Thursday, August 28, 2008

How to not vote and show you care

The Onion has a good video on how to not vote and still make it look like you did, in case you want to follow Tullock and not vote but don't want others to know.

Monday, August 25, 2008

Fallacies of Fallacy

Naming a fallacy is very powerful. It signals that not only is something logically incorrect, but so many get it wrong it's worth naming. But like so many powerful things, it's misused. I found this list of "7 Economic Fallacies" written by Tejvan Richard Pettinger, a teacher at Cherwell College, Oxford. Of the seven, three are not fallacies.
Tax Cuts make people work harder.
When you work you are really swapping one valuable resource (time) for another (money). Cutting taxes (which is the equivalent of a pay raise) could mean the person spends more time to get much more money. It could also mean they spend less time to get the same amount of money. It depends on their preferences. As Pettinger implies by his explanation this is an empirical question, not a fallacy.
A Current Account deficit [also known as the trade deficit] doesn’t matter.
That happens to be true. Many of his explanations for why the trade deficit is a problem happen to have logical fallacies, though. Concerns of an "unbalanced economy" are inconsistent with a lack of concern about trade flows between cities; concerns of capital flows ignore that the current account is the mirror image of the capital flow, by definition; concerns that a current account deficit means more foreign liabilities ignores that the trade deficit is not debt (when two people trade, no debt is created). That Pettinger acknowledges "some economists" don't think the trade deficit matters demonstrates that this is not a fallacy.
Tax Cuts will boost the Economy.
The reasoning behind this supposed fallacy is that of increasing consumption, a straw man since in the strict mathematical sense this won't change anything. (Government spends less and consumption plus investment increases by an equal amount.) The logic behind the argument is in how the funds are spent. Money in the hands of private citizen is more likely to be used more efficiently than money in the hands of political agents (for the normal incentive reasons). Thus tax cuts could easily better efficiency and thus the economy. Granted, Pettinger is correct that borrowing in response to a tax cut does little (it only shifts the spending burden to later generations while crowding out the investments today) but the other way to balance of the budget, cutting spending, won't have such adverse effects.

Popular opinions of economics are filled with blatant nonsense. There are so many, we don't need to the lower the bar and paint differing opinions as something so flawed as a fallacy.

Friday, August 15, 2008

The Emperor's New Grub

LA central planners, lead by Jan Perry, put a moratorium on new fast food outlets in south LA (one of LA's poorest neighborhoods). The policy is to encourage more grocery stores and sit-down restaurants. She cites health reasons and claims there simply aren't a lot of choices in that part of the city.

What she really means to say is that she doesn't like what the poor eats and they should be forced to choose what she wants. It clearly never occurred to Perry that this poor (little money to eat at nice restaurants), working (no time to prepare their own food) neighborhood of LA enjoys fast food for a good reason. Forcing them to swap their preferences for hers is ghastly arrogant and morally reprehensible.

If Jan Perry wants more food choices in South LA she should start a restaurant, not ban others.

HT: Jon Cell

Sunday, August 10, 2008

Their Relevance, Our Traffic Jams

People who move to Washington quickly notice two things about the area: traffic is nasty and housing is high. Many reasons exist for this, but our small-stature downtown is clearly one of them. Where smaller cities sport several skyscrapers, the district sports no such space savers (or very limited versions thereof). Amity Shlaes in The Forgotten Man explains why. In the early 1900s,
...the federal government was a pygmy. Its size was less than 2 percent of the national economy, smaller even than that of state and city governments. Lawmakers of their generation constantly feared that the fast-growing private sector might further diminish their already questionable relevance. Back in 1910, word of the rise of the skyscraper in New York had panicked congressmen, who promptly zoned height limits for buildings in the District of Columbia, so that no private building could ever overshadow the Capitol.

Monday, August 04, 2008

Obama Calls for a Rise in Gas Prices

Barack Obama's latest YouTube ad calls for a windfall tax on so called "big oil," as if they are the reason prices are high. But no matter who market critics blame--the Middle East, spectators, or a handful of companies--their answer will always be incomplete. Oil price rise because of all of us.

This is not merely because so we choose to use oil (making Obama's painting of us as victims all the more absurd). We also choose not to supply oil. And why should we? It's hard. It's complicated. It's takes a lot of start up capital. The rewards have to be pretty high to get us to try. If oil was going for $10,000 a barrel, you see me looking for ways to supply energy.

These current profits do the same job (though on a smaller scale). People are more interested than ever in supplying gas. It takes time to refine it and pump it and find it. But they are looking (which is why we've seen oil futures stumble a bit). But Obama's plan dulls those incentives. Tax profits and people are less willing to enter.

The market reality of oil (or any product) should remind us of one of the great lessons of economics. The surest way to get low prices is to allow people to charge high ones.