Joining the Pigou Club

This morning I attended an AEI event on if we taxed energy enough. Greg Mankiw of the Pigou Club fame was there (and was really the reason why I went). He gave convincing arguments for joining the club, even if CO2’s impact on the weather is minor or negligible. He argued that the $1/gallon tax should correspond to a drop in the income tax by 2%, or something along those lines. That eliminates some distortion in the tax code and taxes negative externalities such as congestion, accidents, pollution. I formally was reluctant to endorse any sort of tax increase, even Pigouvian (the government doesn’t exactly have a great track record on intelligent taxation) but he persuaded me only so long as the gas tax corresponds to a decrease in other taxes.

I talked to him after words and asked him if congestion based pricing for driving on roads similar to London would be more efficient. He said that it would once the technology becomes better. It looks like that is possibly where the next major change in roads will be.

Eyeing Rudy

Larry Kudlow of Kudlow and Company aired his interview of Rudy Guiliani this evening. Guiliani looks like an excellent free market president; Kudlow compared his policies to ones that Hayek, von Mises and Friedman would support.

Here's a few:
-Against government health care.
-Against erecting trade barriers of any kind.
-Against any new taxes, including a carbon tax.

He did, however, speak of "energy independence" but if it happens spontaneously thanks to a deregulated power plant industry (he mentioned the virtues of nuclear power by name), then I don't really care. Besides, no politician is anywhere near close to perfect.

He was probably talking solely to Kudlow's audience and this was all just a lot of fluff. But in this new political climate-where democrats and, by extension their ideas, are very popular-it says a lot for him to disagree with them so consistently.

Note: I will be traveling a lot in the next two or so weeks and as such my blogging will be very erratic, if it appears at all.

As April 15 Approaches

Keep in mind why you must pay taxes, Donald Duck style.

“Every dollar you spend for something you don’t need, is a dollar spent to help the Axis.”

Interesting Graphs

For all the talk we hear about global warming and how CO2 is going to melt the ice and kill the polar bears, there usually isn’t much said about changes temperature due to solar activity. You don’t have to be an econometrician or run regressions to know which variable better fits changes in Arctic temperatures.

The Absurdity of It All

Economists often convey a problem with conveying their ideas to a general audience. In a very real sense, all economists are teachers running a class of students who don't want to be there, but are still paradoxically interested in understanding economics. (Or, more likely, want to talk so that they sound like they understand economics.)

Enter Yoram Bauman who translates Mankiw's ten principles of economics in a way everyone can enjoy. Well, I know economists will enjoy it, but I wonder what non-economists will say. (In the YouTube comments section, one person who was apparently studying for their econ final is "now confused.")

Flight of the Falcon

Yesterday afternoon on Omelek Island, private company SpaceX launched Falcon 1. The rocket traveled 200 miles into and above our atmosphere before spinning out of control. Video feed then terminated.

Falcon 1 was a success and a failure. The vast majority of the new technology worked and only that last bit-5%-wasn't quite get up to snuff. Still, this is another notable step into making space travel more available to the common people.

SpaceX was created by Elon Musk, the co-founder of PayPal, with the expressed intent on making rocket launches cheaper. One of Musk's strategies to accomplish this is the scaling down of the firm's bureaucracy. Using only about 200 employees, Musk is taking quite a different approach than the bureaucracy heavy organizations of Lockheed Martin, Boeing and NASA. I doubt they'll learn anything when SpaceX is finally successful but hopefully other entreprenuers will and the space industry will transform as much as the computer industry has over the past fifty years.

Grounds For Dismissal

This afternoon the US Senate, by an overwhelming majority, approved a rollback of a provision of the PATRIOT Act. This provision was a blantant disregard for the seperation of powers that sits at the heart of the Constitution: it allowed the attorney general appoint U.S. attorneys without Senate confirmation.

Why did the Senate pass such a law in the first place? Because they didn't read it. They didn't read the bill before voting on it. And this wasn't some random farm bill, this politically charged proposal was-and still is-at the center of the public discourse concerning the war on terror. What other laws are they passing that they did not read? (That they did not read the bills they vote on is, sadly, not uncommon.)

Since such sloppiness is clearly not being punished by firing the offending parties, then more drastic measures should be taken. Every person who has the capacity to vote for a bill must read it, in full, aloud and in front of a camera and their peers before they are allowed to vote in favor of it.

Three Reasons to Burn the Flag

As David Frum at AEI notes, the pursuit of political correctness can have some perverse side-effects. At San Francisco State University (SFSU), for example, the College Republicans organization is met with hostility (and possible forced disbandment) by the administration because they trampled mini flags of Hamas and Hezbollah. Frum paints a different picture for Muslim groups:

In April, 2002, Muslim students organized a pro-Palestinian rally on the SFSU campus. To advertise their event, they distributed a flyer with a picture of a dead baby alongside the words: "Canned Palestinian children meat--slaughtered according to Jewish rites under American license."

They received a virtual slap on the hand.

It seems appropriate now to reiterate why a society wants free speech, beyond that it just sounds nice. As John Stewart Mill notes, there are three reasons.
1. Sometimes, you're wrong and they are right. You tell someone to shut up and you might loose a good idea.
2. Sometimes, something can be learned even if the minority opinion really is wrong. This new information can be completely unrelated to the original argument.
3. Sometimes, you need a bad idea because even if there is nothing to gain from a flawed notion, it can aid you in clarifying the truth. And the best way to expose an idea as wrong is to bring it into the light of popular discourse.

I find the last point to be the most subtle, but also the most insightful. When you tell people to shut up and not express an idea, they just become more convinced they are on to something and bitter people buy into the "conspiracy." But when you are willing to debate them and, in doing so, demonstrate why they are wrong, then you change people's minds. You might even convince your opponent.

Tullock Insult

Recently I attended a ceremony in honor of Gordon Tullock. Don Boudreaux spoke on Tullock’s insults that he has directed towards pretty much everybody. After the ceremony was over, I took a picture of Fred Singer and Tullock together. I then asked Gordon if I could take my picture with him too and he said “It’s bad enough I had to take a picture with him [Singer], and now I have to take a picture with you too?”

Boudreaux On Elephants, Boudreaux On Statistics

Don Boudreaux and his wife Karol Boudreaux both published excellent articles in the past week that are worth taking a look at.

Don wrote for the Christian Science Monitor, succinctly describing a common mistake made in interpreting data concerning averages.

Karol wrote for the The Nation, showing how lifting the ban on hunting elephants can actually increase the elephant population. (I've made a similar point last week if you are in search for more free market environmentalism.)

How Green Is MY Valley

Happy St. Patrick's Day everyone. Since I'm not much of a drinker, I don't really celebrate it but I'm glad other people do. They certainly seem to enjoy it and there's no harm from celebrating it.

Lou Dobbs disagrees. Almost a year ago he said,

I don't think there should be a St. Patrick's Day. I don't care who you are. I think we ought to be celebrating what is common about this country, what we enjoy as similarities as people.

Dobbs wants everyone to be the same and purge society of its strangeness and surprise. We shouldn't be happy that we are different, we should be ashamed and try to drown out any differences with celebrations of solidarity. I suppose that makes that easier to direct people to whatever you think we should all be.

While I find Dobbs social theories narrow-minded, I don't have any problem with him expressing it. Only by bringing such ideas to light can we witness how truly selfish they are.

Remaking A City

Mike Mills sent me an email containing this link about Google establishing a server farm in Lenoir, NC. Lenior used to be a city of furniture makers but the rise of China has out competed them and the town entered a decline. Because of this decline, unemployment rose, land values fell and the free market kicked in.

Because of these low land values and lake of people looking to become employed again, Google decided it would place a new server farm there. A server farm is basically a building full of computers that run Google programs (their search engine and so forth) all over the world.

Mike correctly stated that there's "A lot of blogrich material" in the article and that's no exaggeration. But beyond the very cool overarching theme of spontaneous order, I noted one other item I really wanted to point out:

The city offered Google some pretty sweet tax breaks to encourage them to come in. Like the only Libertarian on the city council (who was also the only one to vote against Google's entrance), I'm not too fond of special treatment. However, I also recall the words of Milton Friedman: "I am favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible."

Raising the Barr

Last Friday on Real Time with Bill Maher Roseanne Barr argued that, thanks to Ronald Reagan and other Republicans, the working poor can't afford a house or send their kids to college anymore. It's complete nonsense. Real average wages of the poorest 10% and 20% have remained flat for decades-Reagan didn't sabotage them in any way as Barr implies.

Even more importantly, income mobility during the Reagan era was extraordinarily high. Between 85-95% (depending on who you ask and the time frame) of the lowest income quintile moved to a higher one. More than half moved to the middle quintile or higher. (I've been looking for more recent data, but the information from Steven Horwitz's webpage is still quite impressive.)

Both data sets also ignore that the quality of virtually everything we buy continues to increase. Every year standards rise, the economy grows and, even in light of inflation, everyone gets a bit richer.

Reeding Between the Lines

I've finally gotten around to watching last Friday's episode of Real Time with Bill Maher and not surprising they started with the scandal at Walter Reed Hospital. Don Boudreaux at George Mason University summarizes the importance of the scandal succinctly:

This "flagship" institution is at the heart of Uncle Sam's system of socialized medical care for military personnel. So, why are many politicians and pundits clamoring for socialized medical care for all Americans?

Bill Maher disagreed:

This Walter Reed thing is bad because they privatized it. Because they outsourced it to corporations which have no soul. Which only care about the bottom line. Which only care about greed. At least government workers might have a conscience. Corporations never do.

So who's right? The answer came in the very next comment (though no one noticed it) which was made by Dana Milbank of the Washington Post. He noted the contracted company actually charged than what it would have required of the government. In other words, there was no privatized hospital here, even though a company did the work. If it was truly a free market-if there was entry and exit and competition-the government (as the customer) would have fired them in favor of someone else. Walter Reed was pure politics.

Just because a firm is doing something, doesn't mean they are doing it in the context of a free market. When an industry gets into politics, that industry is no longer privatized in any relevant way. They are in bed with the government just like any bureaucracy. Don't be fooled by a free market facade.

Amazing Grace

The movie Amazing Grace describes the abolitionist movement in England. Part of the story on the support of eliminating slavery is not well known.

Economics is known as “the dismal science.” People incorrectly assume this stems from Malthus (I used to think this).

The reason why Thomas Carlyle dubbed economics as dismal was because early economists like JS Mill used economics to state that all men were equal. From a GMU professor who studied this in depth:

Carlyle attacked Mill, not for supporting Malthus's predictions about the dire consequences of population growth, but for supporting the emancipation of slaves. It was this fact—that economics assumed that people were basically all the same, and thus all entitled to liberty—that led Carlyle to label economics "the dismal science."

Carlyle was not alone in denouncing economics for making its radical claims about the equality of all men. Others who joined him included Charles Dickens and John Ruskin. The connection was so well known throughout the 19th century, that even cartoonists could refer to it, knowing that their audience would get the reference.

Farming Elephants

Every year millions of cows, sheep, pigs and chickens are slaughtered every year. (I don't have exact figures but The Straight Dope estimates that McDonald's alone sends ten million cows to the grinder, annually.) Millions. How can this be? With so much death, why aren't these animals on the endangered species list? How can they not be extinct?

It's because we raise the animals, too. Famers all over the world are watching their herds and making sure the population-and their livlihood-don't run out. They breed them, raise them, care for them, make sure they have lots of offspring. And then they kill them. Say what you want about the ethics of it, but that's a pretty good way to make sure they never go extinct.

Some African countries may be taking this lesson to heart as they ponder lifting the ban on the ivory trade. Some environmentalists insist this will cause poaching to skyrocket. But just like Prohibition, the drug trade and any other banned sector, prices increase. In places where the property rights are sound and secure, people will raise the elephants like ranchers raise cattle. Populations will expand, prices will fall and poachers will be put out of business.

Remembering the Saccharin Scare

Dr. Elizabeth M. Whelan at TechCentral Station notes that this week marks the 30th anniversary of the FDA's ban on saccharin (better known as Sweet'N Low) on the basis that it causes cancer in lab animals. Dr. Whelan writes that the "administered dose of saccharin has been compared to the equivalent of human consumption of 800 diet sodas a day for a lifetime." In other words, they pump the animal with more of it than any human could consume and watch its biology go haywire.

Today saccharin is freely available-the public outcry against the ban was too great-and it is clear it doesn't cause cancer. Remember this history lesson the next time you see something contains "cancer-causing agents;" it's more likely that the science isn't too sweet.

Not Dying While Waiting in Line: Priceless

I've taken to editing Wikipedia's article on the Canadian health care system. Seeing that Clinton's campaign will most likely sound a call to emulate Canada's system, this seems like a good place to clean up a little.

We shouldn't be too surprised that one of the consequences of our northern neighbor's system are lengthy wait times for even the most routine of procedures. Donald Loritz (who appears to lean in favor of the system) pointed to this information concerning Canadian wait times. Now the data (which Donald describes as "the best recent information on Canadian wait times") are poorly presented and not very flattering. Lengths of time include fuzzy language like "within 30 days," wide ranges such as "34-177 days" and strangely presented numbers including "57-100%" (a reference to the percent of wait times for cardiovascular/cardiac surgeries that did not exceed various benchmark goals). There's not even any aggregate data (the closest they get are vague estimates broken down by province, ranging from one month to twelve).

Here's an inkling of the Canadian wait times for health care.

Cardiovascular/Cardiac Surgery: 3-182 days (Nova Scotia)
Bypass Surgery: 17 days, 27 days, 62 days (Ontario, three were listed)
Bypass Surgery: 24 days (British Columbia)
CT and MRI Scan: 80 days (Alberta)
CT and MRI Scan: 7 days, 105 days (Prince Edward Island; "urgent" and "routine," respectively)
Joint Replacement: 95 days, 127 days, 281 days (Ontario, three were listed)
Sight Restoration: 56 days (British Columbia)
Chemotherapy: 2.1-8.4 weeks (Ontario)

This is why I'm not surprised when I hear people die waiting for care under the Canadian system. Some things are worth paying for.

Consensus on “Carbon Neutrality”

Recently I commented on Gore’s increasing carbon footprint. In the comments I was told:

God, if you're gonna make fun of something, at least know what you're talking about:

Live Earth says it will implement a new 'Green Event Standard' that will become the model for carbon neutral concerts and other live events in the future. This will include:-

All electricity that powers the shows will be from renewable sources, either through utility supplied renewable energy, biodiesel generators, or renewable energy credits

Recently there have been some initial analyses on using “carbon neutral” energy.

More fun than chess

A tale of two markets

The Political Economy of Alternative Energy

Another stab at carbon offsets

After reading these the consensus seems to be that credits and carbon neutrality doesn’t work as it claims to. And anyone who denies this is a fringe skeptic in the pocket of the environmental lobby.

Measuring Temperature

Recently I’ve been reading up on global warming. I came across something that I hadn’t heard before on the measuring of temperatures. After the collapse of the Soviet Union, thousands of measuring stations closed in the former USSR. The closing of these stations in cold areas correspond to the rise in temperature measured in the late nineties. Now whenever I see the claims that 1998 was the hottest year on record, I can’t get excited about it. It should be expected that eliminating thousands of Siberian and other cold weather stations will lead to an increase in measured temperature.

Passionately Neutral

Peter Johnson of USA TODAY wrote a wonderful piece about how news anchors tend to adopt a handful of pet issues and focus on those during their broadcasts. Bob Woodruff on army medical services. Lou Dobbs on immigration. Chris Hansen on child predators. Douglas Kennedy's on the dangers of attention-deficit-disorder drugs prescribed to children. The list goes on and on.

From an economics point of view, this is yet another example of the nature of competition. Each anchor is vying for the attention of an audience so it should not be surprising we see specialization in the media market place. And even though I disagree with what some of these advocates have to say (notably Lou Dobbs), one must appreciate this combination of free speech and free markets.

The only problem is the lie they tell us every day. Each anchor (with surely some exceptions) claims to be a neutral voice. In one moment they are passionately discussing their chosen issue. In the next moment they remind us they speak only the Truth; bias is not in their vocabulary. According to Kennedy, this is perfectly consistent: "You can be objective and still take on an issue that is important to society and to you personally." Let me take this moment and remind the media that they are not gods. Things that are personally important to anyone are things they can't be trusted to be neutral about.

Payola Day

In what everyone's calling a landmark settlement, four major radio broadcasters will be paying the FCC a tune of $12.5 million. The settlement gets the agency off the broadcasters' backs on their practice of payola-accepting payment in exchange for playing certain songs.

I see nothing wrong with this; it's just a form of advertisement. If you think the station's playing too much of the same song, do something else. But some radio listeners and-not surprisingly-small time artists are applauding the move because all these stations also promised air time for independent musicians.

This leads to more variety, they say, and I'm sure it does. But most successful independent musicians serve a niche audience. Their songs aren't as suited to the radio. Maybe there's a good reason why we hear only a small band of artists.

What everyone seems to be tip-toeing around is that now these broadcasters no longer have the payola's source of income, how many more conventional commericals will we have?

The Bootleggers and the Baptists Stop for a Smoke

One of my favorite theories of regulation comes from Bruce Yandle concerning his story of bootleggers and Baptists. The latter offers a good public face for some new regulation, say no selling alcohol on Sundays because it is a vile drink and Sunday is a holy day. The former offers politicians the money to pull off the face, in this case breaking the law and selling alcohol on Sundays for an inflated price.

In the standard story, these are two distinct groups but what's common is when they are the same group with two different faces. Consider smoking.

The Baptist. Phillip Morris wants to make it virtually impossible to advertise cigarettes. Young people watch these ads and might be tempted to smoke!

The Bootlegger. Phillip Morris's Marlboro brand captures a good 40% of the market. By making it nearly impossible for consumers to learn about new brands, PM restricts any competition and maintains, or maybe even grow, its healthy market share.

Note that this bill is supported by Ted Kennedy, not exactly a favorite of tobacco companies.

Score Another Point for Technology

Remember the summer of 2006, when an E. coli outbreak made eating spinach dangerous? It turns out the source was a likely culprit: an organic farm.

Organic farms use natural fertilzers, better known as manure, which are breeding grounds for micro-organisms. Some farms even refuse to irradiate their crops, which would have killed any E. coli that called our food their home. I can't be sure if conventional farming is healthier but I bet my life that "inorganic" crops are. If you want food to be safer technology is your friend, not your enemy.

HT: Mike Mills

The Economy Reorganizes

Airbus plans to slice 10,000 jobs from its payroll. Rudiger Lutien, chairman of the Worker's Council, insists the company's troubles are management in nature, not too many workers on the payroll. The truth is usually somewhere in between in cases like these but I'll bet Airbus made the right decision. If Lutien was right, firing a bunch of management looks a lot better from a public relations standpoint than firing five digits of workers.

Some of you may still be upset that these workers are being let go, as if Airbus is going to shoot them behind a chemical shed. These people won't disappear, only move onto new things. It won't be easy, but they will ultimately add more to the economy. If you don't believe me, would you shout down farmers that moved to the cities in the Industrial Revolution or buggy manufacturers when Ford perfected the assembly line? For your own sake, I hope not.

Hidden Exchange

In one of my classes, we read about how various stateless societies functioned economically without money or prices as we are familiar with. There were various methods of exchanged discussed, but this one I found to be the most interesting.

Herodotus discussed the trade relations between the Carthaginians and African tribes several hundred BCE. It went as follows:

The visiting traders (or perhaps better, would-be traders) appeared at some point in the vicinity of the area occupied by their hoped-for trading “partners,” with the goods they wished to exchange, and signaled their presence. The visitors placed their goods on the ground and went into hiding. In due time those with whom they wished to trade brought their goods, which in turn were placed on the ground, after which they disappeared. The visitors then returned to the place where the goods were displayed and if they were satisfied with the offerings of the “host” group, took them and returned home, leaving their own in exchange. If not satisfied, they left the host’s offering and their own goods untouched and disappeared again, thus indicating rejection of the initial offer. The hosts were then expected to adjust their offerings, or withdraw them and depart. In this technique the visitors would normally not be adjusting the amounts that they offered; they merely accepted or rejected the host’s offerings. Further, the visitors, in refusing the host’s first offering, were courting failure of their expedition and even impairment of continued relations with those who had goods that they needed.

F. A. Hayek called the pricing system a “marvel.” After reading about societies without an explicit pricing system, I agree with him that much more.