberty site.

The Merck Mess

Jane Galt explains why the recent Merck case could be an utter disaster for pharmaceutical research in the United States:

According to the Wall Street Journal, jurors were swayed by things that simply shouldn't have been a factor — an irrational belief that the CEO should attend the case (Merck is sued hundreds of times a year; should the CEO stop running the company so the jurors can feel special?), and even more disturbingly, a desire to get on Oprah. You only get on Oprah if you find for the plaintiff.

Every successful big lawsuit against a pharmaceutical company reduces the capital available to the industry, and the willingness of the industry to spend capital on developing new drugs, rather than novel ways to package things already on the market that they haven't been sued for. As Richard Epstein says, it's no good saying you only want to target the bad companies; investors have no way of telling, in advance, which companies jurors will decide are "bad". This case was widely viewed as a slam dunk for Merck, given that the plaintiff's deceased husband had neither the use profile, nor the cause of death, associated with Vioxx's problems. In the case of companies that are misbehaving, that is a cost we have to bear. But there seems to have been little evidence that Merck was misbehaving, and no scientific evidence that the drug caused the death the plaintiff was suing over.

No matter how you look at the case, it's bad news for patients, investors, and the pharmaceutical companies all around. Richard Epstein indicates what may need to happen:

Much as I disapprove of how the FDA does business, we must enact this hard-edged no-nonsense legal rule: no drug that makes it through the FDA gauntlet can be attacked for bad warnings or deficient design.

QotD: Individualism

Liberals say, "It takes a village" to make a society great and strong.

The conservatives reply, "No, it does not take a village; it takes a family."

Both sides are wrong. It takes an individual. It takes an individual to accomplish even modest goals. It takes a special kind of individual to accomplish great things. More often than not, individuals accomplish what they do in spite of the family, or in spite of the village.

It takes an individual to think, conceptualize, plan, and create. It takes an individual to rise above mediocrity, fear, and toward new discoveries.

"Families" do not work, study, and make a living. Individuals do. "Villages" do not discover electricity, or cure terrible diseases. Individuals do. Families and villages are not mystical entities. The are comprised of individuals. It is the brightest, and most creative, of those individuals upon whom the family and village depend.

Michael J. Hurd, "It Takes An Individual", Capitalism Magazine, 2005-08-11

Posted by Nicholas at 12:51 AM | Comments (0)

QotD: Comparative Advantage

To produce the wine in Portugal, might require only the labour of 80 men for one year, and to produce the cloth in the same country, might require the labour of 90 men for the same time. It would therefore be advantageous for her to export wine in exchange for cloth. This exchange might even take place, notwithstanding that the commodity imported by Portugal could be produced there with less labour than in England. Though she could make the cloth with the labour of 90 men, she would import it from a country where it required the labour of 100 men to produce it, because it would be advantageous to her rather to employ her capital in the production of wine, for which she would obtain more cloth from England, than she could produce by diverting a portion of her capital from the cultivation of vines to the manufacture of cloth.

David Ricardo, On the Principles of Political Economy and Taxation, quoted on the Library of Economics and Liberty site.

Steve Stirling interview

S.M. Stirling is a science fiction author whose more recent works are very good indeed (just skip the early "Draka" stuff unless you've got a strong stomach). I've certainly enjoyed his Island in the Sea of Time books and the more recent Dies the Fire. Glenn Reynolds has an interview with Stirling at his Tech Central Station site:

GR: Your novel "Dies the Fire" — and for that matter, earlier books like "Island in the Sea of Time" — depends a lot on ordinary people having hobbies that turn out to be pretty useful. That's partly a plot device, of course, but do you see the widespread possession of all sorts of cottage-industry skills as a good thing?

SS: Well, it's fun for the people who do it, and having a broad skills-base is always a good thing. It's also a sign of the quirky individualism of the American population, also a positive factor.

GR: Do you think that people are more inclined to develop those sorts of hobbies as society gets richer?

SS: Certainly in an absolute sense; you can't afford the time if you're scrambling to stay alive 24/7.

GR: In writing your books, did you interview or observe a lot of armor-makers, SCA types, etc.? Or was it just based on longtime personal experience? What do you think motivates people to take up hobbies like that?

SS: I've moved on the fringes of that set for a long time; and I also made contact with a lot of them specifically for this series. As to motivations . . . it's romanticism, of course, the same thing that makes people read books like . . . well, like mine! Living it out is a more recent development, but as you say, people have more spare time these days.

I was one of the people who provided some input — although my contribution was microscopic compared to many others who were in contact with Steve.

It is interesting that some of the fastest growing hobbies today include things like woodworking and other "creative" no-longer commercial skills and activities. It is quite possible that there are more active woodworkers, potters, glass-blowers, and the like than at any time since the end of the 19th century: we've grown to appreciate the appeal of the hand-made one-off item due to its rarity (our grandparents were delighted to discover that mass-produced items were cheaper and more dependable). This is a luxury of our relative affluence: we can value the aesthetic appeal more highly because we can more easily meet our basic economic needs without undue strain. Mere functionality is assured, so we can place more emphasis on the beauty or other appealing aspects of everyday items.

Hat tip to Samizdata.

QotD: Wal-Mart

Our research shows that Wal-Mart operates two-and-a-half times as much selling space per inhabitant in the poorest third of states as in the richest third. And within that poorest third of states, 80 percent of Wal-Mart's square footage is in the 25 percent of ZIP codes with the greatest number of poor households. Without the much-maligned Wal-Mart, the rural poor, in particular, would pay several percentage points more for the food and other merchandise that after housing is their largest household expense.

So in thinking about Wal-Mart, let's keep in mind who's reaping the benefits of those "everyday low prices" — and, by extension, where the real conflict lies.

Pankaj Ghemawat and Ken A. Mark, "The Price Is Right", New York Times, 2005-08-03

QotD: Financial Risk

I believe that it is [. . .] men of business, of slight education and of active temperament, who have made money rapidly, and who fancy that the skill and knowledge of a special trade which have enabled them to do so, will also enable them to judge of risks, and measure contingencies out of that trade; whereas, in fact, there are no persons more incompetent, for they think they know everything, when they really know almost nothing out of their little business, and by habit and nature they are eager to be doing.

Walter Bagehot, The Postulates of English Political Economy, quoted on the Library of Economics and Liberty site.

Co-generating wind power not financially viable

Colby Cosh links to a post at Sambal talking about the economics of domestic wind power:

Installation cost, including hardware and labor, is estimated at $25k. More than I have in my wallet, but that's okay, maybe we can finance it. It takes money to make money, and the power is free, right? So what the ROI, or, in terms the efficiency types like, the payback on that puppy? The calculator knows how much power costs here, so it can work all that out.

The answer is (drumroll please): 91 years. No typo, ninety-one. I'll be dead, and probably my kids too, and no doubt my house will have been gone for decades before it pays off. Oh yeah, not to mention the turbine itself, which has only a 25 year life expectancy.

Wow. That's even worse than I would have expected!

So much for the hopes of going "off the grid" with your own wind power generation capability.

Free market environmental re-interpretation

Over at The Commons Blog, they're re-examining the underlying story to The Lorax by Dr. Seuss:

Paul Feine of the Institute for Humane Studies suggests the Lorax is subject to alternative interpretations. Viewing the tale of the Lorax through an institutional lens, ruin is not the result of corporate greed, but a lack of institutions. The truffula trees grow in an unowned commons. (The Lorax may speak for the trees, but he does not own them.) The Once-ler has no incentive to conserve the truffula trees for, as he notes to himself, if he doesn't cut them down someone else will. He's responding to the incentives created by a lack of property rights in the trees, and the inevitable tragedy results. Had the Once-ler owned the trees, his incentives would have been quite different — and he would likely have acted accordingly — even if he remained dismissive of the Lorax's environmental concerns.

The story ends with the Once-ler giving a young boy the last truffula seed. He tells him to plant it and treat it with care, and then maybe the Lorax will come back from there. The traditional interpretation is simply that we must all care more for the environment. If we only control corporate greed we can prevent environmental ruin. But perhaps it means something else. Perhaps the lesson is that this boy should plant his truffula trees, and act as their steward. Perhaps giving the boy the last seed is an act of transferring the truffula from the open-access commons to private stewardship. Indeed, the final image — the ring of stones labeled with the word "unless" — could well suggest that enclosure, and the creation of property rights to protect natural resources, is necessary for the Lorax to ever return.

Hat tip to Hit and Run.

QotD: The "Greatest Generation"

Our parents had learned some wrong lessons from the '20s, '30s, and '40s. They learned to love government too well. They learned that government was what rescued you from depression and war. Our parents were very trusting of large governmental institutions. The liberalism that was a seed of the radicalism to come was in our parents, even when our parents were Republicans. They had taken large government for granted.

P.J. O'Rourke, interviewed by Scott Walter, "The 60's Return", American Enterprise, May/June 1997

Four by Dalrymple

As you've probably noticed by now, I'm a fan of Theodore Dalrymple's writing. It's always worth reading his articles, even if you disgree with his premises, because he's reporting on a side of life most of us don't see close-up. The latest issue of City Journal has plenty of Dalrymple content, including a brief article titled The Triumph of Reason?:

In Australia recently, I shared a public platform with an educationist, who had won awards for social innovation in the field of education for disadvantaged minorities. I was looking forward to what she had to say.

I was soon in a towering rage, however. She uttered some of the most foolish cliches of radical education theory, now about 40 years old — theories that I had fondly thought were now behind us, such as the harmful effects upon the children of disadvantaged ethnic groups or families of an emphasis on education as learning, with particular reference to the damage done to their self-esteem by the dominant culture's fetish about reading and writing.

A second article, titled P*ss Off, Copper:

Public drunkenness en masse being now the Briton’s most fundamental human right, and it having been noticed that urine is eroding the fabric of Soho’s old buildings, the local council has wisely ordained that white plastic urinals be placed in the streets on Friday and Saturday nights for the use of revelers. That way, the ancient brickwork will be preserved and the sweetness of the air restored by Sunday morning, after the urinals have been collected.

However, as the German sage once remarked, of the crooked timber of humanity no straight thing was ever made. Competent observers have noticed that many of those for whose use the plastic urinals are placed in Soho each weekend approach them and then — miss.

Third is a look at Malaysia:

When you arrive into Kuala Lumpur airport, you are warned in writing and by the air stewards that the mandatory death penalty is in force for drug smugglers in Malaysia. For some strange reason, this warning makes you feel guilty: could someone have secretly loaded your luggage with drugs between check-in and boarding?

Surely the policy keeps Malaysia drug-free? But I learnt, in the first newspaper that I read after arriving, that Malaysia intends to start a needle-exchange scheme and institute a methadone-substitution program for its drug addicts, all in the name of harm reduction. The death penalty for drug smugglers notwithstanding, Malaysia seems to have quite an HIV problem: officially 60,000 people are seropositive, though unofficial estimates put the real number at 300,000 — 5 times the rate of the United States.

A much longer article on Ibsen rounds out the Dalrymple-fest.

Show your opinions about "random" searches

Julian Sanchez rounds up the latest ways to show your opinion about the *cough* illegal *cough* random searches on the New York subway system:

Via BoingBoing comes a line of Fourth Amendment gear perfect for New Yorkers heading into the subway under new search rules. For the civil libertarians, there's a hep yellow messenger bag with the text of the Fourth Amendment and "I do not consent to this search!" appended in red. For those of you who get goosebumps from the snap of a latex glove, on the other hand, there's a charming thong informing your favorite authority figure that you do consent to a search.

Capitalism in action. Gotta love it.

Social Credit made simple

There's an interesting essay posted at Gods of the Copybook Headings about the time that Alberta "went crazy":

Social Credit? What's that you ask? Some kind of Commie 1930s scheme that briefly held sway and then faded. No, in fact it was an attempt to save capitalism from itself. Capitalism, however, needs saving only from its enemies and occasional false friends. It works just dandy, if you leave it alone. Meddle, even a little bit in the wrong places, like, oh say the money supply, and Kaboom! The economy can implode, as it did when the American Federal Reserve decided it knew better than global capital markets and botched interest rate adjustments in the late 1920s.

The Smoot-Harley Tariffs, Herbert Hoover's jaw-boning large corporations not to cut wages, and an unnecessary interest rate hike produced a perfect economic storm. The result was the Great Depression. Economies are funny things, at least on the surface. Huge chunks of a modern economy can be re-directed toward state expenditure, vast bureaucracies can regulate business to a maddening extent and yet an economy still continues to function. Heck, it even grows a bit. Problem is not government intervention per se, but how it intervenes. The Holy Trinity of a market economy, its nerve system without which it cannot function are: relatively unhampered prices and wages, stable money supply and comparatively free capital markets. In 1929 and 1930 the Hoover Administration and the U.S. Congress intervened in all three to a major extent. Yet, as is so often the case, the blame fell not upon the interventions but on capitalism itself.

I must admit that I'd never quite grasped just what "Social Credit" was all about . . . the raw stuff — the 140 proof version — was already gone long before I was born. The name lingered on, but almost nothing of the philosophy remained.

And, from what Publius has written, a damned good thing, too!

LCBO and Union at daggers drawn

The LCBO and its union are down to the wire in contract negotiations. If no new agreement is reached, the union will strike just after midnight on the 27th. The union rep, John Coones, has some strong opinions to offer to the public:

But Coones said the possibility of a strike is very real and whatever plans LCBO management has in the works to ensure continued customer service will fail.

"I would suggest that the biggest majority of (stores) will be shut down, and the other ones, if they aren't shut down immediately, certainly they will be within two to three days," he said.

In the event of a strike, he said, workers will not only stop working at the stores and in warehouses, they will also make sure no one from the outside takes over by physically blocking any vehicles trying to move stock.

"We'll have secondary pickets, and any truck that wants to try crossing that line, well, that's up to them, but I don't think it's in their best interest to do that."

Now, given that secondary pickets have been illegal in Ontario for several years (that is, picketing parties other than the employer), this could turn out to be interesting. Are they thinking of picketing grocery stores (who have Wine Rack outlets in them)? Beer stores? Restaurants and taverns?

If the union is trying to lose the public's sympathy quickly, I can't think of a quicker way to do it, frankly.

Virginia Postrel on child labour

Virginia Postrel has an article in the New York Times (reg. req'd.) about the realities of child labour in the third world:

When Americans think about child labor in poor countries, they rarely picture girls fetching water or boys tending livestock. Yet most of the 211 million children, ages 5 to 14, who work worldwide are not in factories. They are working in agriculture — from 92 percent in Vietnam to 63 percent in Guatemala — and most are not paid directly.

"Contrary to popular perception in high-income countries, most working children are employed by their parents rather than in manufacturing establishments or other forms of wage employment," two Dartmouth economists, Eric V. Edmonds and Nina Pavcnik, wrote in "Child Labor in the Global Economy," published in the Winter 2005 Journal of Economic Perspectives.

Their article surveys what is known about child labor. Research over the past several years, by these economists and others, has begun to erode some popular beliefs about why children work, what they do and when they are likely to leave work for school.

When he started working on child labor issues six years ago, Professor Edmonds said in an interview, "the conventional view was that child labor really wasn't about poverty." Children's work, many policy makers believed, "reflected perhaps parental callousness or a lack of education for parents about the benefits of educating your child." So policies to curb child labor focused on educating parents about why their children should not work and banning children's employment to remove the temptation.

Recent research, however, casts doubt on the cultural explanation. "In every context that I've looked at things, child labor seems to be almost entirely about poverty. I wouldn't say it's only about poverty, but it's got a lot to do with poverty," Professor Edmonds said.

This certainly flies in the face of most western readers' assumptions about why child labour is so widespread in the third world: almost everyone seems to assume that it's a cultural norm, not an economic need, that keeps children out of the education system.

Some good news out of Africa

I remember reading about "microloan" operations in third world nations back in the early 1980's and thinking that it had immense possibilities for improving the lives of impoverished people. It's exactly the sort of thing that governments don't want to touch: the amounts of money are microscopic, there's no big media reward for getting involved, and there are no photo-ops for presidents, prime ministers, and CEOs. All it does is provide the kind of help that seems to work the best:

K-Rep gives tiny microloans to people who are too poor to be of interest to conventional banks, who always demand collateral in the shape of a vehicle or real estate in case the loan is never repaid.

Because the poor have no collateral to pledge, they tend to stay poor. All over the world, poor people are denied the loans that may help them get onto them up the business ladder, like Mr Siasamallisi did.

K-Rep is not itself a charity. It charges a market rate of interest and demands repayment of the loan pretty quickly.

But instead of demanding substantial property as collateral, K-Rep follows the Gramin principle made famous by the microcredit bank of the same name in Bangladesh.

It uses the assets of the poor in place of property, in particular poor people's reputation.

K-Rep's lending officers go out into the shanty towns to speak to friends and neighbours of the would be borrower.

Often the loan is extended to a group of people, acting as cross-guarantors.

This is precisely the people who need access to funds, to create their own businesses, or to expand existing ones. Pouring billions of dollars into the central government of a third-world country gives the sort of big-ticket, big-media, photo-op-rich splash that lending governments love: they reap huge PR benefits, regardless of the actual success or failure of the dam, power plant, manufacturing facility, or what-have-you. And that's a positive outcome compared to the platinum-plated Mercedes fleet, the squadrons of high-tech fighter-bombers, or the other kinds of ill-advised purchases indulged in by president-for-life types.

Hat tip to James Bryant for the link.

A message from an alternate reality

On one of my professional mailing lists, there were dozens of messages of sympathy for our UK-based colleagues after yesterday's attacks. The moderator called everyone's attention to the nature of the list and asked everyone to return to the topic at hand — there are several thousand members of the mailing list, and if it is allowed to go seriously off-topic, it can get very ugly. A few hours after the moderator's call, a highly incendiary message was posted.

I'm just going to include a couple of paragraphs from this person (whose identity I'll not reveal, out of pity):

Clearly, the horrors inflicted on London today are criminal. But I hope that at least some folks understand that this kind of incendiary behavior is revenge for the many transgressions inflicted on innocent non-Western peoples by Western business and political practices.

First, we have to accept the writer's notion that the "West" is rich only because the rest of the world is not. Farcical though it may be to assert, the writer clearly believes this. Most of the poorest places in the world are not poor because Britain, France, or America came in and hoovered up all the wealth; they're poor because they lack basic human and property rights, access to justice, and the means to protect themselves and their homes, businesses, and property. Where might means right, the only people with security are the ones with the guns . . . and only so long as they're stronger than other tribes, factions, or gangs.

Western business practices can have little effect on cultures with no rule of law: the only way to conduct business in areas like that is to cut deals with the local powers-that-be or to become a local power. This is not good for the company conducting the business: they're not good at weilding power, nor should they be. Their core competency is conducting business, not becoming local bully boys. It's no wonder that when companies do attempt it, the results are not good.

The bombings are not right, but the causes can easily be seen if one wants to look at the underpinnings soberly. Taking other folks' lands and resources, despoiling legitimate leadership, and perpetually impoverishing them can't be a good thing in the long or even the short run.

Of course not, that's why only governments in the west actually have the power to "take other folks' lands and resources". Everyone else in the west is restricted to purchasing what they want (eminent domain is a separate question). As for "despoiling legitimate leadership", I'm not sure just what the writer thinks. Is a non-elected President-for-Life, absolute monarch, or Military Junta the kind of "legitimate leadership" anyone wants to see? In far too many places, that's what the government looks like.

The purpose of government is to provide protection from external threats (the military), protection from internal crime (the police), and basic justice (the courts). Without those three basic tasks, it's not a government: it's an occupying power, an armed gang, or anarchy. Too many governments in the poorest countries much more resemble a biker gang than a parliament.

Businesses are not serving their shareholders or customers by "permanently impoverishing" anyone. Governments, on the other hand, can do nicely out of creating impoverished groups or further oppressing already impoverished groups: the scapegoat principle works very well, I'm afraid. It provides a handy relief valve for dissent and anger: blame this minority racial, ethnic, or cultural group for the problem and let the majority rampage for a bit. It's a long-established pattern because it works for so many tyrants for so many years.

Take Africa... In the last 30 years, Africa has paid more tht double what it borrowed from the World Bank, the IMF and other Western financiers. The chickens are coming home to roost...

He's right, you know: and it could happen to you. Borrow money at a fixed interest rate, but only pay the interest on the debt. For the economically unsophisticated, an unexpected thing happens: the principal never gets reduced, so there's always money owing. For a person, the choice is to start paying down the principal amount or declare bankruptcy. For a nation, the same choices apply. If enough nations in your region go the bankruptcy route, it makes it harder for any nations to borrow money except at a higher rate of interest (in other words, the lender recognizes that it's a riskier loan, so the profits have to be higher to cover the potential losses).

All of this is not to say that there are not things in the third world that could be much better if Western countries and Western businesses had done things differently in the past. But there is much more that could be done by the governments of those poorer nations to improve the lot of their people.

Maybe justice in the Middle East can change the course of the mess we are all in...

The Middle East is a special case. They are, generally speaking, sitting on huge reserves of oil which is in high demand. They don't need to borrow money — they are lenders instead. Many of those countries are potentially quite wealthy, if the profits from the oil weren't directed into personal wealth for rulers, sheiks, imams, generals, and kings. Justice in most of the Middle East is not available to the common citizens . . . except in Israel and (to a lesser degree) in Turkey. The rest of the region has the kind of autocratic, klepocratic, and non-democratic governments already discussed. There are some signs of improvement (local elections, elected bodies being given more scope, reform of justice systems, etc.), but they generally still have quite some way to go.

Victorinox struggles on, post-9/11

I'd never considered the impact of increased paranoia of airline security arrangments on the manufacturers of Swiss Army Knives:

"It was an absolute catastrophe for us," Elsener says. "Until then our knives had sold very well both in duty free shops and on board planes. Most airlines sold them, including British Airways. Then suddenly this distribution was closed. It was zero. The merchandise came back to us. This was really very hard." Under new airline regulations, passengers could no longer carry the Swiss army knife in their hand luggage. Those who didn't comply had their knives confiscated — and they weren't returned at the other end.

The effects were sudden, and devastating. Sales of Swiss army knives dropped by 40% almost immediately. Finally, in April, Wenger SA — the only other Swiss firm allowed to produce Swiss army knives — went bust. Elsener's company, Victorinox, named after the mother of the founding Elsener, decided to rescue its rival, buying it for an undisclosed sum.

Despite 9/11 it would be an exaggeration to talk about the knife's demise, however. The Elseners are still manufacturing 34,000 Swiss army knives a day in the tiny village of Ibach.

The pro-DD(X), anti-BB arguments

The son of Admiral Zumwalt takes issue with the faction who want to scrap the planned DD(X) class of ships and in their place re-activate the Iowa-class battleships:

A comprehensive systems analysis approach to this issue involves weighing numerous cost factors — hidden as well as directly related to hard costs of a battleship's modernization.

The defense budget's costliest element is manpower. An Iowa Class battleship requires a 1,500-member crew. That many sailors could man 10 DD(X) destroyers. No one on active duty in the Navy is trained to operate a battleship's steam plant, weapons and fire-control systems. Training personnel to do so would involve a costly expansion of the Navy's school system.

There are limited shipyard facilities capable of handling larger warships like battleships and carriers. Reactivating the former would greatly impair maintenance support of the latter absent additional funds for expanding the facilities.

The battleship is a single-mission ship, with no viable anti-air or antisubmarine capability. Unlike the DD(X), which has a multiple mission capability and can operate independently, battleships require escort ships to defend them against those threats.

Hat tip to SOMNIA.

QotD: Pharmacology

The Pharmacological industry is the art of making billions from milligrams.

Gerhard Kocher, Vorsicht, Medizin! Aphorismen zum Gesundheitswesen und zur Gesundheitspolitik, 2000 (English translation provided by the author)

L. Neil Smith pans the Supremes

L. Neil Smith has a column in this week's Libertarian Enterprise on the hot topic of the sudden lurch to the authoritarian side by the US Supreme Court:

The last couple of weeks have been illuminating, to say the least. In two separate declarations, the United States Supreme Court has given us all a lesson in civics that nobody should ever be allowed to forget.

In the first, the court held that, no matter what the Constitution says (or doesn't say) to the contrary, the federal government has the legal power to outlaw marijuana — or anything else, for that matter — and that power supercedes any right a state or the people have to disagree.

In the second, it asserted that government has a legitimate power to steal your home or anything else you possess and hand it over to whatever crooks shelled out the biggest contributions the last time around.

In some ways, the two decisions, Raich and Kelo are no surprise: they merely confirm that what the federal government has been doing for the past umpteen years is legal. Just like in Canada, Americans don't really own their property: it can be taken if the government chooses to, and some notion of compensation is offered. The legal marijuana movement has taken a huge body blow, as the court decided that even cancer patients, growing a few cannabis plants for their own use, are somehow having an impact on interstate commerce, and therefore the government can arrest them.

It's been a bad month for personal and economic liberty.

More on the United Airlines pension situation

Ian Welsh has an interesting post up about the ongoing pension problems at bankrupt United Airlines. He starts off by quoting The Economist's "Buttonwood" column (subscription may be required for that link):

[I]n America... people are speaking openly of a taxpayer bail-out to rival the rescue of America's savings-and-loan (S&L) sector in the late 1980s. The pensions insured with the PBGC showed a shortfall... the PBGC needs an infusion of $92 billion in today's dollars to meet its future obligations....

Companies and asset managers have tended to take a laid-back approach to pension underfunding.... What is worrying about the latest numbers is that we are seeing them towards the end of a period of strong economic growth and corporate profitability, neither of which is likely to continue....

Ian points out what should be the most obvious point about this:

Let's get this straight — corporate officers knowingly underfunded pension plans, obeying the letter of the law but violating its spirit. But while doing so they also did something else — they knowingly decided to take a chance on violating their contractual obligations. In fact they didn't just take a chance on it — they made decisions which would almost certainly lead to them failing to meet their contractual obligations to their retired workers.

This illustrates one of the big problems with trying to legislate economic activities beyond the basics of providing penalties for force, fraud, and deliberate malpractice. The corporate officers who made those decisions clearly were more influenced by the "letter of the law": and they are, in effect, being rewarded for paying closer attention to the legal side than the business side:

Lets take United. What would have been the consequences of them going out of business? Their planes would have been bought up, their other assets would have been bought up, and facing less competition the price of airfares might have gone up slightly, making every other carrier slightly more solvent. Yes, their workers would have lost their jobs, but compared to pensioners they are in a better position to deal with it. Furthermore, if there isn't excess capacity in the industry they stand a decent chance of being rehired and if there is excess capacity then someone's jobs were going to be lost soon enough anyway.

But the consequence of relieving United of its debt, as Hale has pointed out, is that every other carrier who hasn't reneged on their pension plan, is now under pressure to do so, because they are operating under a liability which United is not. Moreover, lets face facts — United's management are incompetent. They fucked up. Instead of being punished for it, they have been rewarded by being given another chance.

There is a huge problem with the laws, as currently configured, when bad business decisions are rewarded. Bankruptcy is supposed to provide a safe harbour for companies which have a chance to recover, not a weapon for weaker companies to pull down competitors in their industry to the extent of forcing otherwise healthy companies to also take refuge in bankruptcy.

Ian offers a suggestion, which addresses some of the current flaws, but may well make other problems more acute:

So let me make a modest proposal. Pension obligations are effectively debt — effectively money owed to retirees.

If a company goes into bankruptcy and claims they need to dump their pension commitment then perhaps the pension commitment should have higher priority than the interests of the shareholders? Perhaps if a company can't meet its debts, can't meet its obligations, then it should actually be allowed to really go bankrupt. And perhaps, when it comes time to liquidate its assets, those should go to the pension fund first, to other debt holders second, and to the current shareholders third.

Ownership of a firm includes responsibilities, even share ownership. One of those, is that in exchange for a chance for better returns, you accept that you have very little collateral when the firm goes bankrupt.

Not fitting anywhere on the left-right spectrum

I started writing this last night, and foolishly didn't bookmark which of the dozens of blogs I might have been visiting when the original thought struck me — which is why the post started off as if you'd already read "someone else's post" to which I was sort of responding. After that, the wine kicked in and I think I must have been free-associating, so I'm not even sure where I was going when I wrote it . . .

[Very early this morning] I just posted a comment over on someone else's blog, on a post which (so to speak) broke the world down into two camps: the left and the right.

I've never been comfortable with belonging exclusively to either camp: I'm pro-Capitalism (Right), but also pro-Freedom of Speech (Left), but I'm pro-Drugs (Left) and also pro-Military (Right). I'm pro-SSM (Left), but also pro-RKBA (Right). I'm against laws that restrict freedom of association, but I'm also against vandalism, trespassing, and picket lines.

In general, I'm in favour of ever-expanding personal freedoms, so long as they don't infringe on the freedoms of others. This means that I don't have a natural home in any of the major Canadian or U.S. political parties: each of 'em wants to restrict the freedoms of others in some major way.

On a not-very-closely related line, Perry de Havilland discusses the ongoing disaster that is the British Conservative party. It lost its way after John Major's last premiership (and a strong case could have been made that it was during, not after), and has been languishing in the electoral wilderness ever since. Tony Blair has successfully grabbed every plank of the Tory platform that had any appeal outside the hard-core Conservative grognards, and left successive Tory leaders with little to offer than either Little-Britainism or New-Labour-Lite. If Blair's eventual successors can keep this going, the Tories will swap places with the third-place Liberal Democrats permanently.

The Canadian Conservative party isn't much better off: Stephen Harper has brought them as close to power as they've been in over a decade, and even he hasn't been able to accomplish it — even with the most corrupt administration since Confederation as an opponent. Paul Martin is either the smartest guy to occupy 24 Sussex Drive (if he's been knowingly involved in the corruption) or the most clueless guy (if, as he claims, he knew nothing about the Sponsorship shenanigans).

Colby Cosh on the liberating power of eBay

Colby Cosh's latest column is available online at National Post:

[I]n a decade, the company — founded on a lark by American coder Pierre Omidyar, and turbocharged by Montreal's Jeff Skoll — has transformed the way we see the world. Millions of people who think Friedrich Hayek is Salma's dad have learned first-hand about the behaviour and the signalling function of prices. Like a coal-miner's lamp, eBay has cast light on hidden wealth in the unlikeliest corners. It turns out there's money in everything from old cereal boxes to eight-track tapes to chunks of scenery torn from classic movie sets.

As if by magic, middle- and working-class people have been made free to engage in entrepreneurship without grovelling before a loan officer. Last year, the company estimated that 430,000 people worldwide were earning a living on eBay transactions. Think about that: nearly half a million souls liberated from the time-clock, the boss, and the carbon-belching daily commute. On these grounds alone, eBay may have done as much for human dignity as any motive force in history. Its unorganized, unsalaried "employee" base has become one of the planet's greatest clusters of labour. Citigroup, which has components dating back to 1812 and is said by Forbes to be the world's largest company, boasts a mere 300,000 employees.

I'm flat-out astonished at that 430,000 people estimate: that's about five to ten times what I'd have guessed. eBay really has been a transformative force if that number is accurate.

Another reason for drug decriminalization

A post at Hit and Run points to a recent study of the strong correlation of increased drug enforcement and increased crime:

A new study by LeMoyne College economists Edward Shepard and Paul Blackley, based on New York state data, finds that drug law enforcement is associated with increases in predatory crime. Possible explanations include diversion of law enforcement resources, violence generated by disruption of drug operations, and increased attraction to property crimes among people deterred from dealing drugs. "At a minimum," Shepard and Blackley conclude, "the empirical findings should raise serious questions about the effectiveness of drug enforcement as a crime control measure, and they suggest that significant social costs arise from existing approaches to drug control."

"Joe" adds the first comment to this post to illuminate a useful point:

Severe enforcement of drug laws changes the way the police interact with, and are perceived by, the residents (including the law abiding residents) of low income neighborhoods. The community policing model that worked so well in reducing crime in the 1990s in places like Boston become impossible when the police behave, and are viewed, primarily as the tough guys who kick in doors and arrest people, rather than the neighborhood beat cop who is part of the neighborhood's scene.

QotD: Entitlement Politics

My grandparents' generation thought being on the government dole was disgraceful, a blight on the family's honor. Today's senior citizens blithely cannibalize their grandchildren because they have a right to get as much "free" stuff as the political system will permit them to extract . . . Big government is . . . [t]he drug of choice for multinational corporations and single moms, for regulated industries and rugged Midwestern farmers, and militant senior citizens.

Janice Rogers Brown, Speech at McGeorge School of Law (Nov. 21, 1997). Linked from People for the American Way anti-Brown quotes page.

Wendy McElroy on the gender imbalance at colleges

Over the past fifteen years, there has been a steady increase in the proportion of women attending higher education and a steady decrease in the proportion of men doing the same thing. Wendy McElroy looks at the issue:

The National Center for Education Statistics (NCES) tracks the enrollment in all degree-granting institutions by sex. From 1992 to 2000, the ratio of enrolled males to females fell from 82 to 78 boys for every 100 girls. The NCES projects that in 2007 the ratio will be 75 males for every 100 females; in 2012, 74 per 100.

In short, your son is statistically more likely than your daughter to work a blue collar job.

The imbalance is much worse for low-income families, however:

Yet King insists there is no "boy crisis" in education despite the fact that data from Upward Bound and Talent Search show a comparable gender gap. (These college-preparation programs operate in high schools and received $312.6 million $144.9 million in tax funding, respectively, in 2005.) Of the students who receive benefits from those college-preparation programs, approximately 61 percent are girls; 39 percent are boys.

King's quoted explanation of the gender gaps: "women make up a disproportionate share of low-income students" who go on to college. Since low-income families presumably give birth to boys in the same ratio as the general population — worldwide the ratio is between 103 to 107 boys for every 100 girls — why are so few boys applying for assistance? A higher drop-out rate might be partly responsible, or boys may have no interest in higher education.

She also points to some trends which may account for more of the growing imbalance:

Among those who acknowledge the "boy crisis," explanations are vary and may all be true. Some point to the "feminization" of education over the last decade, which occurred largely in response to a perceived need to encourage girls. But, if boys and girls learn differently, then the changes may be placing boys at a disadvantage.

Others point to explicitly anti-male attitudes — that is, political correctness — within education. The website Illinois Loop lists "22 School Practices That May Harm Boys." One of them: "'Modern' textbooks and recommended literature often go to extremes to remove male role models as lead characters and examples."

Kleinfeld points speculatively to the impact of increased divorce and fatherless homes on the self-image of boys who lack a positive male role-model.

The ID theft epidemic

Another article in this week's Libertarian Enterprise talks about the rising tide of identity theft:

If Robert Douglas, co-founder of www.privacytoday.com has it right, there were 10 million cases of consumer ID theft in 2004, costing the financial services industry $50 billion and consumers $3 to $5 billion. According to Douglas in an April 14, 2005 C-Span interview, "identity theft" is the most common crime in the country today — as well as the fastest growing.

The crime is so lucrative, it's reported, in some cases organized crime figures have been threatening bank employees just to get customer info. According to a an April 17 article in the Washington Post, data aggregator ChoicePoint recently reported a theft of at least 110,000 identity files, and Time Warner just reported (May 2, 2005) data from 600,000 current and former employees missing. Lexus-Nexus has had 310,000 I.D. files stolen, and The Bank of America, 1.2 million. Just today, June 8, New York Times reports, "Personal Data on 3.9 Million Lost in Transit."

Scary indeed, but it gets even more scary:

According to over-optimistic government sources, you can get your identity back in approximately six years — if you spend thousands of hours filling out the correct forms and making phone calls. Experts say you never can.

Back in the late 1980's, I had a dispute with my bank over a credit card purchase. It was a bill for about $500 from a computer store that I'd done business with about a year earlier. I'd charged a $50 purchase on my MasterCard, and hadn't been back to the store since then. The bank mailed my statement with a new charge from that retailer, so I went to the store to find out what was happening. The store had been chained up by the bailiffs for non-payment of rent.

I got home and immediately called the bank to let them know that the store owner had apparently been fraudulently billing old customers and that the store had been closed by the sherrif. The bank told me, basically, that this wasn't their problem and that I owed them $500. It took me months to get them to reverse the charge, and even then, the reversal was marked as a "temporary credit". It took even longer to get them to remove the interest billed on that charge in the interim.

The good thing was that I had options: I could stop dealing with that bank and switch to a different bank, which I did. Eventually, I closed the account (after finally getting the bank to agree that I didn't owe anything for that incident), and haven't dealt with that institution again.

I don't have that option in dealing with the government — without physically leaving the country. And government files are becoming more and more attractive to ID thieves. Governments in the western world are also much more keen on gathering all your data together in one easy-to-manage database. This, I don't think I need to point out, is a bad thing both for your personal freedoms and for your increased risk of ID theft.

Oh, and just glide over the article linked above when the author takes a side-trip into the swamp of "income tax is voluntary": believe what you like, the government believes very strongly otherwise.

Not the same as it ever was

I've had this conversation with folks many times over the last few years, where some assertion is made that "pollution has never been this bad" or words to that effect. In almost every case, the person making that assertion is under 30. You'd pretty much have to be under 30, or to have lived far, far away from major population centres to seriously believe that.

Pollution is a problem. I don't dispute that. What I dispute is the notion that we are living in an ever-more-polluted world. As a child in the 1960's, I lived in an industrial town in the northeast of England. It was utterly filthy, 24/7/365. The streets were dirty, the air was visibly polluted, and the water stank (you needed to be a very brave and/or very stupid kid to go into the river). Most cities in England were like that, to a greater or lesser extent.

My family came to Canada in 1967 and we eventually settled in what is now Mississauga. The air quality was definitely better than what I'd grown up with, but we still had some days where the horizon was brown with pollution. Lake Ontario was visibly polluted, and the beaches were often unsafe due to sewage and industrial and chemical pollutants. The quality of life was definitely better in Canada than it had been in Britain.

Over the past 30+ years, most North American cities have become less polluted, not more. The air is less toxic, not more, and the water is far cleaner than it was. But that's not the message we get from government, media, and activist groups; they are almost unanimous in their outlook that things are worse and getting more so. They all push for more government controls to "save us" from ourselves. More police power to be handed to central authorities, more economic control to be ceded to bureaucrats, and more money to be spent on propagandizing "the truth about the environment".

It's not just environmental pollution that fits this pattern, but the environment is one of those issues that few people have negative feelings about, and most people can be counted on to instinctively (if you will) react to stories about degradation of environmental systems.

The more we can be persuaded that things are going to hell, the easier it is for us to decide that handing the keys over to the government can't make it worse. Too many of us are willing to cede that extra margin of self-reliance in so many different areas, either for fear of being responsible or out of mistrust for others' freedom of choice.

Bad news sells more papers than good news. Disasters are more telegenic than business-as-usual. Politicians appear more important when big issues are being decided than when they are discussing amendments to motions to existing legislation. Activist groups are only relevant (in their own minds, as well as in the view of the general public) when they are front-and-centre with their protests, petitions, demonstrations, and fiery denunciations for the TV cameras. Even the most upsetting, most alarming, and most troubling news has a built-in fatigue factor: the public tires easily and boredom quickly replaces the fear, disquiet, or dread. They don't call it the "news cycle" for nothing: novelty is important. All these elements work together to encourage overblown and alarming coverage of anything that can be considered "newsworthy".

On most measurement, things are not getting worse, but that's not newsworthy. Our society enjoys a better lifestyle than our parents' or grandparents' generations did. We still have problems, but the scale and immediacy of those problems is less than those faced just 30 years ago. Jon passed along a URL to a Powerline post which addresses some of these issues, and which triggered this little rant of mine. I thought it was worth bringing to your attention.

Tom Wark on the Sideways effect

Tom Wark writes:

Actor Jason Priestley is filming a new television series entitled "Hollywood & Vines" in which the former 90210 star takes us on a "road trip" to the West Coast's wine regions. The British Columbia native is putting particular stress on his home region where they are producing stellar wines. All this emanates from the success of Sideways.

I've heard word from other very good sources that other wine series are being considered in Hollywood, including one from a Major Producer you all know, but I've been sworn to secrecy on that one. I suspect that advertisers like the demographics associated with wine drinkers as well as the success the subject matter of wine has demonstrated.

<Snark mode=ON>Oh, good. Another way to drive up wine prices by encouraging conspicuous consumption by expense-account boors and trend-obsessed ignoramusi<\Snark>

Actually, given the current market for new world wines, this may be a good or a bad thing: much will depend on where they intend to target in the wine-consuming marketplace. If they spend their airtime doing "Lifestyles of the Rich and Famous Winery Owners", then it'll have no real effect on the price of quality wines.

In China, cigarette smoking is good for you

The Chinese market for cigarettes is 99% state-controlled. As a result, the government spends a lot of time and effort pushing the benefits of cigarette smoking:

Cigarettes, according to China's tobacco authorities, are an excellent way to prevent ulcers.

They also reduce the risk of Parkinson's disease, relieve schizophrenia, boost your brain cells, speed up your thinking, improve your reactions and increase your working efficiency.

And all those warnings about lung cancer? Nonsense.

You're more likely to get cancer from cooking smoke than from your cigarette habit.

Welcome to the bizarre parallel universe of China's state-owned tobacco monopoly, the world's most successful cigarette-marketing agency.

When the monopoly profits from this controlled trade go directly into the government's coffers (or, more likely, the private pockets of generals and high party officials), the chance that a dissenting view will be crushed approaches absolute certainty.

Hat tip to Jon.

Excerpt from Thomas Sowell's newest book

The Libertarian Enterprise has a lengthy excerpt from Thomas Sowell's newest book, Black Rednecks and White Liberals. The book is available (on a link from that page) from Laissez Faire Books for $16.95 US.

What the rednecks or crackers brought with them across the ocean was a whole constellation of attitudes, values, and behavior patterns that might have made sense in the world in which they had lived for centuries, but which would prove to be counterproductive in the world to which they were going — and counterproductive to the blacks who would live in their midst for centuries before emerging into freedom and migrating to the great urban centers of the United States, taking with them similar values.

The cultural values and social patterns prevalent among Southern whites included an aversion to work, proneness to violence, neglect of education, sexual promiscuity, improvidence, drunkenness, lack of entrepreneurship, reckless search fro excitement, lively music and dance, and a style of religious oratory marked by strident rhetoric, unbridled emotions, and flamboyant imagery. This oratorical style carried over into the political oratory of the region in both the Jim Crow era and the civil rights era, and has continued into our own times among black politicians, preachers, and activists. Touchy pride, vanity, and boastful self-dramatization were also part of this redneck culture among people from regions of Britain "where the civilization was the least developed." They boast and lack self-restraint," Olmsted said, after observing their descendants in the American antebellum South.

I haven't read the book myself, so this is more in the way of a heads-up than a recommendation.

News from a universe just next door

Paul Wells entitles this post "Earthquake", and for good reason. First, read the quoted material below, then check the extended entry for the punchline:

"It is false and tendentious to establish a link between private-sector participation in the health-care system and the degree of progressiveness of a society. How can you claim that societies like France, England or Sweden are less socially advanced than Quebec on the basis of private-sector participation in their health systems? It's easy to see this makes no sense.

"The Scandinavian countries themselves have private participation in their health systems. As far as I know, nobody accuses them of being socially backward."

Here's the alternate universe part of the whole thing:

This statement was made in Quebec's National Assembly during an emergency debate on Friday by Philippe Couillard. He is Quebec's minister of health.

He is a Liberal.

Poverty in Ontario

Jon sent along this link to a Toronto Star article, with the comment that "this cannot be a Toronto Star editorial!" It is rather surprising to find that paper taking a such a careful stance on this notoriously hot-button issue:

Tempting as it may be for social activists to portray the poor in romanticized terms, it is not the basis for sound public policy. That is one of the lessons that emerges from a three-year study of 40 lower-income families struggling to survive in Ontario in the late '90s. The final report, entitled Telling Tales: Living the Effects of Public Policy, was released yesterday.

It is a useful antidote to a lot of the fuzzy thinking, academic theorizing and simplistic analysis that goes on in the social policy field.

The first quoted paragraph is already enough to have me checking the date, to ensure that it's not an April 1st story. But it gets more interesting still:

Not surprisingly, they found that almost none of their subjects moved up the socio-economic ladder. Even those who found work slipped back into poverty over the course of the study.

But there were surprises in the reams of data the researchers collected.

One was that a job — long considered the mainstay of a household's survival — actually plays a fairly limited role in keeping low-income families afloat. Participants cobbled together income from a variety of sources, got help from relatives and friends and depended on social supports such as subsidized housing and food banks. If any of these lifelines snapped, they were in crisis.

In other words, having raised a couple of generations of Canadians who accept and are perfectly comfortable with the concept of being dependent on others, there are now significant numbers of low-income families who are totally dependent on others for their necessities of life. The plight of those individuals and families when circumstances change is desperate indeed: they have no other resources to draw upon.

A second eye-opener was that people who have been cruelly stereotyped often do the same thing to others. It didn't take long for some of the study's participants to display racist, sexist, anti-immigrant and homophobic attitudes.

This one flabbergasted me. I grew up in relatively low-income areas, and it was far more common to hear all sorts of attitudes that — even for that time and place — were significantly more intolerant than would be acceptable in the wider society. I don't know whether the surprise is greater for the researchers or for the reporter, but clearly one or both are less familiar with life in poorer areas of town than they should be.

A third finding that caught them off-guard was that sole-support mothers don't want the government to hound "deadbeat" dads. Experience has taught them that these policies don't work, infuriate their former spouses and place them and their children in danger.

Another "duh" finding, but perhaps I should be happy that they were willing to publish it: it's certainly true that the current emphasis of the courts — punishing most or all non-custodial fathers pre-emptively — is a disaster for the very people who are supposed to benefit, the custodial parent and the children themselves.

Finally, the authors discovered to their dismay that most of the training programs offered by Ottawa and Queen's Park are totally out of synch with today's job market. They are designed to deal with brief interruptions in employment. Yet most of the participants in the study had never known — and never expected to know — steady work. They juggled two or three minimum-wage jobs or hired themselves out through temp agencies. The last thing they needed were courses in résumé writing or job-search techniques.

The Canadian government has been moving towards more private solutions to the unemployment and job-retraining areas, but the problem seems to be that public-service inertia transfers to the private firm, rather than initiative and task-orientation transferring to the public sector. This is typical of the kind of "privatization" governments tend to prefer: block transferring a job to a sole-supplier who is partly or wholly bound by pre-existing public service rules.

Occam proposes a Free Province Project

Occam is tossing out the suggestion that Canadian libertarians and small-government conservatives should emulate the Free State Project:

[. . .] there is simply no place for you in Canada. That country will continue to be governed without regard to your wishes. It will take your money and spend it on things you don't want it spent on, or worse, things you actually find offensive. It's government will do this without scruple, without regret, indeed, with a certain degree of bravado, a certain swagger, if you will. You won't be arrested. You won't be spirited off in the night, or be menaced by government agents skulking about your house. You will, however, be overtaxed and overregulated. The daily comings and goings of your life will come under ever more stringent control and close inspection. Your business will be hampered. Your private property ever more subject to the scrutiny and whim of agents of the state. Though you were born free and grew into an independent, thinking adult, the state will continue to mother you, whether you want it or not. And you do not. You'll carry on, of course, as I am doing, because this is your home, and you are loathe to leave it, but there will come a time when you realize that it has left you.

Jon, my virtual landlord, often comments that right wing bloggers will be the first ones carted off to the "Kyoto Camps". While I don't think that's the way the game will be played, it is hard to believe that the country will stop moving towards the ill-defined socialist paradise which is the inevitable destination if current trends continue.

Samizdata gets on the Olympic bandwagon

It might surprise you to find one of the Samizdata bloggers singing the praises of one of the bids for the right to hold the 2012 Olympic Games:

There is clearly everything to play for in a contest which is far from over and, despite all the predictions to the contrary, London is still in with an excellent chance of winning the right to stage the Games. It is for this reason that I feel compelled to impose upon my fellow contributors and our readers and ask them to join with me in grand effort to get behind the Olympic bid. The Paris Olympic bid, that is.

The amount of money that is wasted by cities and nations in pursuit of the right to host Olympic games is truly staggering. This is a good way to boost the careers of politicians and depress the incomes of taxpayers, for all bidders in general, but especially for the "winners".

The 21st century fight against slavery

Slavery, as everyone seems to believe, was invented just about 1650 (as Africans were abducted to work on American farms) and abolished in 1865. It seems to be presented entirely in an American context — and almost always with white Americans as the only, or at least the most culpable, perpetrators. It must come as a huge surprise to many people, given this extremely faulty background knowledge, that slavery is a huge problem now:

According to the 2005 Trafficking in Persons Report, released by the State Department on Friday, Laos is a significant source of trafficked persons and Thailand a frequent destination. In a few dismissive paragraphs, the authors skim over why this might be so. Trafficked women and children are presented as if lost in a vacuum, their lives stripped of circumstance. Reading the report, it seems completely plausible that a kid from New Jersey might wake up one day as a sex slave in Singapore or a camel jockey in Saudi Arabia.

But such a revelation can still be distorted to provide a very misleading picture of the extent and severity of the problem:

Slavery in all of its forms has become a priority of humanitarian assistance over the past five years, prompting a bumper crop of acronymed NGOs, inspiring turf wars among U.N. agencies, and energizing evangelical Christians in the U.S. Likely because it helps to drum up donations and political support from social conservatives, agencies focus on sexual slavery, which is only one aspect of a much larger global trade that puts men, women, and children to work in factories, fishing boats, and private homes around the world.

In deference to this trend, the State Department report is positively sex-obsessed. The authors devote a whole page to reminding us that "prostitution is inherently harmful" and the U.S. opposes its legalization. The victim profiles don't include a single adult male. In the U.S. media, New York Times columnist Nicholas D Kristof helped cement the myth that trafficking is equivalent to sexual slavery in a slew of confused, sexually charged columns about Cambodian sex workers. The way Kristof tells the story, the cause of sexual slavery isn't poverty, but pimps.

Political agendas set the tone for almost all discussion, and the renewed attempt to eliminate slavery is in no way different. Sex slavery is only a part of the much bigger problem, but it's the most media-genic.

The downside of the recent wine rule change

The recent Supreme Court victory for free trade in wine may have a significant downside, according to Tom Wark:

The Supreme Court ruling, at its simplest says states may concoct nearly any rule for wine shipments within its state as long as they don't discriminate against out of state shippers. Reciprocity discriminates against out of state shippers. It would not be a surprise to see a suit brought against one of the reciprocity states by a party in a limited shipping state or a wholesaler challenging the constitutionality of these laws.

States Could Shut Down All Sales to the Public By Wineries.
I was informed by a person very close to the deliberations on the meaning for the Supreme Court Ruling in Michigan that one interpretation of the decision could be that if no shipping is allowed into the state or within the state by wineries, it would follow that wineries can not sell AT ALL direct to the public. This would be an extreme interpretation, but not out of the realm of possibility. Of course it would be the near total demise of small wineries in states like Michigan.

Given the amount of money floating around, it's not at all unlikely that the worst possible result could be engineered for consumers by the wholesalers and bureaucrats of the various states. Just remember: it's not paranoia if they really are out to get you.

Adventures in the book trade

Gerard Vanderleun used to be a medium-to-large-sized wheel in the publishing business. He reminisces about the first book he edited:

As more and more members of Houghton Mifflin read the manuscript on its way to publication, the clearer it became that Shatzkin was ruthlessly eviscerating the Trade Book industry of which Houghton Mifflin was a founding member. Shatzkin had had decades of experience with the ways in which books were sold and was not pleased by the enduring insanity and stupidity that marked the process from acquisition to pulping. It was an industry centered then as now more on personal preening than profits.

As the editing went on, I was approached on more than one occasion by the publisher and the editor in chief of the house to ask Shatzkin if he could, maybe, perhaps, just tone down his criticisms a wee tad here and there. Not to compromise his integrity, to be sure, but just to make it 'more polite.' "A spoonful of sugar" and all that. I'd nod, tug the forelock, and agree to pass these "suggestions" on to Shatzkin when we next met. I would. He'd laugh and then we'd go to lunch at Loch Ober in Boston and have two martinis instead of one, charge it all to the expense account, and thus fortified, come back and make sure we emphasized the passages that most upset our masters.

GM Canada gets mixed news

A Canadian Press report has good news and awful news for GM's Oshawa plants:

A General Motors car factory in Oshawa, Ont., was the most productive assembly plant in North America last year, but the automaker is losing money on every vehicle it sells on the continent while Toyota continues to improve, according to an industry study released Thursday.

GM's No.1 plant in Oshawa, which makes Monte Carlo and Impala sedans, topped the annual Harbour Report rankings for plant productivity. According to Harbour, it took 15.85 hours to produce a vehicle at that plant in 2004 - well below the industry average of 23.42, based on available data.

GM had three of the top five assembly plants in the report, including a fourth-place ranking for a second Oshawa plant, which makes the Buick LaCrosse — sold in Canada as the Allure — as well as the Pontiac Grand Prix. It also made the Buick Century last year.

The accolades comes just two weeks after J.D. Power and Associates named the No.2 and No.1 car plants in Oshawa, in that order, as the best plants in terms of vehicle quality.

I guess I may have to retract some of the verbal barbs I've thrown at the Oshawa GM folks over the years. Unfortunately, the economic news is much less pleasant for GM:

According to Harbour, Nissan had the biggest profit per vehicle sold - $1,603 US. Toyota ranked second and $1,488, and Honda third at $1,250.

Ford only made $620 US for vehicles it makes on the continent, and DaimlerChrysler just $186. GM, which lost $1.1 billion US in the first quarter, lost an average of $2,311 for every vehicle it sold, according to Harbour.

I've often joked that the only way I'd buy a North American car is if they paid me, but it looks like that's exactly what GM has been forced to do to keep sales going. There is no way that this trend can be maintained for much longer: even a company the size of GM has limits to their bank accounts.

I had no idea it was as bad as that. It makes a mockery of the old joke about "losing a dollar on every sale, but making it up in volume" doesn't it?

Economic distortions, before the media get involved

I'm not an economist, although I've probably read more books about economics than the average blogger. I find parts of economics to be fascinating, and other parts so soporific that I just need to glance at a supply-demand curve to get sleepy. Tyler Cowen talks about how economists prefer to concentrate on single facets, and how this actually encourages media misunderstandings when economists announce the results of their studies.

UK Tax Freedom Day today

Samizdata celebrates the UK tax freedom day today. Sadly, our Canadian Tax Freedom day isn't upon us yet. To calculate your personal tax freedom day, use the Fraser Institute tax calculator. Then get depressed.

Previewing the French vote on the EU

The voters of France are expected to vote against the new European constitution this weekend. Johnathan Pearce has a quick preview:

French voters go to the polls this weekend to vote on the European Union constitution, with polls so far suggesting that the "no's" will narrowly win and shaft the wretched project, although one should never, ever under-estimate the ability of the political establishment to scare voters into saying "oui". My hope, needless to say, is that the French vote against the constitution and throw a great big spanner in the works and prevent the creation of what will be, explicitly, a European superstate.

It is pointless at this vantage point to guess exactly what will be the impact on British political life if the French do nix the constitution. My rough guess is that Blair will secretly breath a deep sigh of relief, as will the Tories. I also think that the United States will also be glad about a no vote, although I am just guessing.

I share Johnathan's distaste for the new Constitution, and the explicit gathering up of further government powers to the centre which its adoption would accellerate. I thought his closing to be quite enlightening:

[. . .] I am struck by the fact that in France, much of the hostility to the constitution is coming not from pro-free marketeers, as is the case in many respects in Britain, but from those who fear that the process will open up France's high regulated, high-tax economy to the icy winds of laissez faire. The ironies abound.

Of course, the fact of mere voters saying no to the EU juggernaut is unlikely to deflect the mixed assortment of deluded idealists, crooks, place-seekers and sundry camp-followers from trying to advance their aims. But a delicious irony would it be if the land of Bonaparte, de Gaulle and Asterix puts a major block in their path.

Trying to encourage people to save more

Last week's issue of The Economist had an interesting report on a recent study of ways to encourage savings. The problem is:

Americans save too little. The personal saving rate, currently running at around 0.5% of post-tax disposable income, is at a record low. Poorer people, in particular, have too few financial assets. Fewer than one in three families earning below $40,000 have any retirement savings. And the typical family in this income group has only around $2,000 in non-retirement savings.

Encouraging any kind of private savings is clearly a priority for the overall health of the American economy: it would mean fewer elderly people who need economic assistance. Whether it's properly the role of government is a completely separate question, and one that few bother to ask these days — where it's axiomatic that any problem is the government's business.

A new study suggests there may be a better way. With help from H&R Block, America's biggest tax-preparation firm, economists at the Retirement Security Project, a bipartisan research group set up by Georgetown University and the Brookings Institution, studied the impact of offering poorer households saving accounts with various levels of matching contribution.

Unlike tax credits, matching contributions give poor people an incentive to save, regardless of how much tax they pay. During this year's tax-filing season, 15,000 of Block's clients in poorer parts of St Louis were offered the chance to open an Individual Retirement Account. As a carrot, they were offered, by the generous accountants, up to $1,000 at various matching rates.

I can understand how the offer of "free" money would be of interest. Heck, it'd be of interest to most of us.

The incentives seem to have worked. The higher the match, the more people saved. Without any inducement from Block, only 3% of its clients contributed to an IRA. With a 20% match (ie, if you saved $2,000, Block gave $400), one in ten put some money in. And with a 50% match, the figure was better than one in six. Those offered a 50% match put in eight times more money (excluding the match) than those offered no cash. And, so far at least, they have not rushed to cash in those bribes.

That last part surprises me just a bit. I've never needed to look into the details of opening an IRA, but I'd assumed the rules were similar to Canadian Registered Retirement Savings Plans (RRSPs), in that any money withdrawn from the account would be subject to withholding tax at the withdrawal point. That might be enough to deter casual dipping into the account.

The article ends by noting that even at the 50% matching rate, the vast majority of participants still chose not to save. This is no surprise: the poorer the person, the stronger the assumption that the government is going to provide them with a pension or food stamps or other forms of support when they're too old to work. This speaks of the huge success government has enjoyed in the past 50 years in persuading people that they are not actually responsible for their own lives. It's not just in the poorest quartile, either: savings rates in the next two quartiles are no great shakes.

It's telling that it's only in the last few years that this idea — that there won't be a big pot of government gold at the end of the working rainbow — has been discussed anywhere outside the business pages of the newspapers. It'll take a while longer for the idea to achieve mass awareness. Acceptance isn't guaranteed — because it'll be a problem that government will be expected to solve.

Virginia Postrel on media bias

Virginia Postrel discusses an aspect of media bias in her current New York Times piece (registration required):

In a recent paper, "The Market for News," two Harvard economists look at that question. "There's plenty of competition" among news sources, Sendhil Mullainathan, one of the authors, said in an interview. But "the more competition there has been in the last 20 years, the more discussion there has been of bias."

The reason, he and his colleague, Andrei Shleifer, argue, is that consumers care about more than accuracy. "We assume that readers prefer to hear or read news that are more consistent with their beliefs," they write. Bias is not a bug but a feature.

In a competitive news market, they argue, producers can use bias to differentiate their products and stave off price competition. Bias increases consumer loyalty.

An interesting line of inquiry, although it doesn't apply as well to smaller media markets (like Canada), where concentration of media ownership is easier to achieve. Canadians can get coverage of world events from liberal to conservative US media, but Canadian media is much less well-distributed (the Sun chain of newspapers are the only major group with a conservative bias, while no television or radio network is a Canadian equivalent to Fox, for example).

Coldplay coldcocks the shareholders

A post at Hit and Run (pointedly titled Will the Next Album Feature Tiny Violins?) pointed to this brilliant examination of why rock musicians should sing rather than pontificate on economic issues:

Coldplay lead singer Chris Martin today launched an attack on his record label EMI and the company's shareholders.

It came after EMI, the world's third-largest music company, warned that profits would be lower because the band took longer than expected to finish their first studio album in three years.

How dare those cretins at head office criticize the genius of Chris Martin?

"I think shareholders are the great evil of this modern world."

Martin told reporters at Manhattan's Beacon Theatre that the band was uncomfortable that they sell so many albums they can affect a major corporation's stock price.

"It's very strange for us that we spent 18 months in the studio just trying to make songs that make us feel a certain way and then suddenly become part of this corporate machine," Martin said backstage.

He criticised what he called "the slavery that we are all under to shareholders".

If it makes Martin uncomfortable, just imagine being one of those poor shareholders!

A good diagnosis of the Canadian malady

Publius, at Gods of the Copybook Headings, conducts a long, deep study of the Canadian political psyche. The results are not pretty, but they are edifying. I encourage you to read the whole thing, as it would be difficult to pull out small chunks of the post without the small chunks becoming very large blocks.

IJ wins interstate wine case

The Institute for Justice (IJ) has won their case before the US Supreme Court challenging the legality of state bans on interstate wine sales:

Wine lovers may buy directly from out-of-state vineyards, the Supreme Court ruled Monday, striking down laws banning a practice that has flourished because of the Internet and the growing popularity of winery tours.

The 5-4 decision strikes down laws in New York and Michigan that make it a crime to buy wine directly from vineyards in another state. In all, 24 states have laws that bar interstate shipments.

The state bans are discriminatory and anti-competitive, the court said.

"States have broad power to regulate liquor," Justice Anthony Kennedy wrote for the majority. "This power, however, does not allow states to ban, or severely limit, the direct shipment of out-of-state wine while simultaneously authorizing direct shipment by in-state producers."

While this ruling has no effect on sales from US wineries to Canada, it's still a welcome liberalization of domestic US wine sales.

Hat tip to Reason Hit and Run.

QotD: Entrepreneurship

If entrepreneurs see value in the [. . .] economic landscape, and perceive there are rich profits to be made in turning around businesses and then flogging them off, it is very good news indeed for the country's economy. By releasing capital from uneconomic areas and focussing it on lucrative new bits, the overall pie gets bigger, jobs get created, and productivity is also increased.

In fact, one could almost create a new economic law: the amount of abuse raining down on entrepreneurs is directly proportional to the good they do. I haven't seen much reason to doubt this law yet.

Johnathan Pearce, "Gordon Gekko goes to Germany", Samizdata.net, 2005-05-05

QotD: Bohemian Lifestyles

[C]onsider the inchoate American gang identified as "Bohemian" in New York Times rock critic Ann Powers' new book, Weird Like Me: My Bohemian America. Powers casually links rock music with her version of bohemia, that world of young and not-so-young hipsters living and behaving in nontraditional ways. Rock, she writes, "inspires fans to dye their hair green and wear thigh-high leather boots; to defy their parents, skip school, and tell off the boss; or even, sometimes, to take a new turn and change their lives completely." Her bohemia is inexorably linked with progressive politics, not holding down a decent job, being kind to gays and minorities, and all else that's "cool."

Powers fails to recognize that her bohemia is predicated upon a market liberalism that throws off so much wealth that you can live like a Pharaoh just by scavenging what other people throw out-as she and her slacker buddies did in San Francisco in the '80s and early '90s. Her bohemian lifestyle is part of the same system that underwrites free markets, consumerism, and tolerance for all sorts of offensive speech and alternative lifestyles. In other words, the liberty to be bohemian is a glorious result of the very capitalist reality that Powers says a real bohemian must be against.

Brian Doherty, "Rage On: The strange politics of millionaire rock stars", Reason Online, 2000-10

More on the UAL pension debacle

I mentioned this briefly yesterday, but Jane Galt knows much more about the situation (and its possible ramifications) than I do:

Many, perhaps even most, libertarians object to the PBGC on principle. Personally, it's the sort of programme I can live with. Markets and companies change in unpredictible ways, and the PBGC is a way of making sure that those who, in perfectly reasonable good faith, assumed that they would have a corporate pension to support them in retirement, do not end up destitute. It has its economic costs, as do all regulatory institutions, but as with FDIC, I think the benefits in terms of economic stability outweigh them.

I'm not really sure what Battlepanda's objection is. UAL is insolvent — can't meet its debt payments or its pension obligations. Does she think that bankruptcy law should force liquidation? Hard luck for the workers, suppliers, and so forth, no? It's pretty generally recognized that Chapter 11 bankruptcy is one of the great strengths of the American economy, allowing companies in hard times to restructure rather than expire, salvaging something for workers, creditors, and the company. And allowing UAL to at least try to limp along isn't costing the taxpayers anything, as far as I know. The only people who lose out are the stockholders.

Now that I actually do own stocks in some corporations (all entirely within my self-directed retirement savings plan), I'm not quite as cavalier about dismissing the stockholders as somehow being the only ones who deserve to get it in the shorts when a corporation goes bankrupt. It seems to me that management generally gets off fairly easy in cases where once-mighty corporate titans are felled: too many of the most responsible seem to do alarmingly well in terms of non-performance-based pay-offs, despite being at the controls when the whole enterprise went kaput.

One aspect of corporate governance in a publicly held company is that the theoretical owners — the shareholders — rarely exercise much in the way of ownership rights. The professional managers exercise almost all of the traditional power of the owner of a company, leaving the titular owners to do little other than belly-ache at annual general meetings.

Refuting the polling bias charge

Andrew, at Bound By Gravity, addresses the common complaint among (some) Conservative bloggers that the polling firms are biased against their party. Unfortunately, he uses tools that may baffle the average blogger: dollars and cents.

Now let's leave aside the following two critical points that blow away the credibility of the "polling firm bias = skewed results" theory all by themselves:

a) Ignore the fact that any polling form caught fixing its numbers would have its reputation irrevocably tarnished.

b) Further, ignore the fact that the quickest way to boost Liberal support (by leeching NDP support) is to show the Liberals behind in the polls.

Instead, let's take a look at the major Canadian polling firms and their donations over the years and see if there is a correlation between poll results and donations.

I'd say it was devastating, but I'm of the innumerate variety of blogger, so I have to take his word for it that the numbers completely obliterate any serious charges of bias.

In all seriousness, I think Andrew is doing a great job of digging up the important facts . . . and few things are more important in political life than money. If you don't already visit BBG regularly, I'd recommend that you start to do so now.

Pension fund worries

Wendy McElroy discusses some of the implications of the United Airlines pension fund scam:

The advice offered by the CNN commentator was sound: don't expect your pension to be there for you when you retire; find new ways to save right now — e.g. instead of sending your children through university, encourage them to take out a loan; downsize — e.g. move to a less expensive house; learn how to budget and budget tightly; consider innovative steps like a reverse mortage. As I said, her advice was sound but I had a strong urge to bitch-slap her smiling face as she chatted brightly about people just "having to move into a smaller house, that's all." Where were those sage words from legions of financial talking-heads who have insisted for years that "gee whiz, the economy is great!" Big Business is your friend. And pay no attention to the man behind the curtain.

I've joked for quite some time about the risks of depending on your government pension ever being there for you to collect it, and the biggest businesses are now much more like the government than like "real" companies. Any time they find themselves in trouble, they can either get the courts to bail them out, or the government will ease their troubles with a regulatory crowbar or six. The pernicious notion that any private entity is "too big to fail" must be stomped out: without the risk of failure, there is little need to pay any attention to market conditions or customer requests (making them, once again, more like the DMV than HMV).

QotD: Politics and Music

"A good song should make you wanna tap your feet and get with your girl. A great song should destroy cops and set fire to the suburbs. I'm only interested in writing great songs."

So says Tom Morello, guitarist for the Los Angeles-based band Rage Against the Machine. He and his bandmates are not simply against cops and the suburbs, of course. They also stand for the Zapatistas and the Shining Path, for freeing Mumia Abu-Jamal and Leonard Peltier, for giving California back to Mexico, and for destroying stores where rich people like themselves shop.

That's pretty strong stuff coming from work-for-hire employees of one of the great cogs in the global capitalist machine, the megaconglomerate Sony, which wholly owns and distributes Rage's music and even is a co-owner of the group's publishing. Since 1992, Rage has sold nearly 7 million records, and it's safe to say that nobody has benefitted more from that commerce than the band's unabashedly capitalist paymaster.

Brian Doherty, "Rage On: The strange politics of millionaire rock stars", Reason, 2000-10

QotD: Social Security

[F]rom a pure policy perspective, Social Security makes little sense except as a modest welfare program. There is, after all, no earthly reason why most middle class or wealthy citizens need the government to garnish their wages for decades and then provide a retirement benefit later: People are generally perfectly capable of saving for their own retirements. Those who want to paint the program as indispensable are fond of pointing to the large numbers of retirees who rely almost wholly on Social Security for their incomes. But then, when you take a hefty 12.4 percent bite out of people's paychecks — leaving them with less to save — and tell them they can rely on a government benefit later, it's not exactly shocking that many people don't save and rely on a government benefit later.

Julian Sanchez, "Social Security's Progressive Paradox: Retirement 'insurance' as a Rube Goldberg machine", Reason Online, 2005-05-02

The Tiger on the prowl

Ben, The Tiger in Winter, has a couple of very thoughtful posts on why the Conservatives are having trouble breaking through, in spite of the ongoing mass of corruption that is the Liberal government.

Go read 'em, even if you're not partial to Stephen Harper's fascist horde. . .

Jon continues the Earth Day celebrations

Jon had me drive the getaway vehicle as he took some drive-by photos of ecological devastation along Highway 404 yesterday afternoon. Go see a small sample of all the trees being destroyed to allow an HOV lane to be added to the highway.

QotD: The Western Way of War

Free capital is the key to war making on any large scale, what Cicero called "the sinews of war," without which an army cannot muster, be fed, or fight. Capital is the wellspring of technological innovation, which is inextricably tied to freedom, often the expression of individualism, and thus critical to military success throughout the ages. That capitalism was born in the West, expanded through Europe, survived the alternate Western-inspired paradigms of socialism and communism, and found itself inextricably tied with personal freedom and democracy in its latest global manifestation explains in no small part Western military dominanace from the age of Salamis to the Gulf War.

Victor Davis Hanson, Carnage and Culture

QotD: Nuclear Power

Nuclear certainly has problems — accidents, waste storage, high construction costs, and the possible use of its fuel in weapons. It also has advantages besides the overwhelming one of being atmospherically clean. The industry is mature, with a half-century of experience and ever improved engineering behind it. Problematic early reactors like the ones at Three Mile Island and Chernobyl can be supplanted by new, smaller-scale, meltdown-proof reactors like the ones that use the pebble-bed design. Nuclear power plants are very high yield, with low-cost fuel. Finally, they offer the best avenue to a "hydrogen economy," combining high energy and high heat in one place for optimal hydrogen generation.

Stewart Brand, "Environmental Heresies", Technology Review, 2005-05

QotD: Urbanization

The environmentalist aesthetic is to love villages and despise cities. My mind got changed on the subject a few years ago by an Indian acquaintance who told me that in Indian villages the women obeyed their husbands and family elders, pounded grain, and sang. But, the acquaintance explained, when Indian women immigrated to cities, they got jobs, started businesses, and demanded their children be educated. They became more independent, as they became less fundamentalist in their religious beliefs. Urbanization is the most massive and sudden shift of humanity in its history.

Stewart Brand, "Environmental Heresies", Technology Review, 2005-05

QotD: Moore's Law

Moore's Law is a violation of Murphy's Law. Everything gets better and better.

Gordon Moore, quoted in "Happy Birthday: Moore's Law at 40", The Economist, 2005-03-26

QotD: Taxes

Not paying taxes is against the law.
If you don't pay taxes, you'll be fined.
If you don't pay the fine, you'll be jailed.
If you try to escape from jail, you'll be shot.
Thus I — in my role as citizen and voter — am going to shoot you — in your role as taxpayer and ripe suck — if you don't pay your fair share of the national tab.
Therefore, every time the government spends money on anything, you have to ask yourself, "Would I kill my kindly, gray-haired mother for this?"

P.J.O'Rourke

Regulation and the economy

A recent Economist article (registration required) discusses the impact of regulation on the economy:

Cost-benefit analysis — which typically quantifies the attractions and drawbacks of a regulation, converts them into dollars or euros, then tots them up — sounds both dull and innocuous. But its findings can be revealing. For example, Robert Hahn, a scholar at the American Enterprise Institute in Washington, DC, calculates that over 40% of American regulations impose costs that outweigh the benefits they confer. What might a similar review of the European Union's regulatory rule-book reveal? How many of the 90,000 pages of the acquis communautaire might be safely torn out, to the net benefit of the union?

To be honest, I'm surprised that the figure of 40% is so low: I would suspect that either Hahn's study only encompassed a particular area of regulation, or the study's "benefits" were overvalued. But I'm a cynic.

Cost-benefit analysis is one of those easily misunderstood boogeymen of economics: they try to put a price on people's lives! Many people find this morbid and creepifying (to borrow a phrase from Mal Reynolds). But it is actually a remarkably useful economic tool: unless you can quantify the costs of a course of action, you cannot discover whether the action is worth taking (economically speaking).

Those who question cost-benefit analysis doubt that a price tag can ever be put on life. How could one seriously count the cost of death and injury caused by road accidents, for example? But, as Robert Frank, an economist now at Cornell University, has pointed out, even the fiercest critics do not get their brakes checked every morning. They have more pressing uses of their time. Road safety, then, does have an opportunity cost, and an economist will want to know what it is. Thus, when the CPR accuses economists of "pricing the priceless", most economists would plead guilty as charged.

Cost-benefit calculations are key to understanding what the effects of regulations on the economy might be, both positive and negative. Every economic decision you make has benefits and associated costs; in most individuals' experience the obvious costs are easy to identify, and the benefits clear. Calculating these for regulations which affect millions of people in sometimes impossible-to-foresee fashions is much more tricky.

Cost-benefit analysis does not always argue for less regulation. It weeds out regulations that do not pay their way, but it can also identify measures not on the statute books, that should be. For example, defibrillators installed in workplaces might be a cost-effective way to save victims of heart attacks. The White House's Office of Management and Budget has sent about a dozen letters to the agencies it oversees prompting them to investigate such potentially beneficial regulations.

Every now and again, I find The Economist wavers from its staunch free market ideals, and the above paragraph illustrates how far they can wander these days. The example is a good one, in that if the installation of defibrillators could save more lives, then there's a good economic argument to do it. However, why is it incumbent on the government to regulate this? Surely employers will do things which will improve the health of their workforce — and saving the lives of heart-attack victims on the job is clearly one such measure. Why have more employers not done this? There are two possible answers: cost-benefit analysis does not support the contention, or the risk of legal action outweighs the potential benefit in other ways (i.e., does the employer take a higher risk of being sued by making the equipment available?).

Actually, a third possibility occurs to me: that there are regulations against employers making defibrillators available in some or all circumstances. That's perhaps the most likely alternative in our modern over-regulated world.

Nasty, Funny, Football Welfare Queens

Matt Welch claws the eyes out of those billionaire welfare bums, the football team owners:

But These Welfare Queens Are Manly!

The state of New Jersey has finally spread 'em wide enough for football's "New York" Giants to accept building a new $750 million stadium in the swampy Meadowlands. Battered-wife quote of the day goes to acting Joisy Governor Richard Codey: "This will be the best deal for the taxpayers of any stadium deal in the NFL."

QotD: Biotechnology

Along with rethinking cities, environmentalists will need to rethink biotechnology. One area of biotech with huge promise and some drawbacks is genetic engineering, so far violently rejected by the environmental movement. That rejection is, I think, a mistake. Why was water fluoridization rejected by the political right and "frankenfood" by the political left? The answer, I suspect, is that fluoridization came from government and genetically modified (GM) crops from corporations. If the origins had been reversed — as they could have been — the positions would be reversed, too.

Ignore the origin and look at the technology on its own terms. (This will be easier with the emergence of "open source" genetic engineering, which could work around restrictive corporate patents.) What is its net effect on the environment? GM crops are more efficient, giving higher yield on less land with less use of pesticides and herbicides. That's why the Amish, the most technology-suspicious group in America (and the best farmers), have enthusiastically adopted GM crops.

There has yet to be a public debate among environmentalists about genetic engineering. Most of the scare stories that go around (Monarch caterpillars harmed by GM pollen!) have as much substance as urban legends about toxic rat urine on Coke can lids. Solid research is seldom reported widely, partly because no news is not news. A number of leading biologists in the U.S. are also leading environmentalists. I’ve asked them how worried they are about genetically engineered organisms. Their answer is "Not much," because they know from their own work how robust wild ecologies are in defending against new genes, no matter how exotic. They don't say so in public because they feel that entering the GM debate would strain relations with allies and would distract from their main focus, which is to research and defend biodiversity.

Stewart Brand, "Environmental Heresies", Technology Review, 2005-05

The hi-tech version of "The British Disease"

Back in the dreadful 1970's, the British working man was renowned throughout the world for, well, not working. Strikes, go-slows, work-to-rules, job actions, pickets, and skiving off were the common complaints of both employers and the general public. The Register does some hard investigative journalism to discover that nothing has changed:

New figures have shown that Brit workers lead the world in "desk skiving" — the art of aimlessly faffing about at their posts when they should be lining shareholders' pockets with filthy lucre. Shockingly, the maths demonstrate that a third of workers may be taking fourteen days extra hols a year while a hard core of eight per cent admit that they are texting, doing personal emails or surfing the web for interesting stories on skiving British workers for an astounding 12 weeks per annum.

Excellent text now online for free

The book Economics in One Lesson by Henry Hazlitt has been made available online in a free edition by The Foundation for Economic Education. If you haven't read this book yet, now you have no excuse.

Hat tip to Jane Galt

US Supreme Court ruling upcoming on interstate wine sales

Reason Hit and Run provided a link to a Washington Post article on the case currently before the Supreme Court on allowing or banning interstate wine sales:

In a complicated web of state laws and regulations that date to the repeal of Prohibition, Swedenburg can ship wine to New York, for example, only if she establishes an office there, but the state allows its own wineries to ship to customers in state. The District of Columbia allows its residents to have no more than a quart a month shipped in from outside the city. Virginia residents can order two cases per month from any wine producer — in state or not — who has a Virginia shipping license.

Swedenburg has no intention of breaking any laws, especially while she is challenging the rules on interstate transportation of alcoholic beverages before the high court.

The stakes are huge. The case has been described as potentially the most significant test of states' constitutional power to regulate the alcohol trade since Prohibition. Over time, a victory for Swedenburg could revolutionize the way wine is sold. As of November, there were 3,382 bonded grape wineries in the United States, according to the trade publication Wine Business Monthly. "When it comes right down to it, people like to taste different wines from different places. And I consider wine an agricultural product that should be able to pass over state lines," Swedenburg says.

And, linked from the same Hit and Run post, the The Scotsman wins the bad wine pun award for their headline on the French vigneron protests: "French wine rebels employ brut force and dynamite".

Jane Galt on Gay Marriage

As often happens, I'm late to the party on this one, but on the off-chance you haven't already read Jane's "really, really, really long post about gay marriage that does not, in the end, support one side or the other", then go do so now!

Oh, and a follow-up post, too.

Wow. I wish I could write that well.

Maybe we should invest in Barbados-based companies?

Kate shows the real Canadian flag.

Jane Galt declares war on fat

Jane takes a hard look at the current public health panic: obesity. Here are a few of her Swiftian suggestions:

Here are things that would work, in my opinion:

Make discrimination against the overweight not only legal, but mandatory

Encourage health and life insurance companies to jack up their premiums. Make seats in public accomodations, from stadiums to subways, physically impossible for the obese to fit in. Force airlines to charge them for an extra seat.

[. . .]

Make unhealthy food extremely expensive

We're not talking about some measly 1%, 5%, or even 50% tax. If you want people to cut down on unhealthy eating, you need to usher in the era of the $5 can of soda, the $10 big mac. I'd guess that an increase in the price of fatty and/or sugary food somewhere on the order of five to tenfold would be the minimum effective tax.

Make being sedentary even more expensive

Slap a 50% tax on automobiles, a 500% tax on power lawnmowers. Limit elevators to buildings of five stories or more, and force them to stop only at every other floor. Give tax credits for "heart healthy buildings": ones with no elevators, and parking at least 1/4 mile away. (Obviously, I assume there would be a — small and slow! — elevator for the disabled.) Slap a 300% surcharge on cable or satellite television, and an additional Britain-style TV tax besides. Jack up the cost of broadband, video games, and MP3 players. Subsidize sports leagues and parks.

Would all this work? I think it probably would. If it becomes even more difficult to be fat, I assume people will do less of it.

While points 2 and 3 require government intervention in the voluntary economic transactions of life, point 1 only requires government to reduce their already vigorous interventions. Health and insurance companies would love to pass on the direct costs of obesity to their customers who are overweight, but for the most part are prevented from doing so by government. Airlines, similarly, would love to be allowed to charge extra for those people who require more space (and more time to get in and out, and more fuel to transport them), but are similarly limited in their ability to do so.

Ain't gonna happen. At least, not until there's a sea change in the way most of the population view obesity (in the same way that it took such a change to finally start reducing the number of smokers in the general population).

It's a good question

Johnathan Pearce asks the very sensible question:

If the resources of the Earth are finite and everything eventually succumbs to the Second Law of Thermodynamics, then by the logic employed by the deepest of Greens, even if we recycle all our goods and live in mud huts, then at some point, the game is up, we are all doomed, the end is nigh. So my question would be that if this is so, then why not live life to the full and enjoy this "finite" world while we have it? Let's get those SUVs, build those spacecraft, take those lavish holidays, create those new technologies. It is all going to end anyway, so enjoy!

Of course, a lot of politicians like to talk the Green line because it is so easy to justify limiting economic liberties to "save Mother Gaia", and individuals must kow-tow to the power of the herd. If life is a zero-sum game, then Johnathan's question is very pertinent.

Not that many politicians actually feel any need to justify any power grab, of course. . .

Post-Secondary Education in Ontario

Angry in the Great White North has a good posting up about Ontario's so-called "crisis" in post-secondary education:

A new rule I have just imposed (because I can do that, you know):

From now on, a spokesperson of a university student association needs to be an economics major if he is going to discuss the lack of government support for post-secondary education.

Angry points out that the claims of hardship are not backed up by the actual figures:

Here's what's strange. If student tuitions have gone up so much, you would expect that the number of students would drop, since a post-secondary education is now beyond their reach financially. But then why are student-teacher ratios higher? For instance, in 2004, Ontario saw a 23% decrease in the number of foreign students studying in the province. But despite that drop (probably because the tuition increase is significantly higher for foreign student who pay the true price of an education, as opposed to the subsidized one Canadian students pay), the overall enrollment is going up [. . .]

QotD: Pornography

The more important effect of home video — and, even more so, of the Internet — has been to create a wide and wild array of market segments, a diversity so dizzying it defies the very idea of a mainstream. A couple decades ago, feminists could argue plausibly that porn was partly responsible for the unrealistic body images they blame for bulimia and anorexia. Today, every conceivable body type has an online community of masturbators devoted to it.

Jesse Walker, "Guess Who's Coming: Progress at the cineplex", Reason, 2005-03-28

QotD: Choice

In the early 20th century critics attacked product variety as being wasteful — a sign that markets were less efficient than central planning. Hence, the Chinese wore Mao suits, Americans got uniformly round automobile headlights and British authorities "rationalized" furniture designs.

A famous scene in the film Moscow on the Hudson has Robin Williams as a Soviet immigrant collapsing at the sight of an American coffee aisle, circa 1984. Imagine what would happen in Starbucks.

A free economy multiplies variety, the better to serve buyers with different tastes and different needs and to give people the chance to experience different goods at different times. Arguing that this plenitude is inefficient went out decades ago. The problem with markets, the detractors now say, is that all these choices make us unhappy.

Virginia Postrel, "I'm Pro-Choice", Forbes, 2005-03-28

QotD: Wall Street

Wall Street is a street with a river at one end and a graveyard at the other. This is striking, but incomplete. It omits the kingergarten in the middle.

Fred Sched, Where Are the Customers' Yachts?, 1940

QotD: Critique of Libertarianism

Libertarians are also naive about the range and perversity of human desires they propose to unleash. They can imagine nothing more threatening than a bit of Sunday-afternoon sadomasochism, followed by some recreational drug use and work on Monday. They assume that if people are given freedom, they will gravitate towards essentially bourgeois lives, but this takes for granted things like the deferral of gratification that were pounded into them as children without their being free to refuse. They forget that for much of the population, preaching maximum freedom merely results in drunkenness, drugs, failure to hold a job, and pregnancy out of wedlock. Society is dependent upon inculcated self-restraint if it is not to slide into barbarism, and libertarians attack this self-restraint. Ironically, this often results in internal restraints being replaced by the external restraints of police and prison, resulting in less freedom, not more.

Robert Locke, "Marxism of the Right", American Conservative, 2005-03-14

QotD: The Great Satan

As soon as you see the recommendation from Noam Chomsky on the cover of the book, you can pretty much guess where McQuaig is coming from. I refer to the Chomskyan school of thought as American Monist: in short, the only actor on the world stage is America. It is the sole source of evil and depradation. Everyone else is motivated solely by love and concern for humanity, whilst America is, singularly, motivated only by greed, lust for power and a general animus for all things good, sunny and nice. Only America acts; everyone else is acted upon by the Hegemon, and can't be blamed for the consequences of their actions. America is the Primus Mobilis. And America is bad. So, for example, the notion that an economy-based increased lust for oil is driving foreign policy is solely a characteristic of America; no other nation on earth appears to give a shit about oil. Certainly not France, Russia or China; McQuaig hardly mentions them. While McQuaig is forced to acknowledge that French, Russian and Chinese support for Saddam (and attendant undermining of UN sanctions) was related in some fashion to the oil deals they had each struck with Iraq, she airily dismisses the role that oil plays in their respective foreign policies. So the "oil as the root of all evil" trope is batted away in the space of two sentences when talking about other countries, but more than 300 pages are required to explain how oil and America are mutually catalyzing demon twins. When the rapaciousness of oil companies is discussed, it is almost exclusively American oil companies which are named; hardly ever any of the European, Russian or other oil companies. Because those other oil companies don't possess the true indicia of evil, you see: they don't stamp their barrels "Made in the USA".

Bob Tarantino, "LIB Review: It's the Crude, Dude", Let It Bleed, 2005-03-05

QotD: Education

We went through a generation in this country where parents discouraged their children from going into trades, and they said to them, "the only way you will get ahead in life is to stay at school until year 12, go to university." Year 12 retention rates became the goal, high year 12 retention rates became the goal. Instead of us as a nation recognising there are some people who shouldn't go to university, and what they should do is at year 10, decide they are going to become a tradesman. They will be just as well off, and from my experience and observation, a great deal better off than many others. I think we have to change that, and it's a very big challenge because 30 years ago, we started getting this foolish bind that everybody had to go to university. Everybody doesn't have to go to university, and a lot of people will be a lot better off if they don't go to university and they recognise that at age 15 or 16, and go down the technical stream.

Australian Prime Minister John Howard, interviewed by Mark Riley, 2005-03-06

QotD: Government

One of the reasons I'm in favour of small government is because big government tends to be remote government, and remote government is unaccountable, and, as a wannabe world government, the UN is the remotest and most unaccountable of all. If the sentimental utopian blather ever came true and we wound up with one "world government", from an accounting department point of view, the model will be Nigeria rather than New Hampshire.

Mark Steyn, "Would you trust these men with $64bn of your cash? Of course not", Telegraph Online, 2005-02-06

Equal Pay?

Wendy McElroy reviews a recent book by Warren Farrell, Why Men Earn More: The Startling Truth Behind the Pay Gap And What Women Can Do About It:

The first part of the book revolves around refuting feminism's explanation of the wage gap: namely that it results from rampant discrimination against women in the workplace.

Many arguments surrounding the wage gap are not addressed, however.

For example, women's lack of access to various well-paying blue collar jobs due to union policies and attitudes. But addressing such arguments is not the book's purpose. Refuting the specific feminist claim of discrimination is. And Farrell ably accomplishes this goal on two levels.

First, he cites research and extensive government data to demonstrate that women who compete for the same job often earn more than men, not less.

In Table 6, Farrell compares the starting salaries for women and men with Bachelor's Degrees in 26 categories of employment, from investment banker to dietician. Women are paid equally in one category; in every other category, their starting salaries exceed men's. A female investment banker's starting salary is 116 percent of a man's. A female dietician's is 130 percent; that is, $23,160 compared to $17,680.

As has been pointed out many times, the perception of wage differentials is not a single phenomena caused by patriarchal oppression: there are several reasons why, in some cases, men are better paid for similar work than women. Discrimination against women does occur, but statistically it isn't anywhere near as prevalent as it used to be (and if you don't believe this, you can't have been in the workforce 25-30 years ago).

Men, for the most part, do not take time away from paid employment to raise children. Women do. This has two effects on women's employment patterns: time away from the workplace (and therefore reduced experience, training, and promotion opportunities), and a stronger preference for shorter and/or more flexible work hours and an increased aversion to shift work, business travel, and overtime. From the employer's point of view, this may reduce the overall value of a woman's potential contribution to the company in direct comparison to a male co-worker.

Generally, women who do not have children end up having statistically similar careers to men: from the employer's viewpoint the only differences between a man and a woman in those cases will be meritocratic (ongoing job performance, ability to learn, and track record of accomplishment).

Offshore Manufacturing

This is an excerpt from a discussion I had a few months ago with a fellow woodworker-wannabe. The topic of overseas manufacturing of machine tools came up, and eventually he summarized the price and quality differences in this way:

Not that it matters, really. All these tools are made off-shore by people who will be dessicated, ground up, and rolled into honey-dipped sesame seed-coated balls that will be sold as impotence remedies.

Maybe that explains the quality of the tools. The Porter-Cable and DeWalt labourers are months away from dessication, so they are still pretty upbeat and do a good job.

The Black & Decker workers are just a few weeks away, so they don't do a very good job assembling the tools.

The Craftex guys go into the drying racks at the end of their shift.

CF Members to get retroactive pay increase

According to a new story on CP, the Canadian Forces will be given a 6.5 percent increase in the upcoming budget:

Defence sources in Halifax and Ottawa told the news agency Thursday that Finance Minister Ralph Goodale's fiscal plan, to be released Wednesday, is expected to contain a 6.5 per cent across-the-board increase that will be retroactive to April 1 of last year.

The pay hike is to be one component of a multi-pronged effort by the Liberal minority government of Prime Minister Paul Martin to revitalize the military, said a high-level source who asked not to be named.

"Better pay certainly makes it more attractive to find recruits and keep the people you need," said the official.

Six and a half percent is certainly better than I've had as a raise in recent years, so that's a good thing. I don't know that it will perform miracles at retaining trained personnel, but it's certainly better than nothing.

The blanket pay increase builds on measures in last year's budget, where Martin's Liberals granted income tax-free status to personnel serving in war zones around the world.

Non-commissioned members, no matter how long they serve in theatres such as Afghanistan and Congo, are exempted from paying up to $6,000 in income tax.

This is something I'd not heard before. An excellent idea, given how much hardship it can be for families when the primary breadwinner is posted to a combat zone. Again, hardly princely, but much better than nothing.

QotD: Capitalism

The moral justification of capitalism does not lie in the altruist claim that it represents the best way to achieve 'the common good.' It is true that capitalism does — if that catch-phrase has any meaning — but this is merely a secondary consequence. The moral justification for capitalism lies in the fact that it is the only system consonant with man's rational nature, that it protects man's survival qua man, and that its ruling principle is: Justice.

Ayn Rand

QotD: Lotteries

I am not a fan of the scratch-game lottery. It does not provide the same amount of amusement as burning a one-dollar bill. Time it, if you doubt me. You can scratch off a card in three seconds: scritch scritch scritch, ah crap. Please play again! But a dollar bill gives you at least 17 seconds of entertainment — more, if you set off the smoke alarm. Otherwise it's the same effect: One dollar has passed from your hand into the great chain of being, and whether it subsequently manifests itself as a Trix bar in the pocket of a state employee or acrid smoke in the kitchen, it's all just molecules in the end. And you're out a buck.

But! Now the lottery has decided to give you a second chance. You mail in your losing lottery tickets — at least five duds, please — and they hold another drawing to confirm that you're not only still a loser, but now you're out 37 cents for postage.

James Lileks, "Backfence: A second-chance column for you", Star Tribune, 2005-02-01

Jeremy Rifkin Greets President Bush

In The Guardian, Jeremy Rifkin gives some sage, sober advice to that yahoo cowboy George Bush:

Bush must face up to a rising power
The US has to recognise the new reality of a United States of Europe

President Bush is scheduled to visit Brussels on February 22, and it may prove to be the most important foreign visit of his presidency. The ostensible purpose of the trip is to confer with European Union leaders. If it were any other head of state making such a pilgrimage, it might not even raise an eyebrow in diplomatic circles. But for Bush, the visit is potentially a watershed event.

The only watershed I'd expect is the water trickling down the inside of European leaders' legs as Mr Bush explains why he's not giving the EU a veto over his actions.

EU officials are quick to point out that in the first four years of his presidency, Bush referred to the EU only a few times in passing.

A remarkably similar response to that of Canadians when they were not mentioned in Bush's speech after the 9/11 attacks. Canadians collectively wound their watches for weeks over the "deliberate slap". Why, you'd almost have imagined that he did it on purpose, or something. . .

Hardly the kind of recognition one might expect, considering the EU is the world's only other economic superpower and a close rival to the US in the global economy.

But not in any way which matters: the EU is unable to successfully intervene in a war literally on its own borders without US assistance.

Until recent weeks, the Bush administration has preferred to deal with individual European countries — often making the distinction between "old" and "new" Europe — virtually ignoring the fact that 455 million Europeans in 25 states have forged the first transnational governing space in all of history.

The distinction between "new" and "old" Europe was real and useful — why not use it? And what the heck does the big number-brandishing "fact" have to do with how the US chooses to deal with individual countries? I think this is what is called a non sequitur.

The EU is also the world's leading exporter and boasts the biggest internal commercial market on earth. And if that were not enough, the EU's currency, the euro, is now stronger than the dollar on world markets.

The freakin' Canadian micro-Peso is currently much stronger against the US dollar than it has been for over a decade. What does that have to do with anything? The rise and fall of currencies against one another is not particularly tied to the respective countries' importance or significance.

But, a sea change may be in the offing in America's relationship to Europe. I understand that behind the scenes EU officials in Brussels have invited Bush to address the parliament in his upcoming visit and the proposal is under consideration at the US state department.

Why would he bother speaking to the so-called European parliament? It has less power, in real terms, than the legislature of Prince Edward Island. The European Commission holds almost all the face cards in the power game in Europe, and those it doesn't already have are in the hands of the individual nations, not in the greasy paws of the most useless talking shop in the western world!

Much is made of the vast economic advantages that have accrued to the US from opening up a political dialogue and commercial relations with China. Bush and his counsellors should keep in mind, however, that with all of its economic growth, China's GDP is significantly lower than the EU's.

But its population is significantly higher (harking back to the earlier "fact"), so we should pay more attention to the Chinese? Is that the point you're trying to make here? Or was the original mention of the EU's population just a throw-away line?

To a great extent, we Americans and many Europeans have blinkers on. Virtually the entire European continent now lives under a common flag, a single passport, and, soon, a common constitution. But we are still in the habit of comparing Germany or France to the US. In the commercial arena, such comparisons make less and less sense. Most companies I am familiar with in Europe think of themselves as European. That's because European businesses are increasingly under the umbrella of a common European regulatory regime administered by the EU in Brussels, just as American companies fall under a US regulatory regime administered in Washington.

Based on the level of intervention already displayed by the EU bureaucracy, I think the long-term trend is to make the European economy less and less a factor in international trade. In most cases, the strongest economic sectors are the ones least encumbered with mandated standards, tariffs, quotas, regulations, oversight committees, and general parasitism by government. Europe is moving towards a more regulated economy, not a freer one.

In many of the world's leading industries, it is European transnational companies that dominate business and trade. European financial institutions are the world's bankers. Fourteen of the 20 largest commercial banks are European. In the chemical industry, engineering and construction industry, aerospace industry, food industry, the drugstore retail trade, and the insurance industry — to name just a few fields — European companies outperform their American counterparts. Sixty-one of the 140 biggest companies on the Global Fortune 500 rankings are European, while only 50 are US companies.

Okay, you had me until you threw in the "drugstore retail trade". WTF? To just randomly pull out the world-beating industries the EU boasts, you pick this? To add to the freakin' aerospace industry? Is there a more featherbedded, crony-infested, corrupt, and incompetent oligopoly in the EU? I suspect not. Without constant support from the national and EU governments, Airbus wouldn't be a factor outside European national "flag carrier" airlines.

All of this is not to suggest that European companies have suddenly leaped ahead of their American competitors. Economic growth is anaemic, unemployment is high, and EU member states have been slow at integrating their internal market. But, the US would be ill-advised to ignore the long-term economic potential of Europe. Over the next 20 years, the EU member states will establish a seamless transportation, communications and power grid, and create a single set of protocols and policies for governing commerce and trade. Moreover, English will become the lingua franca for conducting business on the continent. If the EU can engage in commerce and trade across its member states with the same ease as we do across the continental US, it may well become the dominant economic power.

But the chances of this happening are close to nil: the only way it could come about is if the EU throttled the bureaucracy in its cradle and limited themselves to a much smaller role than they already have: and no Eurocrat would be willing to see that happen. There's also no mention of the looming demographic crisis Europe will be facing in the very near future (low birth rate combined with the impending retirement of a large number of current workers). It's already been pointed out by other commentators that in fifty years, the lingua franca of Europe will have a strong Arabic component.

In the next two years, the EU member states will probably ratify a European constitution, solidifying a 50-year development to create a United States of Europe. The question uppermost on the minds of European officials is: will Bush seize the historic moment and speak before the European parliament and, in so doing, recognise the reality of the United States of Europe, or will he let the opportunity pass?

I think the correct bid here is "Pass".

QotD: Jack Layton

I don't know too much about Canadian poltics, but I'll never forget watching the [. . .] election debate and hearing Jack Layton complain about people having non-public access to MRI machines. Christ, he sounded like a villain from an Ayn Rand novel! How the hell do people go through life thinking like that?

"Protagonist", of Wyatt's Torch, posting in the comments at Daimnation, 2005-02-03

Colby Cosh on Liquor Monopolies

I've written about the LCBO and other state-run liquor monopolies before. I'm not a fan, but I recognize that they're not without some benefits. Colby Cosh gathers up several points (mainly beer-related, but the essential message is the same) in support:

My inbox is swelling with a wave of pro-market comment on liquor retailing. The most urgently relevant missive comes from Matt Bazkur, a hophead who has the goods on the bureaucratic habits of the LCBO (and others). Let's roll the tape:

As an Ontario beer geek, I want a better selection of beer in Ontario. I'm even willing to pay more for the right. As a right-wing nutjob, I want the government out of the booze business. However, my beer-geek desires override my nut job instincts to the extent that I could live with a mix of private and public. Heck, I could live with all-public if they just had a better selection.

Fat chance!

...there is a lot of nonsense that goes on because of Ontario government involvement in the liquor distribution process:

1. Exhibitors at wine/liquor/beer festivals must buy their own products from the LCBO and additionally pay a mark-up. From a posting by an importer at The Bar Towel:

"...all products being poured at this festival and any other beer and wine shows like it where consumers pay for samples must be purchased from the LCBO under a Special Occasion Permit For Sale, which means that we pay full retail plus an additional 16% levy on top."

Go read the rest of the article!

Packrat or Public Nuisance?

Brian Doherty had a link to this article on the conflict between a packrat and her local government:

On Sunday at noon, Mills was escorted from her house by a police officer, she said. She will be kept out until next weekend. Her son, daughter and son-in- law came to the house early Monday, where they joined city and county officials and workers from the Center for Organization and Goal Planning.

"We're going to do what we need to do to satisfy everybody and keep Mom happy, and everything will be fine,' Betsy Randolph, Mills' daughter, said as she prepared to tackle the piles in the living room.

While some of Mills' possessions will be thrown out, the organizers intend to box much of it and put it in storage so Mills can sort through it away from the house.

The Center will charge Mills $18,500 for 14 or more employees to work through the week. They will come back to follow up with Mills afterward. The funds come from a lien on Mills' house.

O-kay. She has her property jammed full of flammable materials, and the local firefighters claim that they'd be unable to get into the house after their last attempt to put out a fire. I'm astonished that her insurance company didn't come down on her like the proverbial ton of bricks before this. And, in fact, why is it the municipality pursuing her rather than her insurance company?

As often is the case, I can see both sides here to some degree. When we had to clear out my late mother-in-law's house, we were astonished at the amounts of old clothes, shoes, books, papers, photos, and miscellaneous flammable objects we had to clear out (eventually, we had to hire a junk clearance firm to come in and empty the place . . . there was just too much stuff). And she wasn't too bad, compared to her next-door neighbour, who has his property packed with the same kind of stuff as mentioned in the article linked above. The neighbour, after he'd filled his entire house and backyard with stuff, bought an old Bell Canada panel van and filled it with stuff, moving it from driveway to street (when the driveway got filled with even more stuff).

But, and here's the point I wanted to make in the first place . . . other than the fire risk, why is the government using its powers to temporarily evict the lady from her own property, arbitrarily disposing of lots of her posessions, and then billing her for the "service"? The answer is (aside from the potential damage to surrounding properties if her house does catch fire), because they can. There's nothing to stop 'em. Even in the United States, there is no absolute right to own property that can't be set aside at the whim of local courts or governments.

Extending this abridgement of her rights to an abridgement of all rights is trivial in a court of law. If the potential of harm can be identified (or made up as needed), then almost any individual, group, or company can be similarly targeted for government action.

Libertarian "Purity Test"

Jay Jardine linked to a Libertarian Purity Test. He then boasted about his score of 137 (out of 160). Once upon a time, I'd have scored much higher on the test as well, but I scraped in with a mere 117, proving that Jay is much more hardcore Libertarian than I am (like that would be a surprise).

My wimp-outs were mainly areas typical of soi-disant "Minarchists": courts, police, national defence. I'd love to scale back the power of the state, but I'm still inclined to feel that a certain minimum of government is necessary. The problem often is that we libertarian-oriented folks spend so much time attacking one another about our lack of ideological purity that there's no time to whittle back the state.

QotD: The Nanny State

[T]he Welfare State redistributes wealth and resources from society at large to concentrated beneficiaries, [but] the Nanny State takes concentrated instances of stupidity and irresponsibility and redistributes the shame and consequences to society at large.

Jay Jardine, "A Dumb Law, By Any Other Name", The Freeway to Serfdom, 2005-01-24

QotD: Europe

From my observations of the French, they still feel French, indeed quite strongly so. Nearly half a century after the Treaty of Rome, they can't be said to like the Germans; to think otherwise is to mistake a marriage of convenience for the passion of Romeo and Juliet.

A common European identity therefore has to be forged deliberately and artificially; and one of the imperatives for attempting to do so is the need of Germans for an identity that is not German (the other, which dovetails neatly, is the French drive to recover world power). And since the Germans are very powerful in Europe, by weight of their economy, their need to escape from themselves by absorbing everyone into a new collective identity will sooner or later be perceived in the rest of Europe as the need to impose themselves — as a return to their bad old habits. New identities can indeed be forged, but usually in the crucible of war or at least of social upheaval: not, in the context, an inviting prospect.

Theodore Dalrymple, "The Specters Haunting Dresden", City Journal, 2005-01

A discussion on the future of the Canadian military

I should have pointed to Heart of the Matter the other day. There's a very good discussion underway there. I threw in my $0.02 in the comment thread, but I'm enjoying reading the other participants' thoughts.

Hat tip to Damian for the original pointer.

NAFTA Viewed from Below the Border

Virginia Postrel has written a New York Times article on what happened to Canadian business after NAFTA:

Before the U.S.-Canada Free Trade Agreement in 1989, one in four Canadian industries — from dressmakers to breweries — were protected by tariffs. What happened when they faced untaxed competition from south of the border? My new NYT column [registration required] looks at a pathbreaking empirical study, using both industry and plant-level data. The article, by Dan Trefler of University of Toronto, is well-known in Canada, where, as econ papers tend to do, it has been kicking around for years in working paper form. But its lessons are remarkable. Even in an advance economy with sound macro policy, simply cutting tariffs can lead to huge productivity gains.

Wine Movies

Reason Hit and Run points to a review of the movie Mondovino which apparently is to be released in North America later this year. One of the comments was quite good (reacting to a flippant comment in the posting, not the movie):

Being both a free-marketeer and in the wine industry, I find it odd that someone from Reason would bitch and moan about people who "contribute to the notion that $50 for a dinner bottle is sane". I have a certain disdain for Parker (mainly, his affinity for syrupy aussie shirazes and his snubbing of anything that's not opulent and slutty), but, please...market prices are market prices, set by demand. Econ 101, anybody? As long as people will pay $50 for a dinner bottle, then the people will pay it. As of now, we're seeing a consumer backlash against arrogant producers trying to pawn off their lackluster Napa cabs as world classics, and who have no notion of a price ceiling.

Sadly, when you go deeper than my level (retail), you see that, many times, the tail wags the dog when it comes to pricing. Most consumers won't take a wine too seriously if it costs $12, so producers set the price artificially high in order to garner respect. I suspect that the wine industry is not alone in this trend, but given the highly subjective nature of what constitutes "good" wine, we are especially susceptible to it.

Evan Williams

Liberal Mindset, in a nutshell

It's an industry that is in Canada. You have to recognize that it is, otherwise you'd have to wipe out the whole industry.

The speaker is former federal cabinet minister Judy Sgro, and the topic was exotic dancers, but it's actually a wonderful encapsulation of what the Liberal Party really thinks about business. You either go out of your way to support it or you work as hard to ban it. Binary. It's good or it's bad: no fuzziness, no neutral ground, no gray areas.

When it's as starkly put as this, you can quickly understand why Canadian businesses are falling all over themselves to bribe donate money to the Liberal Party: they have to stay on the "good" side or they're risking everything.

Once upon a time I thought that the NDP was the greatest threat to Canada's economic and social future. Now I realize that the NDP are pretty small-time operators compared to the post-Pearson Liberals: the NDP actually believe in something, but the Liberals only believe in whatever it takes to stay in power. And, you have to acknowledge their amazing success in doing just that. We still have the theoretical ability to change the governing party, but on a practical level, they've proven that they can get away with just about anything and Canadians won't throw them out.

QotD: Air Travel

Long before 9/11, restrictions on smoking and seatbelts had remorselessly expanded into a culture of trivial but total coerciveness that Americans would rightly reject in any other environment. Airlines assume passengers will put up with anything because they've got no choice. But, while it's true this is a big country, an awful lot of travel is descretionary. Even business travel. Psychologically, we're stuck in the mid-19th century when the original travelling men spent eleven months of the year on the road because there was no alternative. The railroads have gone, the telephone's arrived, and so's video conferencing, and electronic networking, but guys are still on the road, flying off to lunch in Houston and a presentation in Denver and all kinds of other engagements they don't really need to be physically present at. The FAA and the airlines have blithely assumed that they can triple the amount of time you have to allow for a flight to New York for a business lunch without companies calling into question the necessity of that lunch.

Mark Steyn, "Flight from Reality", The Spectator, 2001-11-17

A UN Tax? Where does Paul Martin sign up?

Kate reports:

Not content with taxing its' own citizens, France seeks to enlarge the tax base by suggesting that there should be an international tax and will try to pitch the idea at the next G-8 meeting reports The Australian:

FRENCH President Jacques Chirac made a new call today for an "international tax", saying such a levy would help generate funds to help poor countries and those hit by disasters such as the Asian tsunami.

Because, as we all know, the Western world has been incredibly stingy in their response to the crisis caused by the tsunami in the Indian Ocean. So little money has been promised by individuals that the only fair way to grab the funds is to make volunteer contributions somehow less valid than mandatory levies through the taxation bureaucracy.

"These events stress the need to increase public aid towards development and to find innovative financing mechanisms such as an international taxation," Mr Chirac said in a New Year speech to the Paris diplomatic corps.

Then, Kate asks the inevitable question:

I, once again, am forced to ask — what are the odds that a Canadian Liberal government will not support any UN/French initiatives on international TAXATION?

Odds against? No. Odds in favour, certainement, mon ami!

Brian Micklethwait on why this crisis is different

Brian Micklethwait writes about why so much private aid is flowing to help the victims of the tsunami:

This catastrophe is, it seems to me, an exception to a rule which is now widely accepted among the donation-giving (as opposed to donation soliciting) classes. This rule is: that most of what passes for Foreign Aid these days is pointless, or worse. Personally I believe this, and I now believe that a lot of other people believe it too, and have believed it for some time.

Take the Sudan. Suppose you throw money into that mess. Who gets their hands on it? Starving people? Maybe. But a lot of it surely goes instead to the people who are inflicting rather than suffering from the starvation. The starvation-inflicters control the country like prison guards, and they demand tribute from Aid Agencies as a price for the Aid Agencies bringing their Aid to a few of the starvation-sufferers.

This is exactly my own feeling as well: far too much of what passes for charity is (at best) fractionally beneficial to the intended recipients, and far too much of it ends up in exactly the wrong hands: either the criminals who steal the donations or the "armies" and bureaucrats who are often the primary cause of the crises.

[Aid workers in this case], it seems to me, have one huge advantage compared to the circumstances that pertain in other disasters. They have a definition of cleaning up. They have an objective. Basically, very approximately, very roughly, as best they can, as imperfectly as they must, they are trying to restore the state of affairs that existed before the Tsunami struck. And, they can be confident that if they do manage an approximation of this Herculean labour, the local people whom they are seeking to help will then know just what to do. They will get back to getting on with their lives. Their lives worked okay before. They can work okay again. Meanwhile, they need a helping hand. A big one. But only for a while.

Other 'disasters', of the sort that are said to have 'root causes' (i.e. complicated and controversial and intractable causes), but upon which we are nevertheless nagged to shower Aid, have no such simple and shared objective to get everyone who is trying to help to actually help.

Aid of the second sort, is really just guilt payments: there is little or no hope of the donations actually making the situation better for anyone (except the criminals and oppressors), and a strong likelihood of making it worse. Perpetuating oppression and misery is a terrible way to assuage a general sense of guilt! And yet that's exactly what seems to happen in many cases.

To summarise, this disaster is (a) exceptional in being one that good people have been allowed, by circumstances and by local politicians, to deal with; and (b) it is exceptional in that it is actually reasonably correctable. Money will, in short, not do that much harm, and could do a hell of a lot of good.

Note that I am not just saying that this is how I think it is. Maybe I am totally wrong. Maybe the politicians are screwing up everything, and maybe the idea that there is a status quo ante which can in any imaginable way be returned to is utter nonsense.

I don't think Brian is wrong here, and he makes some excellent points that I haven't scraped off and reposted here. Do read his whole article!

NHL Strike vs. The Canadian Economy

Jon has a very good post up (which I meant to link to yesterday, but didn't get the chance). In summary, the NHL strike is a big issue to a lot of Canadians, but claims that it's had a huge impact on the economy are, at very best, overwrought. I'm not a hockey fan, and have no dog in the fight between the billionaire owners and the multimillionaire players, so it matters little to me personally whether the strike is resolved sooner or later.

The pretence that the strike is responsible for the current downturn in economic indicators is very quickly struck down by Jon's figures: the direct economic effects of the NHL strike are infinitismal compared to much more credible movements in the economy as a whole.

QotD: A Christmas Carol

It's Christmas time, and that means it's time to enjoy A Christmas Carol, Charles Dickens' melancholy tale of a productive businessman who gets worked over by three meddling supernatural social workers one Christmas Eve, transforming him into a simpering socialist.

It's almost as sad as Star Wars, really.

Douglas Kern, "A TCS Christmas Carol"

Bjorn Lomborg on Global Warming

Reason Hit and Run had a link to this article by Bjorn Lomborg on global warming:

[T]he economic models tell us that the cost is substantial. The cost of Kyoto compliance is at least $150 billion a year. For comparison, the UN estimates that half that amount could permanently solve the most pressing humanitarian problems in the world: it could buy clean drinking water, sanitation, basic health care and education to every single person in the world.

Global warming will mainly harm the developing countries, because they are poorer and therefore less able to handle climate changes. However, even the most pessimistic forecasts from the UN expect the average person in the developing countries to be richer in 2100 than we are now.

So action on global warming is basically a very costly way of doing very little for much richer people far into the future. We need to ask ourselves if this indeed should be our first priority.

"Corkage" Re-Enters Ontario Dialect

To my surprise, the Ontario government has passed the "bring your own wine" legislation. I really expected this one to die on the order paper, but I'm delighted to be proven wrong:

The passing of Ontario's bring-your-own-wine legislation puts the province in a club that includes Alberta, British Columbia, Quebec and New Brunswick, which already have similar programs.

The changes update the province's liquor laws and give licensed restaurants new choices to entice patrons to visit more often, Consumer and Business Services Minister Jim Watson said when he introduced the bill earlier this summer. But the bring-your-own-wine program won't be in effect during this holiday season.

Wine drinkers will have to wait several weeks until restaurants receive all the necessary approvals from the government.

It will be up to each restaurant to decide if it wants to offer the choice, and how much they will charge.

That last paragraph is going to be the stumbling block. Some restaurant owners will be worried that they'll lose too much business (because of the obscene mark-ups they have on their own wines), so even if they apply for and receive all the necessary "mother may I" permits, they'll probably set their corkage fee astronomically high.

No rational person is going to take a $12 bottle of wine into a restaurant and then willingly pay a $20 or $30 corkage fee, but it would make a good deal of sense to take a $40 or $50 bottle of wine at the same fee levels. A $12 bottle of wine will often be selling in the restaurant for $30-$36, while a $40 bottle will be marked up well over $100.

Of course, the nanny-state advocates will be all over this one as encouraging unlimited drinking (as if underage drinkers are going to suddenly start walking into restaurants because they can bring in a bottle). To some people, any easing of the now-ancient restrictions on alcohol is by definition a bad thing. They're the sort of people who don't really trust anyone to act responsibly unless there's a policeman watching them.

Here's a toast to common sense: a rare and uncommon bird in these parts.

French Winemakers Revolting

The downturn in demand for French wines is starting to cause serious worry among French winemakers, according to this report:

PARIS - Wine is less a beverage than an elixir of life in France, but the country's vintners say they're vexed by a problem that threatens their livelihood — too much of a good thing and not enough people drinking it.

Pinched by overproduction, shrinking exports, advertising restrictions, an aggressive campaign against alcohol abuse and changing drinking habits, at least 6,000 growers and winemakers staged spirited demonstrations nationwide Wednesday to press the government for help.

"We are a sector in crisis," said Jean-Michel Lemetayer, the head of France's main farmer union, urging the state to bail out an industry awash in a sea of Chablis and Bordeaux.

Vintners wearing black armbands marched through Bordeaux, Avignon, Angers, Macon, Nantes, Tours and other cities in key winemaking regions to urge the Agriculture Ministry to help offset their financial losses.

While I'm sympathetic to the plight of individual winemakers and their employees, I note that their first instinct is to demand government action. The report lists several reasons for the decline in sales, including worldwide overproduction of wine and domestic anti-alcoholism campaigns (but oddly does not mention the US unofficial boycott of French wines).

The worst-hit winemakers appear to be the higher-priced Bordeaux houses, whose products have suffered a 25% decline in foreign sales. I get the LCBO "Vintages" mailings, which recently included information on the most recent Bordeaux releases. Famous brands like Chateau Margaux and Petrus were selling for a couple of thousand dollars per bottle. I drink a fair bit of wine, but I can't imagine spending a significant portion of my annual drinking budget on just one bottle of wine, no matter how wonderful.

In most industries, when the demand for a product decreases, the logical reaction is to reduce the price per unit. Apparently, some divine law must insulate top-flight winemakers from such mundane economic considerations . . . and the French government is being pressured to make good on that divine ruling.

Hat tip to Jon for the link.

Updates on the Wine Wars

From Reason Hit and Run, some news on the ongoing court cases to overturn various state laws on importing wine:

Judging from yesterday's oral arguments, things are not looking good for bans on direct interstate wine shipments. Several justices were openly skeptical of the position that the 21st Amendment allows protectonism and the claim that the bans in Michigan and New York could be justified on other grounds. In what looks like a sign of desperation, Michigan's solicitor general urged the Supreme Court to overrule its 1984 decision rejecting a Hawaii excise tax that discriminated against alcoholic beverages from other states. "If you can't grant a tax exemption," said Justice John Paul Stevens, "it seems to me a fortiori that you can't prohibit importation."

Consumer Choice

Virginia Postrel has an article in the New York Times (registration required) talking about the latest threat to shopper sanity: too much choice. Do you remember when the greatest threat to shoppers was that evil capitalists were taking away choices?

Whether shopping for watches or jeans, salad greens or bathroom faucets, consumers have many more options than ever before. The variety of choices today gives us a much better chance of finding something that exactly suits our needs, our personalities, our activities and our bodies. We don't have to settle for the lowest common denominator or one size fits all.

But those choices can be overwhelming. Sooner or later, every shopper has an experience like my watch-buying breakdown. Our brains lock up, and we just want to go home. The stress is particularly great when we're buying unfamiliar goods, spending a lot of money or picking out something we'll have to live with for years.

I've had that experience myself recently. My desk chair at home finally gave up the ghost after nearly 20 years of service (the tilt mechanism self-destructed so that it no longer "un-tilts"). My wife and I went out to look for a replacement. Have you any idea how many desk chairs are available nowadays? Yikes!

It may seem like a trivial choice, but I spend a lot of time at my keyboard, so a comfortable chair is not a luxury: it's a necessary part of my work environment. It will probably be after the holidays before I can take the time to get a good replacement for the old one. Of course, while I'm waiting, I'm still using the old chair and hoping I don't cause myself damage when I sit down or stand up . . .

Retirement "Planning", Bank Style

Having passed the terrible age of 40, I've been paying slightly more attention to what the heck I'll be doing after my last employer shuffles me out the door. Because I've been working in software for the past twenty years, I don't have any pension entitlements from any of my various employers (most of whom are no longer in business, at least under the original names). I could, of course depend on the Canada Pension Plan and Old Age Supplement from the government.

Okay, now that we've had a good laugh. . .

There's almost no chance that I'll be entitled to anything from the CPP, because by the time I'm old enough to draw from it, it'll be so far into the red that they'll be doing everything they can to exclude claimants and increase claw-backs. Anyone over the age of 35 who's depending on the Canadian government's largesse will be eating cat food and scouring rubbish piles by retirement age, unless they take some provision for themselves.

I've been saving money in my registered retirement savings plan, although I've never been able to afford to put away the legal maximum for my income (I've come close, but never hit the max). This is literally the only tax dodge available to Canadians earning less than $200,000 per year: the money you save in that year is deducted from your taxable income and the interest it earns is also tax-deferred until retirement.

This means I'm saving a theoretical 14% of my pre-tax income as provision against starvation once I retire. Sounds reasonable, no?

According to the banks, no. If you go to any of the major Canadian bank websites and look at their online retirement planning tools, you'll discover that no Canadian can ever really afford to retire. In my case, going on the (doubtful) assumption that I continue to earn the same as I do now until I retire, I need to save approximately 105% of my pre-tax income in order to barely maintain my standard of living after retirement. If I manage to stay employed for a few years after age 65, I cut that down to needing to save only 94% of my pre-tax income.

In the most hopeful scenario, where I work until age 78 and die the same year, I won't go bankrupt.

Okay, I'm exaggerating, but not by much. I've always found it depressing to do this sort of planning, and the bank websites (which of course are biased to encourage you to keep more money with them) sure don't help. For example, the CIBC retirement calculator says I need to save just over 75% of my take-home pay every month in order to be able to retire at 65. Aaaaggghhh!!!

More Wineries Go To Court

Jon alerted me to this post on Free Will:

Free the Grapes

At last, the Supreme Court is going to hear arguments on interstate wine sales.

The U.S. Supreme Court is set to hear cases on Tuesday on whether small California wineries, such as the Agua Dulce Vineyards north of Santa Clarita, can sell their products to the national market over the Internet, a practice that is banned in several states.

"California wineries, particularly smaller family-run operations, should be able to ship their product directly to customers in all states," said K. Lloyd Billingsley, editorial director of the Pacific Research Institute and author of the new report "Wine Wars: Defending E-Commerce and Direct Shipment in the National Wine Market."

"Twenty-four states prohibit direct shipments of wine," he said. "The trend is toward direct shipping and the high court should recognize that current reciprocity arrangements could simply be extended to all states."

As with the last report on wineries appealing against archaic and illogical restrictions, I hope that the court sees fit to restore rationality to the market.

Jon Disses the Recyclers

Jon, my virtual landlord, has an amusing post up about his recent dealings with the recycling commissars:

This whole Blue Box and recycling thing is a crock. I am convinced that it has nothing to do with recycling and is instead an experiment in behaviour modification. The various levels of government want to see just how compliant we can be made to become. My guess is that they are hoping that, when the time comes, we will willingly walk to the camps just on being told that it's good for the environment – that way they won't have to provide transportation.

Especially pay attention to how he's taken to packaging his recyclable cardboard boxes. I don't think I'd have the stones to do that!

And while you're at Blogulaciousness, don't miss this post about the economics of hydro in Ontario. Good reading.

While I'm busy pointing to good posts on Jon's blog, I should mention that I had this idea to riff on an older posting of his ("Every time you use Highway 407, a terrorist gets appeased"). What I was going to do was to use the Treo camera, take a photo of a new sign that appeared recently on the 407 and edit the wording to say something deeply profound, like "Durka durka Mohammed Jihad!" (obligatory Team America reference). Unfortunately, the plan derailed because I'm a moron. I took the photo yesterday, while driving past the sign, and then forgot to save the image, and turned off the camera. Doh!

QotD: Air Travel

If you go to a supermarket at certain times of the day, you'll find that the deli counter can be quite busy, so you pull a little ticket from the dispenser and mooch around in the general area, loading up the yoghurt and Pop-Tarts until your number's called. For 15 billion bucks, maybe the airlines could buy a couple dozen dispensers apiece. But apparently not. They want you backed up in lines shuffling your bags forward a couple of inches at a time because your misery is their convenience.

Mark Steyn, "Flight From Reality", The Spectator, 2001-11-17

"Economical" Cars

Dennis gives some real economic analysis on Natural Resources Canada's list of fuel-efficient vehicles:

It seems to me that except for the Toyota Echo and Matrix high efficiency cars are not for the cheap economically challenged. You could buy a Pontiac Sunfire for $16,230 and use that $14,000 savings versus a Toyota Prius to pay for fourteen years worth of gasoline. Something to think about when balancing fuel efficiency versus the purchase price.

More Economic Voodoo — or is that Feng Shui?

Again this morning, I was listening to my local jazz radio station on the way in to work. As usual, they had a broker from CIBC Wood Gundy giving portfolio advice at about 9:20 a.m. Today's talk was about investing in China, and how the markets have been reacting to the recent small drop in the official GDP growth figures released by the Chinese central bank.

This time, the emphasis was on the idea that in spite of the breathtaking growth figures, Chinese firms still are not particularly profitable and that therefore there are better ways of investing your money to benefit from all that growth. Unlike the last time I addressed this issue, this time I thought that the advisor was actually making pretty good sense. The incredible transformation of China from a pure command-driven economy to a mixed economy will certainly provide lots of opportunities for people to get rich; it will also provide even more opportunities to lose big money.

Much of the problem is that even now, the Chinese economy is not particularly free: the official and unofficial controls on the economy provide far too many opportunities for rent-seeking officialdom to play favourites and cripple antagonists (and for once, "cripple" is not just a bit of hyperbole). Any numbers provided by the Chinese authorities can not be depended upon, and should probably only be viewed as an indication of what the Chinese government wants the outside world to believe.

Even in a relatively free economy like Canada, the underground economy can be huge, with plenty of economic activity happening out of reach of the taxman. In China, where everybody was raised in an environment where providing the "wrong" answer to your leader could get you imprisoned (or executed) as an economic criminal, the numbers upon which the bankers and financial officials depend can only be described as extremely unreliable.

Update 26 October: The Last Amazon asks a highly pertinent and pointed question:

In the past week, the Globe and Mail has been featuring the economic engine that China has become. It's economy is thriving so much so that Chinese government owned companies like China Minmetals Corp (which had revenues in 2003 of USD$11.7 billion) is currently negotiating to buy outright 100% of the stock of the Canadian mining corporation, Noranda Inc. The total stock is estimated at approximately CDN$6.7 billion.

If the Chinese government can afford to buy Noranda Inc. why hasn't anyone asked when China will reimburse the overburden Canadian taxpayers of this fair land for the Cdn$65.4 million that has been given to China as foreign aid?

Putting my money (literally) where my mouth is

As a Canadian, I'm used to the idea of going to the doctor for a checkup (or whatever) and no money changing hands: I present my Health card and the financial side of things is invisible to me as a patient. It's very easy to get into the notion that healthcare is "free", because on a practical level that's exactly how it appears. For those of you living in jurisdictions where you don't see a doctor without reaching for your debit card or chequebook, this may sound like a great innovation.

When the system works well, everyone is happy. Unfortunately, the system is designed to oscillate out of control very quickly indeed: there are no limits to the demand for healthcare, and because the costs are not borne directly by the patients, there is no dampener on the demand from the payer. Canadians like to think of our system as being fair: everyone has equal access to healthcare. This is true, to a degree: it is against the law to "jump the queue" and pay directly to get faster treatment. As a device to prevent corruption, this provides doctors with a good reason not to stray outside the system, for fear of the penalties for being caught taking payment directly.

Dental care is not currently part of our government-run healthcare system, and we're much more familiar with the idea of paying for services. Many of us have some health insurance coverage through our employers which pays some or all of the costs of regular dental care. My employer, for example, pays a significant share of the costs for me and my family.

My employer, however, has a strong incentive to purchase group insurance for their employees through whichever insurance company offers the best deal: there is a competitive market for providing group health insurance. I assume that my company is satisfied with the trade-off they've made between the cost of providing the benefit and the degree of coverage the plan provides to me and the other employees.

A specific example, and this relates to the title for this posting, is that the insurance coverage we have provides for twice-yearly cleaning and scaling treatments. My dentist has recommended that I come in more frequently (as a kid, and even as a young adult, I had terrible dental hygiene: I've spent more hours in dental chairs as a "mature" adult as a result).

Any additional care, beyond what my insurance provides, comes out of my pocket. And this is right: I'm the one who benefits — although I find it hard to think of it as a benefit as the dental hygienist is taking a pick and shovel to my gumline!

This is where the natural limits to healthcare in general should also fall: without some patient buy-in (and I mean that literally, as in cash-on-the-barrel), we will never manage to reign in the out-of-control costs of the overall healthcare system. As it is, we ration by time, and some people suffer for months before the system can take them in their turn and fix whatever needs fixing. For some, that means living in pain that is totally unnecessary. If that doesn't strike you as being wrong, then we probably have diametrically opposed ideas about human dignity.

Rant: "The Chinese Economy"

On my way in to work this morning, I heard a stock advisor doing his best to make reasonable assumptions about what the average listener needed to know about the economy. This guy has been pretty level-headed in the past, but this morning's talk just got my head ready to explode.

The topic of discussion was the Chinese economy and how the Chinese central bank was having to take greater efforts to rein in economic expansion. He talked about how many different sectors of the North American economy were, to greater or lesser degree, depending more and more on Chinese growth to increase their own investments and output. The idea that the Chinese economy was "overheating" was bandied about. He closed by indicating that a slight drop in the official growth rate from 9.8% to 9.6% showed that the Chinese central bank was seeing some results from their intervention in the economy.

There are so many things wrong here that I'm almost at a loss where to start. While there is no doubt that China is a fast-growing economy, the most common mistake among both investors and pundits is to assume that China is really just like South Carolina or Ireland. . .a formerly depressed area now achieving good results from modernization. The problem is that China is not just the next Atlanta, Georgia or Slovenia. China is still, more or less, a command economy with a capitalist face. One of the biggest players in the Chinese economy is the army, and not just in the sense of being a big purchaser of capital goods (like the United States Army, for example).

The Chinese army owns or controls huge sectors of the economy, and runs them in the same way it would run a division or an army corps. The very term "command economy" would seem to have been minted to describe this situation. The numbers reported by these "companies" bear about the same resemblance to reality as thos posted by Enron or Worldcom. With so much of their economy not subject to profit and loss, every figure from China must be viewed as nothing more than a guess (at best) or active disinformation.

Probably the only figures that can be depended upon for any remote accuracy would be the imports from other countries — as reported by the exporting firms, not by their importing counterparts — and the exports to other countries. All internal numbers are political, not economic. When a factory manager can be fired, he has his own financial future at stake. When he can be sentenced to 20 years of internal exile, he has his life at stake. There are few rewards for honesty in that sort of environment: and many inducements to go along with what you are told to do.

Under those circumstances, any growth figures are going to be aggregated from all sectors, most of which are under strong pressure to report the right numbers, not necessarily corresponding with any real measurement of economic activity. So, if the economic office wants to see a drop in the economy, that's what they'll get.

Basing your own personal financial plans on numbers like this would quickly have you living in a cardboard box under a highway overpass. Companies in the soi-disant free world have shareholders or owners to answer to. Companies in China exist in a totally different environment.

Women in the workforce

Jane Galt, over at Asymmetrical Information, quotes Stuart Buck at length, following up with some of her own observations:

Consider that when my grandmother got married, laundry took an entire day, and left her exhausted by the wrenching work of boiling water for washing, wringing the clothes out, and physically hefting wet clothing onto the clothesline. Three hefty meals a day had to be prepared for men doing hard physical labour without any of the modern aids, from food processors to frozen vegetables, that I enjoy, a mound of dishes done after every meal, a house had to be cleaned without the aid of vacuum cleaners, groceries had to be gotten on foot . . . everything was physically more demanding, and more time consuming.

My mother stayed home with us. By the time I was ten, she was going bonkers. There simply wasn't enough to do in the house . . . and my mother, mind you, had gone in for gourmet cooking in a rather large way, producing elaborate dinners that took hours to prepare. She was the mainstay of the PTA, the building's co-op board, and so forth. Nonetheless, there simply wasn't enough to keep an active woman occupied after the children were in school.

This has created a problem, of course: women's work used to be compatible with child care, and now it is not. And the business world is still largely designed for men: it is not structured to accomodate professional women who stay home with young children.