Saturday, June 30, 2007

China Heads for Europe

Firms flock to the Chinese mainland because production are so tremendously low. The astonishing growth of the world's most populous country has lifted tens of millions of people out of poverty. The Chinese government, for some reason, thinks this is a bad thing.

China is adopting new and restrictive labor laws--no doubt bowing to the communist mentality that still lingers there. The laws, among other things, requires "that employers must submit proposed workplace rules or changes concerning pay, work allotment, hours, insurance, safety and holidays to the workers' congress for discussion." In other words, companies all over the country will be forced to swap flexibility for stability. Costs could (and probably will) also rise. Naturally, some businessmen are getting concerned.

No one seriously expected that China would throw off all its communist roots. Like the US and the countries of Europe, China would transform into a mixed economy. But if there was any question if China would be more like the US, as a freer market, or Europe, as a more restrictive one, this latest development suggests it's leaning towards the Continent.

The Capitalist Soul

With the media press and growing attention of Michael Moore's Sicko, I can't help but remind myself of enduring truths about various ways used to govern an economy. This is particularly reinforced with the testimony of Che Guevara's daughter (who appears in the movie) concerning the evils of capitalism and the virtues of centralization.

Under communism, penning a well-written book critical of communism means death.

Under fascism, penning a well-written book critical of fascism means execution.

Under absolute monarchies, penning a well-written book critical of the king means extermination. Tn any of these, the best one can hope for is censorship or a confiscation of materials.

But under capitalism, penning a well-written book critical of private ownership means becoming a millionaire.

Say what you want about the evils of free markets. Rare is the institution that rewards-or even tolerates-those who challenge it. That alone should earn capitalism a lot of respect.

Sicko, Reviewed

Mike sent me this excellent review of Sicko, noting Moore's unsurprisingly sloppy presentation of the facts. Worth a good read, though after it I'm confused why the author suggested one should pay to go see it.

The review is notably in a Canadian newspaper, the same place of the implied ideal health system.

Thursday, June 28, 2007

Impoverished Logic

Maude Hurd, President of Acorn (an antipoverty organization), needs to check her economics. In a letter to the New York Times, she defended John Edward's work in raising the minimum wage. To her, "his efforts were both sincere and a very effective way to fight poverty."

I fail to understand how making it more expensive to hire those that have the hardest time finding employment eases their burden. For those that are good enough to not be fired, they could have gained a raise on their own. Perhaps Hurd's organization should have helped with their negotiation skills instead of raising their wages at the expense of the most downtrodden.

Salads Do Not Melt

The Supremes ruled against allowing public schools to use race as a factor to determine where children went to school. The ruling, which a lifetime ago would have made conservative white folks very angry, now is making liberal black folks very angry. The ruling declares "racial balancing" as unconstitutional.

This technique, used by countless school districts the country over, attempts to create an equal balance of races in all the schools they reign over. This has not only had the nasty unintended consequence of denying a better student because they weren't the right race but making sure a student doesn't leave because they were the right race. In other words, it's forced integration.

Maybe it can be a good thing: people can learn through diversity. But all schools shouldn't be forced to comply with that particular strategy. At the same time, the Supremes shouldn't outlaw the practice, either.

I am surprised to hear that few talk about why schools are segregated, indeed communities in general. We have Chinatowns, black and white neighborhoods, and Little Tokyos. Yes, some of this is based on income, but people seem to prefer to hang out with people like them. They self-segregate. The melting pot seems like a fine idea in the abstract but in practice, most reveal they are happy with salad bowls, despite the possible benefits. Why force it any other way?

A Clean Environment is a Luxury Good

Despite the blame on America for massive pollution, the 10 Cities with the Worst Air Pollution are all in developing countries. The richer people are, they can demand more that their environment be cleaner.

Cairo, Egypt: 11.1 million
Delhi, India: 15 million
Kolkata, India: 14.3 million
Tianjin, China: 7 million
Chongqing, China: 6.4 million
Kanpur, India: 3 million
Lucknow, India: 2.6 million
Jakarta, Indonesia: 13.2 million
Shenyang, China: 4.7 million
Zhengzhou, China: 2.6 million

Wednesday, June 27, 2007

Moore Reading, Not Less Health Care

Micheal Moore went to the Daily Show tonight promoting his new movie, Sicko, a work promoting national health care. Moore is tremendously upset because people don't have the health insurance he wants. In fact, he doesn't think private health insurance should exist it all.

If it turns out the health insurance people get doesn't cover something they think it should, why not instead encourage people to read contracts before they sign them? Then they would know what's covered and what isn't and then they could decide if they want to purchase the product. I'm sure people sign a lot of things without reading it. It's a problem. But telling people they shouldn't be expected to read things they sign isn't helpful.

But Moore doesn't merely think that people should read less, he thinks we should throw out the very contracts they should read. Moore told Stewart that it's awful companies provide insurance because they are in it to make profit. Thus, they look to not pay off claims. What Moore ignores is that if they never paid off claims, they wouldn't make any money, either. Nobody would want to buy such insurance.

Unless, of course, no one bothered reading the contracts.

Tuesday, June 26, 2007

Gbrands

Germany's looking to pass a new law requring all email service providers to collect and store information on its users. It would also ban anonymous accounts. If the law is passed Google announced that it would no longer offer the country Gmail (called Google Mail over there thanks to a trademark dispute).

One can imagine such a law would be burdensome to Google. Not only is that a lot of data to keep track of, fewer people would be willing to use their services. If not, email in general. Those who travel to Germany and use Gmail (as an avid Gmail user who's undergone some recent globe-hopping, having an email I can access anywhere is a godsend) would also be subject to the law.

But Google doesn't seem as concerned about that (Germany, after all, is still one of the largest economies in Europe). Their global privacy counsel, who announced the possiblity that Gmail won't be in Germany focused on a different reason.
Many users around the globe make use of this anonymity to defend themselves from spam, or government repression of free speech. If the Web community won’t trust us with handling their data with great care, we’ll go down in no time.
Anti-free marketers often point to corporate brands as leading to monopolies and heartless decision-making. This is an example of how brands are quite good: companies will go the extra mile to do the right thing because a hit to their brand is a hit to everything they sell.

Saturday, June 23, 2007

Slicing Subsidies

AEI published a short essay yesterday arguing for the elimination of subsidies to US farmers. As much as one should support cutting off free handouts at the expense of taxpayers, AEI argued that such a change won't really harm the industry. This sadly suggests that if the supports are keeping farmers around, they are justified.

If the government funds an industry, it's a problem even if many firms would otherwise go under. Especially if they would otherwise go under. Subsidizing a profitable firm means you have a few more people working on something that doesn't need working on. Subsidizing an unprofitable firm means you have a whole company doing a wasteful job. Such supports pass a tipping point from loss to profit. Successful companies are not at a tipping point so subsidies (while still undesirable) only waste at the margin.

Don't be afraid to deregulate a firm--or even an industry--into destitution. Such times are when we can often do the most good.

Friday, June 22, 2007

Supporting the Phantom Film Industry

Last I checked, Spain doesn't grow many cacao beans (for chocolate). This shouldn't surprise anyone--Spain isn't a good place to make quality beans. I suppose they could get around that by constructing vast greenhouses and use vast amounts of energy to simulate the needed climate. Doing so would, of course, be a needless and tremendous burden on their economy. Thankfully, no one (to my knowledge) is suggesting they do that.

For whatever reason Spain--indeed Europe in general--isn't a good place to make films either. Most people over there prefer American movies. But that doesn't stop the Spanish government from forging a new law requiring cinemas to show one European movie for every three non-European ones. It would be like requiring 25% of the chocolate in stores be made from cacao beans grown in New England.

The politics of it is, of course, to support the local film industry. But cinemas all over the country scream in protest, even engaging in a 24 hour strike on Monday (93% participated). They know their customers want foreign films, not films from a local industry so poorly executed it has to force people to sell them.

Thursday, June 21, 2007

Has America Strayed?

A lot of people would say yes, including myself. Once a haven of small and decentralized government, the state has become a major influence in social and economic affairs.

Joel S. Hirschhorn agrees with me, at least with the "yes" part. Hirschhorn feels as though our country is too interested in consumer products and other bread and circuses to care about the horror that the US government bears down on us. He supports a national convention (as allowed by Article V of the Constitution) so "the people" can propose amendments. Knowing that Amendments can help (freedom of speech) as well as hurt (Prohibition) the country, adding another Congress-like body even for a while hardly seems like a recipe for success.

I think Hirschhorn wouldn't be so concerned if he knew that things aren't nearly as bad as he says. Yes, the government is much harsher now. But people are richer, healthier, and more educated than they've ever been. Never in the history of the world has so many options been open for so many people. Hirschhorn laments that most people don't seem to care about the inner-workings of the government and most don't vote. But that can be a good sign, as it is here. The countries where people are really angry about their government, where people take to the streets and vote in massive droves, are not good places to live. People only pay attention when things get really bad, especially when it threatens the "mindless entertainment" that supposedly is the cause of inactivity.

The state of the government is certainly cause for attention and anger. But it's not nearly as bad as the doomsday Hirschhorn paints it as. Winds? Yes. Hurricanes? No.

NJ Congress Encourages Students to Not Think

For many Americans, college is the place where kids become adults. They learn to manage their own schedule. They learn to live by themselves. They learn to interact on a more professional basis. Many take jobs.

But the New Jersey Senate thinks they are growing up too fast. Earlier today they passed the Codey/Lesniak bill which, among other things, the exchange of gifts from lenders to educational institutions in exchange for preferred lending status. According to Sen. Lesniak:
The only reason a lending institution should get a college’s stamp of approval over a competitor is because it offers students a better deal for their money.
In other words, students and their parents shouldn't be bothered with understanding the requirements of a student loan. All the thinking they should have to do is check the college's list of suggested lenders and then mindlessly act accordingly.

The students may be the ones who will suffer the most. Not only is the Senate discouraging thinking, they are also discouraging companies from donating the very buildings and equipment that often draw students to a particular college and teach them when they arrive.

Wednesday, June 20, 2007

Lost in the Black

Last night I happened to have caught Lewis Black's stand up on Comedy Central. He argued that creating economic growth is easy: just get the government to build a big thing in a state that needs economic growth (he suggested Mississippi). Then people will say "I have to go see the big thing!" and then travel to Mississippi. Presto! we have growth.

It's hard to tell if Black was kidding or not (I suspect he wasn't) but it's worth pointing out why this is a bad strategy. Similar plans often pop up in government circles, candidate speeches, and various interest groups.

To illustrate where Black went wrong, let me propose a similar plan: to save money, instead of making a new big incredible thing people want to see, move an existing one. Let's pick up the Statue of Liberty and move it to Mississippi. That would create a lot of growth right? After all, we know people will travel far and wide to see it. It's a proven project and cheaper than starting from scratch.

But wait: what about all those New York businesses that depend on the tourism that the Statue brings? They would go under or move to Mississippi, which is why Black's plan won't work. Similarly, there are those who would go see the new amazing thing and thus forgo doing other things, like going to New York to see the Statue and patron local business. Black's just shuffling wealth. Net gain is zero (actually it's negative because we had to pay to get nothing).

Monday, June 18, 2007

Surface Trade, Not Deep Research

Over a mile below the surface South Dakota toils.

The state is looking to win an NSF bid for the construction of a "Deep Underground Science and Engineering Laboratory." It has spent $2.1 million so far this year prepping an old gold mine.

If approved for funding, this will be the country's first DUSEL, with others existing in Russia, Japan, and Italy. Naturally, the fact that we don't have one was a cited reason for making it. On NPR today, I heard talk of needing to "catch up" with the rest of the world because the new science can be so powerful.

I have a much cheaper idea than spending $116 million to make a lab at least three other countries already have. Just do what we usually do when someone creates new technology we don't have: trade for it. We are, after all, "way behind" in Wii technology but we still have them.

Tyler Cowen’s New Book and Secret Blog

Today Tyler Cowen has an interesting offer: order his forthcoming book Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist and he’ll send you the link to his secret blog.

I have been looking forward to this book for quite a while now. I did some editing and looked up random facts for Dr. Cowen last year for this book and have been waiting to see the final version. It reads kind of like his blog, but contains much more. It was an enjoyable read and I learned a bit and it got me thinking about things I hadn’t thought about before. I recommend it, even without the bonus of learning about his secret blog.

Sunday, June 17, 2007

Showing That You Care

Hillary Clinton recently spoke out against the restraints on federally-funded stem cell research. Her sentiment is in the right place. Why should a culture of cells much of the country doesn't even think is alive take precedent over those no one can deny are suffering?

And yet her perceptions are askew. At an event she said there are millions of families left
...waiting and wondering whether their government is really on the side of helping and saving the lives of their loved ones. Where we are now is, we're going backward. We're not just stalled. We're going backward.
The government may be going backwards, but despite what Clinton suggests it is not the only source of technology. Industry is far more effective at invention and innovation than government scientists. Congressional funding is fickle and oversight often oppressive.

Instead of engaging in the abortion battle, Clinton should encourage tax cuts for private research firms. Not only would that get past Mr. Bush, it would run counter to her platform. It would demonstrate that this really is about the sick and dying and not about playing politics with people's lives.

In Defense of Amnesty

Lou Dobbs Tonight once again referred to the immigration bill in the Senate as "amnesty" in spite of the rest of CNN calling it something else. A lot of people are upset about Lou Dobbs. I am not.

Amnesty--or a general pardon of offenses--is exactly what we need for illegal immigrants. Yes, they broke they law but they didn't do anything wrong. They shouldn't be treated like criminals.

The word, however, has a negative connotation (which is good reason to be mad at Dobbs and is probably why it appeared on his show). But it shouldn't, at least not all the time. People get arrested for all kinds of dumb reasons. Suggesting that they didn't do anything wrong (by making them innocent people) is something we should see more of.

Saturday, June 16, 2007

No Green, No Green.

Libby Rosenthal at the NYT noted with disgust that "going green" seems to be solely focused on making money. Instead, we should focus on taking care of the environment because "it is the right thing to do." In fact, the economic benefits may be exaggerated.

The strange thing about the article is that the author just gave every reader a reason to not go green. Good feeling and a guilty conscience only gets one so far. But the pursuit of wealth, as Julian Simon pointed out, is the most reliable motivator to ensure humanity does not strip it down to nothing.

Tuesday, June 12, 2007

Why oh Why Can’t We Have a Better Press Corps? (Autism Edition)

According to the AP:

The court is being asked to decide whether there is a link between autism and childhood vaccines.

The court doesn’t decide if there is a link or not. If there is a link and the court rules there isn’t, that doesn’t mean that the existing link suddenly disappears. If there is no link and the court rules that there is, autism won’t suddenly be transmitted via vaccines. The court is being asked to examine the evidence and come to a conclusion the best that it can.

Monday, June 11, 2007

Why oh Why Can’t We Have a Better Press Corps?

A recent article in the NY Times gave the statistic that the pretax income for the top 1 percent of American households rose 7 percent, to 16; while the income share to the bottom four quintiles fell 7 percent. And then this sentence:

It’s as if every household in that bottom 80 percent is writing a check for $7,000 every year and sending it to the top 1 percent.


That’s not even a remotely true statement. The first problem is the oft quoted “They aren’t the same people.” Those in the bottom quintile in 1979 are not the exact same people there today. I would be willing to bet that the majority of people in the bottom quintile today weren’t even in the labor force in 1979. Furthermore, all quintiles have gotten richer since 1979, but the rate of growth for the quintiles has been different. Just because the top 1 percent has risen faster, doesn’t imply that the bottom 80 percent are sending checks in the mail to them from their helpless exploited state. It could be (there’s really no way of knowing for sure one way or the other) that if the top 1 percent didn’t increase as much the bottom quintiles would have grown slower.

On a somewhat related note, Don Boudreaux directs us to Steve Landsburg.

Give Us This Day Our Daily Shootout

For some strange reason the Church of England is angry that people are going to their Winchester Cathedral. Well, they're not really going there but they are in a video game. And no, it's not in some religious expansion for The Sims. It's to kill people in Sony's PS3 game "Resistance -- Fall of Man."

Granted, I'm not surprised that they are upset.

I wasn't really sure what side of this debate I sympathized with. After all, the Church owns the building. Don't they have a right to say how it's depicted? But the bricks of the building are not the same thing as images of the building. Suppose I take a picture of the Cathedral and I make it look like it's on fire. Or being crushed by an 80-foot tall Jesus. Or placing Pauly Shore in front of it. All of these things depict the Cathedral in a negative way. If I put them on the web, does the Church of England have a right to make me take them down (free speech arguments aside)? After all, don't I own those pictures?

You might say that because the subject didn't consent, I don't have that right. Let's ignore the fact that the subject is a building and cannot consent. I'm talking about the nature of private property. The Church of England allows people to take pictures of the Cathedral (granted, I don't know this for sure but I think it's a reasonable assumption). If they wanted to control its image so much, why don't they ban such photography?

It's a question worth thinking about, not just if the Church has a right under private property but if it's socially optimal to extend private property that far. Again, I'm siding with Sony and not just because I think it would be fun.

Sunday, June 10, 2007

Monopoly Lesson

Any fledging economics student should know that a monopoly is the sole entity that sells a particular product. By definition, monopolies have no competitors.

Why this is important is that sometimes one company will claim its competition is a monopoly--a contradiction in terms. But Google doesn't think so. It's talking to anti-trust officials concerning a built-in search tool in Windows Vista.

For those of you who haven't used Vista, when you bring up the Start menu there's a little input box at the bottom where you can type a search query. I don't use it. In fact I often forget it's there. But Google wants it to be easy to shut it off.

Some people shoot back that Microsoft is using its so-call "unfair" advantage as a popular OS to challenge other markets. But so what? Celebrities use their popularity to pose as spokespeople for products that are not the movie they star in or sport they play. Wegman's turned its egg business into a chain of major grocery stores that sell everything from corn to cooking pots. McDonald's now sells salads. Game consoles often double as DVD players.

And oh yeah, Google turned its popular search engine to place where you can also get maps, e-mail, and news. Let's not forget that all those services are free to boot. Talk about unfair.

TV Online

When I was home a friend pointed me in the direction of TV Links. Check it out, especially when you just have to watch TV.

Friday, June 08, 2007

WiTric Boogaloo

MIT scientists are demonstrating once again the importance of scientific independence. Sick of forgetting to plug in his cell phone to a charger, Marin Soljacic and his team of researchers have developed "WiTricity" or wireless electricity. So far they can only power a light bulb from about seven feet away but they are putting the fledging technology up for sale to be developed further.

Imagine never having to worry about the battery life of a cell phone or laptop. Imagine having fewer cords behind your entertainment center. Imagine maintaining power after--or even during--a hurricane. It's a wild idea and there still is a lot of work to be done but the technology is easily worth billions.

Some people say that new technology comes from tinkerers, and that's partly true. But widespread revolutionary technology comes from profit-seeking. And all of them essentially come from fulfilling a need consumers demand.

Thursday, June 07, 2007

FrankenKeynes

Lately I've been reading Thomas K. McCraw's Prophet of Innovation, the biography of Joseph Schumpeter. Schumpeter was a famous economist in the early and mid 1900s. He was as famous as Keynes, if not more so. Around the time of the Great Depression, he published Business Cycles but it was not received well. There were some legitimate concerns but the most common critique was that it had no policy suggestions. Keynes' General Theory, however, did. In 1939, Schumpeter organized a seminar to discuss his book. But as McCraw describes
....it became evident that almost no one had read the text. Afterward, several students said that they had never before seen Schumpeter genuinely furious, as he was on that occasion. One of them recalled that 'in the discussion everyone talked about Keynes and not about [Schumpeter's] work.'
Arnold Kling tells a similar story concerning the reaction to Keynes's work. Roosevelt misinterpreted General Theory to mean that one must restrict output to save the economy (as part of the New Deal, crops were burned, pigs were prematurely slaughtered, and "too much" production was made illegal). Keynes' book became a Frankenstein's monster--most of this critical ideas in understanding the nature of the Great Depression were ignored.

When disaster hits, people love to embrace a policy suggestion. Any suggestion, no matter how twisted or vague. Extreme scenarios and strong emotion are the realms where government expands most often and most dangerously. It is also, notably, where con artists thrive.

Pricing the Waves

Today in the NYT Ralph Nader called for the broadcasting companies to be charged for their use of the public airwaves. I applaud Mr. Nader's interest in establishing a pricing mechanism for the use of a scarce resource. But this is not the same as a price. Prices emerge out of market interaction, not political processes. If Mr. Nader really wanted broadcasters to pay for their airwaves, why not sell it to them--or whoever will pay--outright? That way we can eliminate the existing regulation that's used to govern this current public good while at the same time making people pay for what they use.

Well Meaning Environmental Effort from the 1970s

In the 1970s there was a well intended project that put about two million tires off the coast of Florida to create an artificial reef. The result? They didn’t support sea life and have been destroying coral. Now the state is spending $2 million to remove 700,000 of the tires to fix the problem.

The law of unintended consequences is something to keep in mind for any legislation, especially with something as complicated and intricate as the environment.

Tuesday, June 05, 2007

The New Scientific Method

Recently I’ve been reading The Chilling Stars. It is about Henrik Svensmark’s and others new theory on climate change. The theory, in extreme brevity:

[Svensmark] saw from compilations of weather satellite data that cloudiness varies according to how many atomic particles are coming in from exploded stars. More cosmic rays, more clouds. The sun’s magnetic field bats away many of the cosmic rays, and its intensification during the 20th century meant fewer cosmic rays, fewer clouds, and a warmer world. On the other hand the Little Ice Age was chilly because the lazy sun let in more cosmic rays, leaving the world cloudier and gloomier.

This theory implies that carbon dioxide and other greenhouse gases play a small role (if any) in climate change. His colleagues’ reaction to the new theory was complete rejection. One called it “extremely na├»ve and irresponsible.” Svensmark was invited to a dinner with other Nordic scientists. He was invited so others could mock him, which they did, and labeled his work as “dangerous.”

The government was reluctant to give him funding, and when he got a grant from the Carlsberg Foundation a government scientist wrote to the foundation urging them to cancel the funding. Svensmark won Danish prizes for his discovery: the Knud Hojgaard Anniversary Research Prize and the Energy-E2 Research Prize, but he was still scandalized in the press.

Apparently the scientific method that I learned is now outdated. Theories don’t have to be proven wrong or invalidated. Hypothoses don’t have to be tested. New theories can simply be derided and have the funding cut if they don’t conform to your priors so you can keep believing whatever you want.

Monday, June 04, 2007

My Politics

On this political test (via Greg Mankiw) I scored about the same as Milton Friedman.