Thursday, January 29, 2009
Tuesday, January 27, 2009
"Organized public works, at home and abroad, may be the right cure for a chronic tendency to a deficiency of effective demand. But they are not capable of sufficiently rapid organisation (and above all cannot be reversed or undone at a later date), to be the most serviceable instrument for the prevention of the trade cycle."Find out the answer at Greg Mankiw's Blog.
Monday, January 26, 2009
Sunday, January 18, 2009
After the 2000 Census, the richest county in America was Douglas County, Colorado. By 2007, Douglas County had fallen to sixth. The new top three are now Loudon County, Virginia; Fairfax County, Virginia; and Howard County, Maryland. All three are suburbs or exurbs of Washington, D.C. In 2000, 14 of the 100 richest counties were in the Washington, D.C., area. In 2007, it was nine of the richest 20.Arnold Kling reacts at EconLog,
All of this is fine if you happen to live in the D.C. area. It's not so great for the country as a whole...
The problem is that, save for the tech corridor in D.C.'s Virginia exurbs, the Washington Metro area doesn't actually produce anything. Washington doesn't create wealth, it just moves it around—redistributes it. As government grows and takes control of more and more of the private economy—either through spending, regulation, or taxes—more and more wealth that's created elsewhere comes to Washington to be devoured.
The Washington wealth boom is the result of the massive expansion in government over the last 10 years, which has populated the region with an increase in well-paid federal employees, and wealthy federal contractors and lobbyists...
America's wealthiest counties ring a city where the chief industry is government - and the entire region's only getting richer. That doesn't seem like a trend that bodes well for the health of a market-based economy.
My guess is that there is a pretty strong relationship between the share of government spending in GDP and the share of incomes in the DC area. Since the former is going to rise dramatically in the coming years, the latter will, too.
If you thought it was unproductive for the best and brightest to go to Wall Street to become investment bankers to decide to use other people's money, watch what happens when the best and brightest come to Washington to decide how to use other people's money.
Friday, January 16, 2009
2008 was a very bad year. But it was not without its bright spots. One of these bright spots was the U.S. Supreme Court ruling in District of Columbia v. Heller, in which the Court held that the Second Amendment guarantees to the right to own guns to the individual.Students for Liberty recently announced that Robert A. Levy, Chairman of the Cato Institute and organizer of the D.C. v. Heller case, will be speaking at the 2009 International Students for Liberty Conference.
REGISTER TODAY and meet the man himself!
I agree with Kristof that sweatshop jobs are a solution to poverty, not a problem. I disagree that Obama and the Democrats mean well in opposing them.
Mr. Obama and the Democrats who favor labor standards in trade agreements mean well, for they intend to fight back at oppressive sweatshops abroad. But while it shocks Americans to hear it, the central challenge in the poorest countries is not that sweatshops exploit too many people, but that they don’t exploit enough.
Talk to these families in the dump, and a job in a sweatshop is a cherished dream, an escalator out of poverty, the kind of gauzy if probably unrealistic ambition that parents everywhere often have for their children.
“I’d love to get a job in a factory,” said Pim Srey Rath, a 19-year-old woman scavenging for plastic. “At least that work is in the shade. Here is where it’s hot.”
Another woman, Vath Sam Oeun, hopes her 10-year-old boy, scavenging beside her, grows up to get a factory job, partly because she has seen other children run over by garbage trucks. Her boy has never been to a doctor or a dentist, and last bathed when he was 2, so a sweatshop job by comparison would be far more pleasant and less dangerous.
I’m glad that many Americans are repulsed by the idea of importing products made by barely paid, barely legal workers in dangerous factories. Yet sweatshops are only a symptom of poverty, not a cause, and banning them closes off one route out of poverty. At a time of tremendous economic distress and protectionist pressures, there’s a special danger that tighter labor standards will be used as an excuse to curb trade.
There seems to be a strong consensus among economists that sweatshops help the third world. I've seen Kristof's case made before by highly-respected liberal economists, such as Jeffrey Sachs and Paul Krugman. (For more on sweatshops from Krugman and Sachs, see here and here. Great arguments have also been made at LewRockwell, the Library of Economics and Liberty, and the Mises Institute.)
I find it hard to believe that our Democratic policy makers are unfamiliar with the names Paul Krugman and Jeffrey Sachs (or Nicholas Kristof, for that matter). So either they are familiar with their arguments, and choose to ignore them and instead lie in order to get votes, or they haven't even consulted the experts, and conduct policy with extreme recklessness. I personally believe the first option is more likely. Most Americans listen to racist idiots like Lou Dobbs over true experts, and it's much easier for politicians to pander to their incorrect notions rather than speak the truth and risk losing votes.
Ask yourself this: Why are American unions, such as the AFL-CIO, so vociferously against sweatshops? They don't have any dues-paying members in the third world; why do they care so much about their welfare? The truth is (and the AFL-CIO knows it) that increased labor restrictions in developing countries means fewer jobs there. The cost of doing business in these countries will increase, and more dated, inefficient manufacturing jobs will stay in the U.S. Unions claim to care about making sure workers in the third world aren't exploited. Really, they want to steal their jobs--no matter how much more people in the third world may need them--and make you pay more for goods at the same time. Liberals claim the free market is immoral, but this is 100% selfish, deceptive evil. And Obama and the Democrats play right into it.
Thursday, January 15, 2009
A revolution is coming.
It's no longer a doubt in my mind, that the intellectual climate shift towards Statism, big government, or Leviathan is in the air. It has always been present throughout the last century. The last eight years have demonstrated a scintillating move towards a militaristic, bail-out driven police state. The next eight, seek to complement the aspects of society that the Rightish could not complete. That is, the gradual socialization and intervention in several industries of the economy, such as food, health-care and more.
There isn't a difference between the political left and the political right. They're both warmongerers and big government utopists. They intervene abroad, spreading freedom in nations that don't seek it, at the expense of its citizens here. It's easier nowadays to purchase a rifle or light a cigarette in Baghdad than it is New York City. They prohibit our activities in our bedrooms, tap our phone calls, regulate, tax, subsidize or bailout our economies failing industries and pass legislation that violates our natural rights to life, liberty and private property. More importantly, both are submissive to the will of the Federal Reserve, save for the few dissenting voices in the campaign for liberty.
It's this fallacious notion that government can save us all and alleviate every aspect of society. That somehow, Barack Obama and George W. Bush are messianic saviors, with magical powers and special wands. It's depressing to see so-called intellectuals like Jeffrey Sachs call on openly in Time magazine for big government, and then go on to chastise the anarchy of the free market, as if capitalism were to blame for the present economic maladies. What idiocy from a Columbia University professor! An economist should know better! The pervasiveness of an anti-capitalistic mentality persists, particularly in Morningside Heights.
"...big difference between the U.S. and the rest of the rich world is that for the past 30 years or so, Americans consistently rejected "government solutions" to the problems of health, poverty, education and the environment. We've kept our taxes as a share of national income lower than Europe's by focusing on the private sector. But we're getting much less for our money. Markets are great at providing consumer goods and services. We don't want the government running our restaurants, movie houses, bookstores and manufacturers. Markets are not so good, though, at some very important things. A pressing example: our mostly private health system, at $8,000 per American, is twice the cost of Europe's mostly public system, yet with worse outcomes. And nearly 50 million Americans lack health insurance..."
This is an excerpt from Sach's article. It's interesting to see how he values efficiency. Apparently, the market is efficient at producing items like consumer goods and services. What does he call a consumer good or service? Basically, "unimportant", material items, like movie houses, restaurants, book stores and manufacturers. So does Professor Sachs agree with government abstinence for federal bailouts to the automobile industry in Detroit, the little three? A consumer good or service is any final item or activity produced on the market that satisfies the wants of the consumer. That's pretty much anything. If the market is so remarkable in producing bookstores and Leonard Reed's pencil, why do we put the government charge of producing and or micromanaging important goods and services, like our monetary system, the post office and our much of our transportation system.
So, the Professor likes the fact that markets can produce high quality Outback Steakhouses, but he disapproves our "mostly private health insurance". This is an utter fallacy!
"...In the days before Medicare and Medicaid, the poor and elderly were admitted to hospitals at the same rate they are now, and received good care. Before those programs came into existence, every physician understood that he or she had a responsibility towards the less fortunate and free medical care was the norm. Hardly anyone is aware of this today, since it doesn’t fit into the typical, by the script story of government rescuing us from a predatory private sector...we’ve had managed care, now, for about 35 years. It’s not working, and nobody’s happy with it. The doctors aren’t happy. The patients aren’t happy. Nobody seems to be happy--except the corporations, the drug companies and the HMOs. The most obvious way to break this cycle is to get the government out of the business of meddling in health care, which was far more affordable and accessible before government got involved. Short of that, and more politically feasible in the immediate run, is to allow consumers and their doctors to pull themselves out of the system through medical savings accounts. You don’t have to throw anybody out in the street, but long term you have move toward the marketplace. You cannot expect socialized medicine of the Hillary brand to work. And you can’t expect the managed care system that we have today [to work, because it] promotes and rewards the corporations. It’s the drug companies & the HMOs & even the AMA that lobbies us for this managed care, and that’s why the prices are high. It’s only in medicine that technology has raised prices rather than lowering prices. We’ve had managed care in this country since the early 1970s, and it hasn’t worked well. It’s very, very expensive, and it’s the fault that we changed our ERISA law and our tax laws that created this corporatism that runs medicine. Wall Street rakes off the profits. The patients are unhappy. The doctors are unhappy. And it’s a monopoly now. Who lobbies us in Washington? The drug companies and the HMOs. They come. And now what is the cry for? Socialized medicine. That’s not the answer. We need to get the government out of the way. Inflation hits the middle class and the poor the most. Those are the people who are losing it. We don’t have enough competition. There’s a doctor monopoly out there. We need alternative health care freely available to the people. They ought to be able to make their own choices and not controlled by the FDA preventing them to use some of the medications..."
- Bits and pieces from Congressman Ron Paul's "The Revolution" and GOP Presidential Debates in 2008
Jeffery Sachs is suggesting the socialization of consumer goods and services that he deems important, not what actually is. Not only that, he's smearing personal political aims, with tangible facts. Either that, or he knows very little of price theory. However, I do agree with Sachs on one level. The market does not always produce the greatest goods out there, as Ludwig von Mises indicated, the market is not moral or immoral, it is amoral. I love the fact that Black Sabbath hammers away on Planet Caravan and I have Microsoft providing a healthy alternative to Apple's iPods. The existence of Ron Paul silver bullion coins in existence, make me happy. I also consider psychedelic drugs, the writings of Anne Coulter, polka music and a plethora of bad economists as being detrimental to humane society. That does not mean I want the government tomusic and train economists. We have enough socialists coming out of the private sector in itself! I find the market has been pretty terrible at producing good economists, particularly at Columbia. Thankfully, the market has several handfuls of a few, damn good ones that are either dead, or in Auburn, Alabama. I cannot come to an understanding as to why socialists like Professor Sachs cling to their ideology when they know they have to be dishonest in order to defend it. Instead of planning for freedom, all we are going to get is planned chaos.
The first Mont Pelerin Society
Wednesday, January 14, 2009
Current American political discourse labels people as either anti-government or pro-equality, but wanting to help the poor should not require the abandonment of sensible skepticism about expanding the size of the state. Many of my favorite causes, like fighting land use regulations that make it hard to build affordable housing, aid the poor by reducing the size of government. In the wake of Hurricane Katrina, I also argued that it would be far better to give generous checks to the poor hurt by the storm than to spend billions rebuilding the city, because those rebuilding efforts would inevitably help connected contractors more than ordinary people.
Even when there are lots of idle workers, government bailouts and stimulus plans are not likely to add to employment. The reason is that bailouts and stimulus plans must be financed. The additional government debt means that existing current resources just move from one use to another, from private investment to government investment or from investment to consumption, with no effect on total current resources in the system or on total employment. And stimulus plans only enhance future incomes when they move current resources from less productive private uses to more productive government uses - a daunting challenge, to say the least.It's been over 150 years since the days of Bastiat, yet the government just keeps on breaking windows.
Actor The Promise The Reality Financial Executives Brilliant Risk Management Catastrophic Losses Eliot Spitzer Mr. Clean, Financial Reformer Celebrity Prosecutions, Real Abuses Untouched, and Not So Clean Sarbanes-Oxley Financial Responsibility Large Costs, No Apparent Benefits Basel Capital Standards International Coordination, Sound Banks Worldwide Banking Collapse Fannie, Freddie Stable Mortgage Credit Fed the Boom, Stuck Taxpayers with the Bust TARP Unclog the Financial System Zombie Banks Big Fiscal Stimulus Put the Economy on a Better Path Wait and See
The pattern is big egos, big money, and big power offering big promises, getting big media play, and making big mistakes (Spitzer's mistakes were relatively small, to be honest). To me, the fiscal stimulus represents yet another redistribution of power away from ordinary people and toward the elite, when already the imbalance is too high. I am more worried about rot at the top of society than at the bottom.
While I was eating in one of the cafeterias, I encountered a sign advertising an open forum on the referendum. Here's the text:
What's wrong with this picture?A.S. Activity Fee Referendum
Jan. 7th PC Ballroom B at noon
Free food and refreshments
Tuesday, January 13, 2009
In the words of Zbigniew Cheezinski, DISGUSTING! Seriously, think about this. Not only does the USPS have a legally-enforced monopoly on first-class mail, but we actually pay taxes to help them steal business away from legitimate private-sector companies.
And they have the nerve to claim to have the lowest rates...as if the rates would be anywhere near where they are without massive taxpayer subsidies. People complain about Walmart setting low prices to drive out competition, but it's happening within our own government! Where are the hippie protesters when we need them?
I seriously see no need for the USPS to exist. The fact that they need to advertise to avoid losing business to "competitors" is clear proof that the private sector is serving the market just fine.
This was the final straw, USPS! Next time I have gum to spit out, it might just find its way into a mailbox instead of a trash can.
To claim that government cannot spend resources that it doesn't first acquire from the private sector is hardly bizarre. To claim that taking resources from the private sector reduces demands in those industries from which the resources are taken is hardly bizarre. To claim that any economic activity stimulated by increased government spending is offset by economic activity elsewhere slowed by government's need to get the resources it spends is hardly bizarre. Again, such claims might be mistaken -- but what about such claims is so ludicrous as to advertise persons who make them "ethics-free Republican hacks"?
Monday, January 12, 2009
I was going to expand on an article on the Great Depression, but here landed another gift on the front of the LvMI from our friends at Rothbard's anarchocapitalist circles.
The coming stimulus bill, warts and all, will demonstrate brilliantly what he had in mind.***
I've been in somewhat of a baffling conundrum of late. I'm flabbergasted at many actions taken by the American state and by policy recommendations made by Harvard economists such as Professor Martin Feldstein, and of course, Lord Keynes eery disciple who's crusade against capital savings is startling. Our very own Nobel Laureate has not been silent on the matter either, but at least he's straight out, blunt about the blizzard we've consumed ourselves in. The latter video features him in a rare office hours. Ha! The Austrians, Ron Paul and Peter Schiff have spoken out against them. I'm not going to link you, they're on this site's new YouTube hoster, right there ------->
Secondtier's latest entry speaks of Harvard University Professor N. Gregory Mankiw, who points out that perhaps Rahm Emanuel's comments on the incoming administration ambitions are not that dissimilar to the outgoing one. This of course comes to no surprise, as both parties are in essence, identical when it comes to their faith in government's ability to work miracles.
For all of Professor Mankiw's studies in contemporary matters of scarcity and choice, his knowledge of Keynes (whom he references periodically throughout the article) and of the Great Depression, he knows very little of economics. Keynes was meticulously refuted by Henry Hazlitt in the 1950's. A brilliant contribution oversighted by nearly everyone. However, he makes an interesting comment towards the end of his treatise on Keynes. He writes that he personally believes that Keynes, being an outspoken elitist and master of rhetoric, may have simply concocted the general theory as a mere mockery or wordplay, to defy the laws of nature and economics and attempt to fool the masses, much in the manner of H.L. Mencken. Perhaps, he simply went along with the popular surge afterwards. This may also add to an explaination why Nobel Laureate Friedrich August von Hayek, Lord Keynes ideological, Austrian counterweight at the London School of Economics, never wrote a counter-treatise.
Sunday, January 11, 2009
This part reminded me of Joseph Mises's comments about the Bush administration and 9/11:
Isn't change great?
Rahm Emanuel, the incoming White House chief of staff, has said, “You don’t ever want to let a crisis go to waste: it’s an opportunity to do important things that you would otherwise avoid.”What he has in mind is not entirely clear. One possibility is that he wants to use a temporary crisis as a pretense for engineering a permanent increase in the size and scope of the government. Believers in limited government have reason to be wary.
Thursday, January 08, 2009
So far so good, but I start to lose him later on in the Q&A.Some people have argued that the turmoil was caused by a lack of government regulation. What do you think? Do we need more regulation?
KRF: It is not obvious that financial regulations were weakened during the last few years. This claim seems to have been the product of a Presidential election in which both candidates were running against the incumbent. In fact, one could easily point to important new laws and regulations such as Sarbanes-Oxley to argue that market regulation increased. As more tangible evidence, the SEC's budget increased from $377 million in 2000 to $906 million in 2008. It is certainly true that different regulations could have reduced the magnitude of the current turmoil, but that is like saying a different portfolio allocation could have produced higher returns.
Second, we should improve the capital requirements and other regulations that limit the default risk of financial firms. The ongoing bailout of Wall Street is probably not a one-time event. Even with an improved resolution mechanism, it is easy to imagine that under similar circumstances we will bail out the banks again. If so, they have a strong incentive to take more risk. When things work out their shareholders keep the profits and when they don't taxpayers cover the losses. As we saw with Freddie Mac and Fannie Mae, this is not a good business model for taxpayers. If we are going to insure financial firms, we need regulations that will limit the risk they take.Perhaps greater regulations are necessary if we are going to insure financial firms. But why should we be insuring financial firms in the first place?! Is a private market for insurance really so hard to find? My spam email folder suggests otherwise. To those who would argue that government intervention is necessary because insurance companies (AIG) can mess up just as badly as financials, I have only one thing to say: buyer beware! Don't punish the taxpayers because a bank chose a reckless insurer.
I like how Eugene Fama finishes off the Q&A:
The ideal legal and regulatory system would be ground rules that allow bad financial innovations to fail and work themselves out of the system without government intervention. Again, the devil is in the details.
More generally, current events are certain to produce more regulation, and much of it is likely to be counterproductive. My longtime colleague, George Stigler, was famous for his argument, buttressed by empirical evidence, that regulators are eventually captured by the regulated. As a result, regulation often has results opposite those intended.