Division of Labour: November 2008 Archives
November 30, 2008
This intensive four-day seminar will be held at the Acton Institute June 16-19, 2009. Some very interesting details:
As a participant of Acton University, you will delve into the moral, cultural, economic, legal, and theological underpinnings of the social order that values human liberty. Because you can build your own curriculum, your experience will suit your interests, whether you are an undergraduate or graduate student, a non-profit professional, a member of the clergy, professor, Catholic High School teacher, social worker, journalist or business person. More than 50 AU courses are now available, ranging from the theological and philosophical, to the policy-oriented and practical. If you are interested in deepening your understanding of the integration of sound economics, rigorous philosophy, and the Judeo-Christian faith, Acton University was designed for you. Space and scholarship funds are limited – the 2008 conference carried a siginificant student waiting list within weeks of last year's launch- so register or apply now!
November 29, 2008
Plan A for the Treasury's $700 billion was to buy "troubled assets" from banks. The Treasury quickly scrapped that plan, although the Fed now seems determined to resurrect it on its own self-financed dime. Plan B was to inject $250 billion of new capital into banks. What would be Plan C? Uwe Reinhardt helpfully describes the new program embodied in the guarantees on Citibank's assets: (underpriced) credit default insurance. He calls the operation BBP (for Bair-Bernanke-Paulson) Trio Insurance. Unfortunately, because the guarantees are off the Treasury's balance sheet, the size of the guarantees isn't limited by the unspent share of the $700 billion:
at least there was a legislated $700 billion limit to [the bailout] and some accountability, at least in principle, if not in fact. By contrast, is there any limit to the size of the insurance book of business to which the BBP Trio Insurance can expose the taxpayer, the ultimate underwriter on this insurance? I believe it is something to worry about.
November 26, 2008
The Citibank bailout: that's not the way it's supposed to work
Jim Rogers -- whose book Investment Biker I recommend as supplemental reading for a money and banking class -- discusses the bailouts on a Bloomberg Radio podcast here. Total length 41 minutes, but the best stuff is up front. Here is Rogers getting down to basics (own transcription):
Why are we bailing out Citibank? Why are 300 million Americans having to pay for Citibank's mistakes? The way the system is supposed to work, Mark: People fail. And then the competent people take over the assets from the failed people, and then you start again with a new stronger base. What we're doing this time is, they're taking the assets from the competent people, giving them to the incompetent people, and saying "Okay, now you can compete with the competent people." So everybody's weakened: the whole nation is weakened, the whole economy is weakened. That's not the way it's supposed to work. ... All these homeowners who did nothing wrong are now being forced to pay for the people who did crazy things ...
Hayek in 1975 (updated)
Here's a panel discussion with F.A. Hayek in 1975, courtesy of the Mises Institute. Hayek has made three points that are ignored in today's policy discussion but that are nonetheless very, very relevant:
1. The crisis of the 70s was due to the policy prescriptions originating in the theory that insufficient aggregate demand is what causes recessions.
2. Inflation distorts relative prices, which draws resources (capital and labor) into lines of employment that they wouldn't be in without the inflation. Thus, further inflation is needed in order to keep them in those lines of employment. This is unsustainable in the long run. As I understand it, Hayek's emphasis on inflation-induced changes in the relative prices of factors of production doesn't get much play in macroeconomics. There were no index entries for "relative prices" in either of my grad macro textbooks (Romer's Advanced Macroeconomics, Blanchard & Fischer's Lectures on Macroeconomics). If I'm wrong, please let me know.
3. "Planning" flatters the intellectuals, who are attracted to the idea that a society is a machine that can be controlled, coordinated, and planned. Much like Adam Smith's "man of system" arranging pieces on a chessboard, the intellectuals to whom Hayek referred view societies as neat and orderly processes that can be tinkered with. I'm not convinced that we take Smith's insight that all of the pieces have their own principles of motion seriously enough, but that's another thought for another day (shameless plug: we'll discuss this in detail in my Classical & Marxian Political Economy course this Spring, and I'll be writing about it here and elsewhere).
November 25, 2008
Historical holiday widsom in a new op-ed from Ben Powell, "The Pilgrims’ Real Thanksgiving Lesson"
Many people believe that after suffering through a severe winter, the Pilgrims’ food shortages were resolved the following spring when the Native Americans taught them to plant corn and a Thanksgiving celebration resulted. In fact, the pilgrims continued to face chronic food shortages for three years until the harvest of 1623. Bad weather or lack of farming knowledge did not cause the pilgrims’ shortages. Bad economic incentives did.
Ben says the Pilgrim leaders at first centrally planned agriculture. All productive resources were commonly owned, while distribution was uniform. Bad harvests were the result. Culling Governor William Bradford's 1647 history of the Plymouth Plantation, Ben illustrates,
The problem was that “young men, that were most able and fit for labour, did repine that they should spend their time and strength to work for other men’s wives and children without any recompense.” Because of the poor incentives, little food was produced.
Leaders changed the organization og agriculture from a commons toward private property, and happier results followed.
Makes me think of what John Wayne would have said: "Privatize, Pilgrim." In the spirit of Ben's article, I wondered about the origins of this particular John Wayne-ism. As many of you know the phrase was first used in The Man Who Shot Liberty Valance, a 1962 John Ford film and one of the best westerns ever.
November 23, 2008
The Cato Monetary Conference
I spoke on "Federal Reserve Policy and the Housing Bubble" at the Cato Institute's annual monetary conference on Wednesday (theme: "Lessons from the Subprime Crisis"), and reprised my Cato talk at the Southern Economics meetings on Friday. The Cato conference is now available for streaming as RealVideo or for downloading as podcasts here. (A fast connection is recommended for streaming the video.)
My talk was the second on the first panel. I emphasized two points: (1) the Fed held the Fed Funds rate too low too long between 2001 and 2006; (2) the Fed's new lending programs add up to a shadow bailout of $1.7 trillion. That's right, trillion. It's a bailout because it has nothing to do with being a lender of last resort in the standard sense of preventing the money stock from shrinking. Buying T-bills is an effective (and preferable) way of doing that. The Fed is trying to selectively channel credit.
Preceding the first panel was a keynote address by Donald Kohn, vice-chairman of the Federal Reserve Board of Governors, essentially defending the legacy of his mentor Alan Greenspan. I wasn't persuaded, but I do tip my hat to Kohn for sticking around to listen to the first panel. It was a rare opportunity for what our leftist friends like to call "speaking truth to power".
All of the panels were very good, and I also recommend Jeffrey Lacker's post-luncheon address. In understandbly guarded language, Lacker made it clear that he isn't happy with the Fed's departures from its traditional mission.
HT: David Boaz
November 22, 2008
Best Sentence I've Read Today*
"Large transfers of physical capital to Third World countries, through nationalization and foreign aid, have often been only a prelude to the deterioration of that capital."
Thomas Sowell, "Marxism," p. 192
Prague Conference on Political Economy: Call for Papers
From Josef Sima:
Prague Conference on Political Economy, April 24-26 2009
Call for Papers!
Details and registration http://pcpe.libinst.cz/
Cuhel Memorial Lecture: prof. Hans-Hermann Hoppe
Pre-concerence event: April 23, 2009 16:00 - 19:00
Transaction Costs and Institutional Change: Saturday Morning College Football Blogging
In light of the annual controversy over how college football's national champion is determined, I've written up a proposal for how conferences can be realigned. My modest contribution is below the fold.
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My reasoning here is that the lack of a conference championship game hurts the Big 10 and the Pac 10 because it doesn't ensure that the conference's best teams play one another. It also deprives those conferences of an "elimination game" in which their champions can prove their mettle. I would make the same argument for the Big East, but their conference schedules ensure a round robin. Here's a proposed and potentially feasible conference realignment, based on a couple of assumptions:
1. Teams do not leave the ACC, SEC, Big 12, Big 10, Pac 10, or SEC. Since the Big East has been raided before, I assume that it can be raided again. I have heard an interesting argument that Kentucky would be better off as the southernmost team in the Big 10 than as the northernmost team in the SEC, but I'm going to assume that doesn't happen.
The Big 10+2:
The Bigger East:
The Pac 12:
Now to the smaller conferences:
CUSA, hurting from being raided by the Big East (again) and losing three teams (again), adds North Texas from the Sunbelt, Louisiana Tech from the WAC, and TCU from the Mountain West Conference. The new CUSA Texas Division is Rice, Houston, UTEP, SMU, TCU, and North Texas and the new CUSA Not Texas Division is Tulane, Tulsa, LA Tech, Memphis, Southern Miss, and UAB.
The Mountan West and WAC reconcile their previous differences and realize that without a conference championship game, they won't survive. They re-consolidate (as the Mountain WAC, perhaps?) with the Nevada and New Mexico State going over to the old MWC and San Diego state going over to the old WAC for a new conference alignment of the Mountain WAC Mountain Division consisting of Air Force, Colorado State, UNLV, New Mexico, Wyoming, Nevada, and New Mexico State and the new Mountain WAC "WAC" Division consisting of San Diego State, Boise State, San Jose State, Hawaii, Fresno State, Utah State, and Idaho.
Again surveying the ultra-competitive landscape of college football, the Sun Belt decides to try to expand, as well, but they'll need some help from the former Division I-AA. They absorb Western Kentucky to make up for the loss of North Texas, but then they have to add four former I-AA teams to get a 12-team conference. Let's say these teams are Central Arkansas, Southeastern Louisiana, Jacksonville State, and Tennessee-Chattanooga. The new Sunbelt East consists of Troy, Middle Tennessee, Florida Atlantic, Florida International, Jacksonville State, and Tennessee-Chattanooga. The new Sunbelt West consists of Louisiana-Lafayette, Southeastern Louisiana, Louisiana Monroe, Arkansas State, Central Arkansas, and Western Kentucky.
And that solves everything.
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November 21, 2008
What Creates a Self-Policing Corporate Culture? (Updated)
I just read Alexandre Padilla's very interesting paper "Self-Regulation in the Adult Film Industry: Why Are HIV Outbreaks the Exception and Not the Norm?" Here's the revised abstract:
This paper analyzes how self-interest and long-term profit expectations provided the necessary incentives for the adult film industry to self-regulate and to find mechanisms to minimize the risks of HIV outbreaks that could result from the asymmetric information and network effects that characterize the industry. With the help of the Adult Industry Medical Healthcare Foundation (AIM), the adult film industry developed a corporate culture to facilitate widespread coordination among members and to make the industry similar to a private club. First, I discuss the predicted effects of asymmetric information and network-effect problems on the industry in terms of HIV outbreaks. Second, I tell the story of AIM and present the policies the industry has adopted since AIM’s creation to mitigate those predicted effects. In particular, I discuss how the industry managed the 2004 HIV outbreak without government intervention. Finally, I present statistics comparing HIV infection rates in the industry and general population as well as additional observations to assess the relative effectiveness of the industry in preventing and containing HIV outbreaks.
A couple of comments are in order. I really like the research design. Alex is exploring how self-regulatory institutions arise to address problems arising from networks and asymmetric information; in the porn industry, these problems are crystal clear and at the center of how the industry operates. Thus, the probability of arriving at clear insights that aren't gummed up by confounding factors is pretty high.
The worst-case scenario--HIV infection--is very clear and the transmission mechanism is unambiguous. That said, I would be interested in seeing just how the risks of working in porn compare to the risks of other hazardous occupations--in other words, I wonder how the estimated HIV-related cost of working in porn compares to the estimated injury-related cost of working in construction. Further, how does the insurance market work for porn? Do porn stars pay higher or lower premiums? How does this affect their incentives?
Another thing I like about the research design--which also complicates it a little bit--is that pornography is an internationally competitive market with near-perfect capital mobility. It can be produced virtually anywhere and sent anywhere at the click of a button. This puts serious constraints on regulators and has implications for how the industry self-regulates. I'd like to see this explored in greater detail.
The paper will probably attract attention because it has the phrase "Adult Film Industry" in the title, but the most important term in the title (and in the paper) is "Self-Regulation." It's a very interesting paper because of the obvious and seemingly intractable problems in a globally competitive industry. I look forward to seeing where this leads.
Update: via email, Alex tells me that it's going to lead to a book. I look forward to it.
Rent-Seeking and Public Finance in Monty Python
Economics instruction gets better via the Monty Python YouTube Channel.
HT: Brad DeLong.
Voting Essay Contest Winner
Congratulations to Jeff Daiell, who won the Essay Contest I sponsored earlier this month. Jeff won a copy of Buchanan and Tullock's The Calculus of Consent, and I learned a lot. Thanks for all the entries (a few dozen or so). And for people who are interested, I did vote (and then chose a winner after the fact). Jeff's winning essay is below the fold.
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Refuting The Arguments Against Libertarians Voting
I have heard two major arguments against libertarians
Argument A. "Voting Is Immoral, As It Gives Sanction
1. You have just received a visit from thugs
Have you, or the investigator, "given sanction" to the
2. Majority rule does not justify violating Rights
Argument B. "Don't Vote - It Only Encourages Them"
This makes for a cute bumper-sticker, but that's about
1. When have you ever heard a politician -- or
2. If statists want libertarians to vote, why do they
3. Most laws and regulations supposedly designed to
Argument C. "Your Vote Doesn't Matter"
The odds that a single vote will determine who
So, libertarians: vote! In good conscience, go vote!
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What I've Been Writing Lately
"Shock and Awe: Institutional Change, Neoliberalism, and Disaster Capitalism." This is a long review essay on Naomi Klein's The Shock Doctrine prepared for the Journal of Lutheran Ethics. Thanks to the Fraser Institute for letting me use some of their graphs, and thanks to Bob and Josh for letting me use one of the tables from our still-uncirculating paper.
"The Skinny on Big Box Retailing: Wal-Mart, Warehouse Clubs, and Obesity" (with Charles Courtemanche, revised 11/6/08) A couple of additional changes and this one's out the door. The abstract:
We estimate the impacts of Wal-Mart and warehouse club retailers on height-adjusted body weight and overweight and obesity status, finding evidence that non-grocery selling Wal-Marts reduce weight slightly while grocery-selling Wal-Marts and warehouse clubs either reduce weight or have no effect. The effects appear strongest for women, minorities, urban residents, and the poor. We then examine the effects of these retailers on exercise, food and alcohol consumption, smoking, and eating out at restaurants in order to explain the results for weight. Most notably, all three types of stores are associated with increased consumption of fruits and vegetables and reduced consumption of dietary fat. This is consistent with the thesis that Wal-Mart increases real incomes through its policy of "Every Day Low Prices," making healthy food more affordable, as opposed to the conventional wisdom that cheap food makes us eat more.
November 20, 2008
What Conversations About Economics Are Like Sometimes
Remember: it isn't usually a question of funding. It's usually a question of reality.
Many DOLers are headed to the Grand Hyatt in DC for the Southern Economic Association meetings. Here is the conference program and list of participants. The Southerns are an important annual event for economics in the classical liberal tradition. For example, the Society for Development of Austrian Economics holds its meetings each year here (list of sessions is here). Also, more than 175 faculty in the Institute for Humane Studies network will attend. The Cato Institute is also hosting a reception in honor of Bill Niskanen; Saturday from 5-7 p.m. at the Cato building (details and registration here). Personally I am presenting a paper on the entrepreneurial economics of fashion apparel, "Of Human Action and Human Design: Adaptive Entrepreneurship and the Marketization of Fashion."
Finally, for friends and alumni of IHS who are in the area, please join me and Nigel Ashford at the IHS reception, Friday the 21st 6.00-7.30pm at Grand Hyatt, Penn Quarter B.
November 19, 2008
Emek Basker is Right on Target
The makings of an exam question in Econ 101:
The Wall Street Journal, 11/14/08: "Wal-Mart Flourishes as Economy Turns Sour"
The Wall Street Journal, 11/19/08: "Target's Profit Continues to Slide"
I was reminded of this paper by Emek Basker. The abstract:
I estimate the aggregate income elasticity of Wal-Mart's and Target's revenues using quarterly data for 1997-2006. I find that Wal-Mart's revenues increase during bad times, whereas Target's revenues decrease, consistent with Wal-Mart selling "inferior goods" in the technical sense of the term. An upper bound on the aggregate income elasticity of demand for Wal-Mart's wares is -0.5.
Doh! That darned Law of Demand again!
My friend Don Lacombe (Ohio University -- Go Bobcats!) co-authors a nifty new paper on the minimum wage. Here's the abstract,
The relationship between minimum wage increases and youth employment is investigated using county-level data and spatial econometric techniques. Results that account for spatial correlation indicate that a 10% increase in the effective minimum wage is associated with a 3.2% decrease in youth employment, a result that is 28% higher than the corresponding estimate that does not control for spatial correlation. Thus, estimates that do not take into account spatial correlation may significantly underestimate the negative effect of the minimum wage on teenage employment. Improperly controlling for factors that vary systematically over space can lead to incorrect inferences and misinform policy.
Build a Better City By Stifling Innovation
Lawns gardens are a great idea, and I completely agree with the writer that if one is going to spend time and energy on yardwork, why not ask that such time and energy yield something? As some of the comments on the post point out, local regulations often forbid it.
I understand the rationale for green lawns, which are basically a form of fire insurance (HT: my father-in-law, who inspects hospitals for a living and knows everything there is to know about fire codes). However, and in my mind this is unfortunate, what we think of as a "yard" has been enshrined in law and potentially useful experiments in urban living have been effectively made illegal. I'd much rather tend a tomato patch in front of the house than mow grass (or, more specifically, pay someone else to do it). I'm pretty sure the City of Memphis wouldn't let me. I'll have to look into it.
I can think of a couple of externality rationales for laws against front-yard gardens, but I don't think they're tenable when subjected to scrutiny. One could argue that there are aesthetic externalities, but first I'm not sure they justify the regulatory costs and second it isn't clear that the externality is positive or negative. Some of our neighbors do truly amazing things with their yards, and we reap some of the aesthetic benefits (they don't grow vegetables, though).
It seems like this can also be fixed through the housing market. In efficient housing markets the expected value of future positive and negative externalities emanating from the fact that we don't have onerous restrictions on what you can and can't do with your yard in our neighborhood will be capitalized into home values. One man's trash will be another man's treasure: people who value freedom and experimentation will live in neighborhoods that don't have such restrictions. People who value uniformity and continuity can select into private neighborhoods with restrictions on what you can and can't plant.
A more plausible externality argument is that edible flora will attract undesirable fauna. Again, though, the steps people would take to ensure that their veggies don't get eaten would also reduce the probability that neighbors' veggies would get eaten and at least partially mitigate the externality. Even if contracting institutions fail, I'm still not convinced that the size of the externality justifies government intervention, especially when one considers the long-run effect on incentives to use force rather than persuasion to accomplish what you want.
And while we're talking about externalities, if the "food miles" argument for locavorism has any merit--and I'm not convinced it does, but don't take my word for it--then we're trading off small negative externalities associated with at-home food production in order to reduce negative externalities associated with the international structure of food production ("global calorie infrastructure," perhaps?).
There is also a more fundamnetal question about liberty at stake here. If Sarah Palin can shoot wolves from a helicopter, shouldn't I be allowed to grow tomatoes in my front yard?
What Would Good News Look Like?
Is the media a cause or an effect of pessimistic bias? If prices rise, it will worry economists and pundits because it is inflationary. If the price level falls, it will worry economists and pundits because it signals possible deflation and a "contracting economy." For what good news might look like, here's the European Central Bank's website on price stability. With respect to macroeconomic policy, here's co-blogger Larry White on the Gold Standard and a podcast with George Selgin on free banking.
For grad students who are interested in applied Austrian monetary theory and who are reading this blog instead of writing, you can justify your procrastination by beginning an empirical/historical paper on price stability under alternative monetary regimes. You can start your lit review here. And here's the Google Books preview of Larry's The Theory of Monetary Institutions, which you can get used for $10 plus shipping at Amazon.
Louis CK on the Tragedy and Poverty of Modernity
Mike asks whether this is illustrates pessimistic bias. Off the top of my head, I think there is some merit to the idea that what matters is not our absolute level of income, comfort, whatever but rather how those levels exceed (or fall short of) our expectations. This isn't to say that money can't buy happiness, though.
Walter Block does a Larry Summers
Dear Members of the Loyola [College in Maryland] Community:
Walter's take and reaction is found here.
November 18, 2008
CNN headlines aplenty
What do a major network news website's headlines tell you about a country or an economy?
Regulators: Bailout is working--Paulson and Bernanke say the $700b is working despite its critics. Future headline--"Shaughnessy: short economists more intelligent than most."
So if the bailout is working, why do we see the Ford CEO on bailout opposition: Past is past. He says "the automobile industry is just absolutely essential to the United States' economy." Elsewhere, we find out that "The automakers are asking for about $25 billion in loans to help them survive until 2010." An absolutely essential industry needs $2b a month? There are "more than 1.6 million jobs tied to the auto industry." So each affected person requires $15,625 in tax subsidy? This second story only discusses the harm from an auto industry failure; it says nothing about the current harm from misallocating scarce resources to prop up an inefficient industry.
What's really killing Detroit? I'll agree with SUV addiction, lack of small cars, lousy quality (including the struts on my '04 Pontiac Grand Prix), lack of hybrids, and union workers. But of course they also have to throw in the class-envy bone of fat executive paychecks.
From the "government can do everything" file: Bush hopes to ease holiday travel congestion.
And from the "well, maybe not" file: Blind woman threatened with suit over 1-cent. The overdue payment is for her city water bill. The city official criticizes the blind woman for not paying the extra penny in her original bill.
Don't get sick (again): Half of primary-care doctors in survey would leave medicine if they had an alternative. "Many said they are overwhelmed with their practices, not because they have too many patients, but because there's too much red tape generated from insurance companies and government agencies ... With lower reimbursement from insurance companies and the cost of malpractice insurance skyrocketing, these health professionals say it's not worth running a practice and are changing careers. Others say they're going into so-called boutique medicine, in which they charge patients a yearly fee up front and don't take insurance." And if you're looking for an example of the problems of not using price as a rationing mechanism: "People who have insurance can't find a doctor, so suddenly we are going to give insurance to a whole bunch of people who haven't had it, without increasing the number of physicians?... It's going to be a problem."
Lastly, As children starve, world struggles for solution, with a focus on Haiti. Haiti's EFW score is 6.2, but they have an abysmal 2.59 in the "legal system and property rights" category. Why would the world struggle for a 200-year old solution?
How did we get into this financial mess?
As Ricky Ricardo would say, there's a lot of 'splainin' to do. My attempt to summarize the causes of the turmoil is now available as a Cato briefing paper..
Impeach Here and Impeach Now
I just saw this on the WSJ's webpage:
The Treasury secretary told a House committee it is unrealistic to expect the $700 billion rescue plan to reverse the woes inflicted by the financial crisis.
Then why the @#$! are we p!ssing away the $700B? Good grief, would someone please start impeachment proceedings against this crowd since it's not safe to leave them in office for another two months.
Thanks to Craig Newmark ...
... for including DOL on his list of The Ten *Really* Best Economics Blogs. I was also glad to see Craig included his own fine blog in the list.
Mike Lester on the Detroit Three Bailout
Here is Mike Lester's cartoon from today's Rome News-Tribune:
November 17, 2008
Bailouts of Everything: Olympics Edition
Skip Sauer points to articles indicating that the Vancouver and London Olympic organizers have outstretched palms.
Anyone else feeling like The Forgotten Man these days?
To prevent the next bubble
Constrain the Federal Reserve's over-expansionary proclivities, writes Jerry O'Driscoll in today's Wall St. Journal. How? Impose a commodity standard, which will automatically stop the Fed from following a policy course that inflates asset prices.
ADDENDUM: Walker Todd sounds a similar theme in the Christian Science Monitor today. The intro:
Too much credit and easy money. Those were the biggest culprits behind this financial crisis. Yet, apallingly, the government's rescue attempt is built on more credit and even easier money. That's like giving a procrastinator a deadline extension.
A Puzzle: Posed and Solved
I had just read this in a thoughtful column by Kevin Hassett:
The U.S. has always distinguished itself relative to its major trading partners by having a higher faith in free markets and a greater respect for the limits of big government. Sure, the U.S. passed a stimulus package now and then, but it also let failure run its course and refused to resort to excessive big- government intrusions into the private sector.
Then I read this in a puzzling column by Bill Kristol: "I don’t pretend to know just what has to be done. But I suspect that free-marketers need to be less doctrinaire and less simple-mindedly utility-maximizing, and that they should depend less on abstract econometric models."
Finally, a note posted below Kristol's article cleared it up: "Paul Krugman is off today." Nice of Kristol to fill in for him.
George Selgin talks about free banking
In a new EconTalk podcast interview with Russ Roberts, here.
Trillion Dollar Lockup
Not that it's likely to matter any time soon, but here's an excellent summary of at least one part of the ANWR debate.
The proponents of ANWR development have also distorted the picture by themselves making false arguments. First, it should be acknowledged that ANWR oil production will not in itself come close to achieving energy independence for the United States. Second, ANWR production alone will not affect oil prices significantly. Even the large reserves that ANWR possesses are not large enough, relative to the total world oil market, to have much effect on future world prices.
November 14, 2008
I Channel Don Boudreaux
in the latest issue of the New Yorker.
Snarky Thought of the Day
Crikey, George W. Bailout warning against too much government involvement in markets is akin to Bill Clinton warning against marital infidelity.
Nonsense on Stilts
An extension of unemployment benefits has one of the highest pass-through rates of any federal spending choice, says Mark Zandi, chief economist and co-founder of Moody's Economy.com, a subsidiary of Moody's Corp. (MCO). The June passage of 13 weeks of additional unemployment benefits, for those who had exhausted the maximum 26 weeks of benefits, cost $20 billion. Now, Zandi says, another $20 billion is needed for a second extension.
Thankfully Hamilton offers some words of wisdom. Zandi's comments are par for the course for a guy who says (see 1:45 or so of this video; HT: Joe Coletti of The Locker Room) of bailout plans and stimulus packages, "This is capitalism" and "government is always part of capitalism." Sheesh.
Posted by E. Frank Stephenson at 12:59 PM
I’m not saying he lit the match ...
... but Jim Cramer must be pleased.
Flames that ripped through multimillion-dollar mansions Thursday evening continuing burning this morning in the upscale Southern California community of Monticeto, near Santa Barbara. At least 100 homes have been destroyed.
Cliff Mason of CNBC, Nov.13:
Burn Our Way Out Of The Housing Crisis? It's An Idea. … Jim Cramer has suggested this plan semi-seriously on "Mad Money."
Cramer also suggested this plan semi-seriously on Conan O’Brien a few nights ago: in cities where unsold houses are depressing house prices, leading to mortgage defaults and thereby troubles for lenders, etc., have the federal government buy up the houses and torch them.
So is Cramer's plan serious, which would make it an an extension of the broken window fallacy? Or is it a parody of the broken window fallacy?
Comments are open.
November 13, 2008
President-elect Obama provided a short essay for "Teaching Tolerance," a website maintained by the Southern Poverty Law Center. Too bad that not all of his followers got the memo. This from the Chicago Tribune:
Catherine Vogt, 14, is an Illinois 8th grader, the daughter of a liberal mom and a conservative dad. She wanted to conduct an experiment in political tolerance and diversity of opinion at her school in the liberal suburb of Oak Park.
Drudge: UK Sperm Banks May Need Bailout...
With apologies to Kevin Grier ... holy crap people!
Clicking through to the story reveals something a bit less headline grabbing:
Britain is facing a sperm donor shortage after reversing confidentiality laws and limiting the number of women who can use sperm from one donor, fertility experts warned Wednesday.
Posted by E. Frank Stephenson at 12:23 PM
Colleges Belly Up to the Trough
From the Chronicle of Higher Ed ($):
Congress is crafting a second economic-stimulus bill, and the nation’s colleges, hit by the deepening fiscal crisis, want a share of the money.
It's looking more and more like it will be difficult to top the bailout as an example of the famous quote, "Government is the great fiction, through which everybody endeavors to live at the expense of everybody else."
November 12, 2008
There aren't words for this. Tears, maybe. But not words.
Building Brand Equity: "Under Review" Becomes "Forthcoming"
I just found out that my paper "Profit and Production" was accepted by the Quarterly Journal of Austrian Economics. Here's the abstract; it will appear in print in 2009:
Profits and losses provide powerful incentives. This essay explores the roles of profits and entrepreneurs in a market economy. In a market with secure private property rights, profits are a reliable guide that directs productive activity. Profits reward entrepreneurs for successfully adjusting the structure of production to better suit the wants of consumers. This has implications for Michel de Montaigne's thesis that one's profit is another's loss: while this seems like an attractive (and intuitive) proposition, profits arise when an entrepreneur is able to satisfy consumer wants. This essay applies Ludwig von Mises' thesis that the source of human action is the desire to remove "felt uneasiness." For example, in a situation in which an entrepreneur alleviates discomfort, it is the opportunity to alleviate the discomfort that is the source of the profit and not the discomfort itself.
A Bailout for the Dallas Cowboys?
[UPDATE--A comment on Brad's posts asks whether the government would get an ownership share in the Cowboys. That would give a whole new meaning to "America's Team."]
BTW, Treasury has already spent a big chunk of the $700B:
Treasury has just $60 billion left in its rescue fund, and either the current or next administration will have to turn to Congress to request the second half of the promised $700 billion. Treasury has so far committed $250 billion to banks and is spending an additional $40 billion to buy preferred shares in American International Group Inc., the big insurer.
The way that's working out so far, maybe a chunk for the Cowboys isn't so far-fetched.
November 11, 2008
Clawing back up the slope
The Motley Fool carries this op-ed that is both fun and depressing--a plea to bail out neither U.S. automakers nor the satellite radio companies that beam a deadbeat product to the dashboard.
Satellite Radio: Too Big to Fail By Tim Hanson November 10, 2008
So basically what we're saying here is: No, no. Don't throw good money after bad. This isn't like the financial bailouts--which really, really were important and which we really, really were reluctant to support. No, this is different. And not just because we're staked in financials. Bailouts for cars? Who's next? Here's where we draw the line. No more bailouts, please!
Meanwhile, today's WSJ reports on AMEX gaining access to financial bailout funds:
"Everybody wants to be a bank because everybody wants access to government funding," said Craig Maurer, an analyst at Calyon Securities, a unit of Credit Agricole Group.
November 10, 2008
Why you should be watching the NBA this year
Chris Paul of the New Orleans Hornets is why. He is a remarkable player (I'll pass on the comparison to MJ, but see below) who is fun to watch. Yes, you can say that about a number of players and that's nothing new. But Chris Paul is proving that he is on another, more worthy, and historically significant level. Recapping Saturday's victory over the Miami Heat, ESPN laid out these facts:
Paul finished with 21 points and 13 assists for his sixth straight double-double of at least 20 points and 10 assists to open the season, surpassing the mark set by Hall of Famer Oscar Robertson in 1968.
Paul also has an incredible 90 straight games with a steal. That's 13 more than Michael Jordan's longest streak and second only to Alvin Robinson at 105. Tune in my friends.
November 09, 2008
The more things change...
Steve Chapman is insightful, as usual:
Obama, as it happens, won by offering voters the same thing Reagan promised: tax cuts. Most of those who supported him did so on the assumption that they would not fall in the class of people who will have to cough up more to the IRS.
What I've Been Reading
1. Entrepreneur Journeys by Sramana Mitra.
I received this book in the mail from Maureen Kelley of BizBookPr.com, presumably because of my previous research on economic freedom and entrepreneurship. Thanks to Ms. Kelley for sending me a review copy.
Sramana Mitra is a columnist for Forbes and in this book she interviews the founders of more than a dozen high-tech start-ups. Each chapter is an interview with a different individual and the questions and answers from each interview are presented in their entirety. The interviews are organized into five sections: (1) Bootstrapping; (2) Taking on Giants; (3) Disrupting Business Models, (4) Addressing Unmet Market Needs, and (5) Tackling Planet Scale Problems.
I suspect that I'm not the target audience for this book and that those who are in the target audience (current or wannabe high-tech entrepreneurs) might get more out of it. As an institutionalist, I am interested in how economic, political, and social institutions affect entrepreneurship. There is very little discussion of that in this book. As an economist, I don't like sampling on the dependent variable. As a series of interviews between Mitra and successful high-tech entrepreneurs, that's exactly what this book is. As a social scientist, I'm afraid I learned very little from these interviews.
For high-tech entrepreneurs, however, these interviews might provide useful roadmaps and insights on "how to get things done" or insights into their competitors. At least that seems to be the points being made by other Amazon.com reviewers and the those posted on Mitra's blog. The interviews do seem very well conducted, although I would have appreciated an explanation for many of the less-commonly known (at least outside Silicon Valley) acronyms.
2. Wine & Philosophy: A Symposium on Thinking and Drinking, edited by Fritz Allhoff.
Review hopefully coming out in the next issue of the Journal of Wine Economics.
3. Prohibitions, edited by John Meadowcroft.
Review forthcoming in the The Independent Review.
4. From the Corn Laws to Free Trade: Interests, Ideas, and Institutions in Historical Perspective by Cheryl Schonhardt-Bailey.
Review forthcoming in the Journal of Economics.
November 07, 2008
Gas Below $2 in GA
Mark Perry of the excellent Carpe Diem has been tracking states with gas prices below $2. Add one more--Georgia!--to his list. On my way to take in some Lady Vikings hoops earlier this evening, I saw a station posting $1.99. The RNT has a story of other local stations with price below $2 per gallon. Prices are roughly half of the price of one month ago.
I am almost back, after being absent due to the election, but I am awfully sick. Can't shake the cold I got from doing this.
Some more recent stuff. Nice of Duke to do that, frankly. I appreciate the reacharound.
Posted by Michael Munger at 07:11 PM
Larry Kotlikoff, co-author of The Coming Generational Storm, will be giving a talk at Berry next week. Former students and readers living nearby are welcome to join us--the talk is next Tuesday at 7 pm in the Science Auditorium.
For those looking ahead, Robert Guest of The Economist will be here on Nov. 20. Details later.
Laura Ingalls! You've been a very baaaaad girl!
Here's a news story of government regulations run amok: "Little House on Prairie," adults-only version!
No, don't worry, they haven't done a porn version of Little House on the Prairie.
HELSINKI (Reuters) – Finland has rated the DVD release of the much-loved children's television series "Little House on the Prairie" suitable for adult viewing only.
HT: Steve S.
November 06, 2008
Marginal income tax rates are a weak policy instrument
Exhibit 1: Aggregate income tax revenues are highly inelastic to the top MTR.
...but tax revenue is directly proportional to GDP. So if we want to increase tax revenue, we need to increase GDP.
That said, the government can alter things besides the marginal rates--such as exemptions, deductions, and credits, for example. Here is a more in-depth history of major income tax changes and their static revenue effects.
Exhibit 2: the distributional effects of higher MTR are not well understood. After the Reagan tax rate reductions in 1981, the share of taxes paid by high-earners increased. After the 1993 tax rate hikes, taxable income decreased.
These two points, in a nutshell, are why Obama's tax plan relies so much on credits and so little on changing the marginal rate structure.
Bonus track: the labor supply effects of marginal tax rates are also not well understood. The balance of the literature (good intro here) concludes that labor hours are inelastic, but that only begs the question: are we measuring the right things (e.g. quality of work environment, work effort, timing of compensation, etc.). Here is Austan Goolsbee in the Journal of Political Economy on taxing the rich.
I recently received this email from a student:
She [a relative living in Zimbabwe] wanted to know the name of this figure: 10,000,000,000,000,000,000,000,000 (1 with 25 zeroes) ? This figure is the equivalent of what 1 trillion dollars is today, however in the old currency (before they knocked 13 zeros off). The banks actually took off another 6 zeros last week as their systems couldn’t handle the numbers anymore.
I don't know the name of that number--anyone? Bueller?
BTW, Cato has a nifty page on Zimbabwe's hyperinflation.
UPDATE: A kind reader informs me the number is 10 septillion.
Three Reasons for Optimism
I'm optimistic about liberty's long-run future, and here are two reasons. First, Steven Horwitz's excellent "Open Letter to My Friends on the Left" is spreading around the world in multiple languages.
The publishing work being done by groups like FEE, the Mises Institute, Liberty Fund, and other organizations gives me another reason for optimism. Here's Jeff Tucker speaking on Mises Institute publications. They've taken full advantage of the internet age and have put together an impressive repository of classics from Ludwig von Mises, Murray Rothbard, and articles by much lesser lights. According to Jeff Tucker's talk, everything on Mises.org is now available via Creative Commons.
This post started with one reason to be optimistic after I saw Steve's post on translations of his open letter. Then it became "two reasons" when I saw Jeff's talk in my RSS reader. Then it finally became "three reasons" when I thought about how the blogosphere serves as an almost instant corrective to flawed economic reasoning. Major newspapers can't mishandle economic theory without Don Boudreaux writing a letter to the editor about it and posting that letter at Cafehayek.com. Here's one example among many, many others.
November 05, 2008
Bob Barr was a "spoiler" in maybe two states
With all the precincts in Missouri reporting, unofficial totals as of this morning have McCain carrying the state by only 5,868 votes over Obama. In percentage terms, the outcome was 49.4% to 49.2%. You could say that Libertarian Party candidate Bob Barr, with 11,355 votes (0.4%) , held the “balance of power” or was a “spoiler”. But then you’d have to say the same about Ralph Nader, who drew 17,769 votes (0.6%).
Meanwhile, Barr is reportedly calling himself a spoiler in North Carolina, which is still too close to call at last report, where
Democrat Barack Oama has a 12,000-vote lead over Republican John McCain, and Barr, a former Republican congressman from Georgia, has 25,181 votes, or 1 percent.
Google and Yahoo have called off plans for a joint advertising partnership. One executive points out that moving forward would likely mean a long battle with regulators. I speculate here, but I wonder whether Google, Yahoo, and other large firms are anticipating a tight regulatory regime under an Obama administration. The stock market seems to think so. Here's the CNN coverage; people with an interest in media bias might be interested to note that the Fox News story mentions immediately that this is the biggest day-after-election stock drop in history.
Congrats to Mike Munger
Mike made a pretty decent showing in the NC governor's race: 120,000 votes, 2.9% of the total.
Incentives Matter: Signing Bonus Edition
My former student John Fowler points me to this news item:
Some baseball agents already are thinking about trying to beat a possible tax increase for their well-paid clients under an Obama administration.
Chez Schumpeter: Creative Destruction in the Kitchen
In these trying economic times, the family and I have been partying like it's 1939. Several meals have included/consisted of baked potatoes cooked over an open fire in the back yard (HT: Robert Lawson and Ryan Stowers for helpful hints). As part of the search for cheap, tasty food we hit on a pretty good combination that we'll probably turn into a dip or something this holiday season: salsa and blue cheese dressing. It has just the right combination of kick and pungency, with a texture that varies depending on the chunkiness of the ingredients. It most closely resembles a totally awesome buffalo chicken cheese dip our Sunday School teacher made for a Super Bowl Party back in ought-seven, and we've found it to be a cheap way to spice up otherwise mundane meals. Two seconds with Google yielded a recipe for buffalo chicken cheese dip, courtesy of Cooks.com.
Sell the Vote
I often look at the world through the lens of an insitutionalist. I look to see what political or economic institutions in society will come into play when individuals voluntarily interact, whether in the marketplace or in the political arena.
Here's an example: In many states it is illegal to sell your body as a prostitute, but it is not illegal (or if it is, the penalty is far lower) to make an offer to buy a prostitute's services. If a voluntary action between two individuals is deemed illegal, why punish one side but not the other? This makes sense if nabbing the “john” was much more difficult than nabbing the “call girl,” creating an assymetric allocation of enforcement costs, but that seems very unlikely.
So here’s my concern about our American democracy: I find it interesting that a citizen's vote is not considered private property. If you can characterize politicians as suppliers of public policy and voters as consumers of said public policy, there is clearly a market populated by politicians (call girls) “soliciting” for voters’ (johns’) ballots--pun intended, of course.
Politicians can directly offer prices they are willing to pay for citizen’s votes (see Obama’s tax break calculator) without fear of prosecution. However, a voter can go to jail for offering to sell his vote, as we saw in the infamous case of the e-Bay vote seller.
So my question is this: Is it more ethical to allow for politicians to directly compete for votes by offering "explicit" (snicker!) benefits to individual voters than it is to allow voters to compete to sell their vote to the highest bidder?
Inquiring minds want to know...
Posted by Mike Stroup at 10:09 AM
November 04, 2008
Live Blogging the Election
I'm going to post a few thoughts as the evening progresses. Comments are open.
First up--CNN has "The Diff" in its election results.
Looks like Obama has it won; Fox has called PA and OH for him. FL, IN, NC, and VA are not yet called so Obama might take several moderate to large states from McCain.
Decent news on the gridlock front--GOP senators in GA and KY have held on and it looks like Trent Lott's seat in MS will stay GOP and there's some chance of taking a Dem seat from LA. Maybe the filibuster will still be an option.
UPDATE (9:30)--Bryan Caplan raises an issue I've been wondering about--would McCain have fared better if he had voted against the bailout? I think so.
UPDATE (9:40)--The Raleigh NC News and Observer reports co-blogger Mike Munger has 3% of the vote with 24 NC counties reporting complete results and 49 others reporting partial results.
UPDATE (10:00)--Much has been made of Starbucks giving out free coffee today (to the benefit of two of my favorite students), but Instapundit points to a shop giving out sex toys to folks who vote.
UPDATE (10:45)--Obama repeatedly charged that McCain supported tax breaks for companies shipping jobs overseas. What specifically was he refering to? Surely there is no tax credit or other break specifically for transferring a job from the US to overseas.
Last update of the night--Obama's large margin (13) in PA leaves me wondering why McCain spent so much time there over the past 10 days. Not that it mattered since Obama is rolling to about 375 electoral votes. Senate is Dems plus 5 with OR, MN, and AK to go.
Drip: Bollywood Workout Videos
A catalog arrived in the mail today, addressed to me for some reason, which featured Bollywood workout videos (among other items). That's another drop in the Prosperity Pool.*
*HT: Don Boudreaux.
On this election day, we do well to consider the opening of Frederic Bastiat's "The Law:"
The law perverted! And the police powers of the state perveted along with it! The law, I say, not only turned from its proper purpose but made to follow an entirely contrary purpose! The law become the weapon of every kind of greed! Instead of checking crime, the law itself is guilty of the evils it is supposed to punish!
If this is true, it is a serious fact, and moral duty requires me to call the attention of my fellow-citizens to it.
He does so here.
Mas sobre "No mas!"
I received quite a few emails about my decision to not vote. One issue was the question of whether I thought my vote matters. On this point it is important to note that my switch to non-voting status has nothing to do with whether I think my vote matters. I've always understood that my vote doesn't matter and yet I still voted previously.
The "logic" of my decision has to do with a change in my premise about the nature of voting. If your premise is that democracy is how we make decisions collectively, then there's nothing per se wrong with voting. I see nothing wrong, for example, with a group of people taking a vote to determine which restaurant to go to so long as individuals are then free to go with the group or not.
But my evolving premise is that democracy is closer to rape--that is, it is about some people forcing other people to go along with their will. Given that premise, which I consider immoral, I choose not to participate.
To be sure (1) I think someone who votes because he thinks his vote will matter is wrong as a matter of fact, but the main issue is that (2) I think someone who votes because she thinks voting is some sort of uplifting civic good needs to "check her premises" as Ayn Rand used to say.
November 03, 2008
On election day c. 1908
From the Nov. 3, 1908 NYT (election day 1908):
NATIONAL ELECTION DAY
After voting in every presidential election since 1988 and almost every other election and special election since, I have decided to cut my losses. I have not registered to vote in my new state of Alabama and will not vote tomorrow or perhaps ever again.
My working metaphor for politics is gang rape. If 9 rapists and a woman are in a room and hold a vote, it's 9-1 in favor of raping the woman. If the woman doesn't vote, it's 9-0. Same result. But at least the victim doesn't have to sanctify the process that violates her rights. I am no longer going to go to the polls to give legitimacy to these criminal politicians.
Though I appreciate and agree with Brad's point that Obama is a serious threat to liberty--far more than McCain in fact. This is a case where I simply can not vote for the lesser of two evils.
I read a saying somewhere recently (where? anyone know?) that says "when faced with a choice between two evils, it is important to pick neither." Words to live by. [UPDATE: possible source: Charles Spurgeon. HT: Craig]
November 02, 2008
We're Number One...
...even though I'm not certain we should be. After last night's thrilling conclusion to the Texas-Texas Tech game, Alabama is #1 in the AP, USA Today, and Harris Polls. I expect the Tide to be #1 in the BCS standings whenever they come out. My Top 10 plus a few thoughts are below the fold.
Read More »
If I were voting, here's how I would rank them:
1. Alabama. A few second-half meltdowns notwithstanding, the Tide has left little to question this season and didn't seem to notice the loss of Mount Cody against Tennessee and Arkansas State. LSU might be a test, but after having their heads handed to them by Georgia and Florida, I'm not convinced the Bayou Bengals have what it takes to beat Alabama. The SEC Championship Game looks like it will be 12-0 Alabama against 11-1 Florida for a spot in the BCS title game against either Penn State or the Big 12 Champion.
2. Texas Tech. They've steamrolled almost everyone they've played, dominated Texas in the first half, and pulled it out at gut-check time. Oklahoma State and Oklahoma stand between the Red Raiders and the Big 12 Title Game, where they would probably play Missouri. The only reason they're not a clear #1 is that they would have lost to Texas if that one guy had intercepted that one pass in the closing seconds.
3. Texas. Ran a tough gauntlet of Oklahoma, Missouri, and Oklahoma State and came oh-so-close to beating Texas Tech.
4. Oklahoma. Very impressive so far with their only loss coming against Texas. Blowout non-conference wins over 6-2 Cincinnati and 9-1 TCU help their case.
5. Penn State. PSU is #5 because they're undefeated. My Dad suggested a few weeks ago that not having a conference championship game hurts the Big 10 and the Pac 10. Conference title games strengthen SEC and Big 12 schedules, add an extra hurdle for these teams, and ensure that a conference's top two teams play each other at some point. The apparent weakness of the Big 10 and Pac 10 doesn't help, either. Presumably Big 10 and Pac 10 teams should be able to make up for this shortcoming through their non-conference schedules, but PSU's non-conference slate of Coastal Carolina, Oregon State, Syracuse, and Temple is underwhelming even in spite of OSU's win over USC and their 5-3 record.
6. Utah. The fact that they're ranked behind USC is kind of strange. They're undefeated, they beat Oregon State, and they play in a conference that has proven its superiority to the Pac 10 on the field.
7. Oklahoma State. See "Oklahoma" without the marquee non-conference wins.
8. Florida. Would be undefeated (and ranked #1) without what looked like a suspect play call at the end of the Ole Miss game.
9. USC. They jackhammered Ohio State in one of the season's marquee non-conference games and pounded the snot out of Oregon. The loss at Oregon State was really bad, especially since they were dominated in the first half. They've beaten up on a few other Pac 10 teams, but then again, so has virtually the entire Mountain West Conference.
10. Boise State. Beat Oregon, but nothing like USC did.
Sad Fact of the Weekend: It's probable that Utah, Boise State, and Ball State will finish the season undefeated. At least one of them (Ball State, most likely) will be on the outside looking in while the ACC and Big East champions will get BCS bowl bids with two and three losses each. Florida State (6-2) v. Maryland (6-2) will probably determine the ACC Atlantic and Georgia Tech has the inside track to win the ACC Coastal, but Florida State and Georgia Tech will get their heads handed to them by Florida and Georgia at the end of the season. This will set up a rematch between 9-3 Florida State v. 9-3 Georgia Tech to see who gets to thumb their nose at an undefeated and probably more deserving Utah, Boise State, or Ball State team. In the Big East, West Virginia has the inside track for the conference title and will finish a respectable 10-2 record if they win out.
I know, I know, don't quit my day job. College football sure is fun, though.
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November 01, 2008
Will Libertarians Really Vote for Obama?
My good friends at Reason have taken their quadrennial presidential “poll” of contributors and other libertarians. (I passed on an opportunity to participate.) Of those who would reveal their preference, there were 14 for Obama, 4 for McCain, 13 for Libertarian Bob Barr, and 1 for Ralph Nader.
I respect the folks responding to Reason, and many of them I know personally and consider friends. But when I read the infatuation of these libertarians with Barack Obama, I simply have to conclude that they are not thinking seriously.
For example, one common reason for the choice was to “punish” Republicans. Science fiction writer John Scalzi typifies this sentiment: “I think the GOP need [sic] a moment or two in the Time Out corner, don’t you?” Ron Bailey says, “The Republicans must be punished and punished hard.” Author David Brin argues that if the GOP is “utterly … sent into exile,” then, “perhaps sincere men and women may remember Barry Goldwater and resurrect some kind of healthy, libertarian Conservatism.”
Let’s leave aside the question of which party could really stand for some time in time out (Us!? What about them!!) The problem with this theory is that such “punishment” simply doesn’t yield the desired results.
Read More »
Historically, parties that suffer major defeats at the polls move away from ideological purity. When Reagan blasted Mondale in 1984, the Democrats moved not to the left, but to the technocrat Dukakis in 1988 and then to the still more moderate DLC leader Clinton in 1992. When Nixon thumped McGovern in 1972, the Democrats did not become more pure, but nominated the hapless moderate Jimmy Carter in 1976. Republicans remember 1964 as the year that paved the way for Reagan, but they forget that Reagan’s election did not come for another 16 years. Many young Reaganites may have cut their teeth in the Goldwater campaign, but the campaign did not move the party’s standard bearers to the right, and the thumping Goldwater absorbed in 1964 probably kept Reagan from being the nominee in 1976, if not sooner. In 1966 the party made big gains, but for the most part not behind conservatives (despite Reagan’s California gubernatorial win), but behind moderates such as Illinois’s Charles Percy, Everett Brooke of Massachusetts, and Oregon’s Mark Hatfield in the Senate, George H. W. Bush in the House, and Governors such as Walter Hickel of Alaska and Ray Shafer of Pennsylvania, not to mention big reelection wins by moderate governors such as George Romney and Nelson Rockefeller. In 1968 the party rejected Reagan for president in favor of the more moderate Nixon, and in 1976 it rejected Reagan again, for the more moderate Gerry Ford.
Moreover, it is not only the losing party that draws lessons from an election. The winning party does, too. What lessons will the Democrats draw from a landslide win? I suggest it is not going to be that they moderate their pursuit of socialized medicine, a windfall profits tax on oil, union “card-check” legislation, anti-trade sentiments, or any other of the thoroughly un-libertarian policies that dominate the Democratic party.
The GOP needs to be punished, eh? Really? How many times did we hear this same thing two years ago? How has that worked out, huh? Most of these same libertarians, for example, opposed the financial bailout. Hey, maybe with another twenty conservative Republicans in Congress, that bailout would have failed. Do they really think Congress can’t cut spending because there are too few Democrats?
From a policy standpoint, it is very hard to see that Obama offers libertarians anything. And in those same Reason predictions, my old high school classmate Tim Slagle – one of the funniest political comics in America - makes a huge point: “With the Federal Government holding so many banks and a lot of the mortgages right now, I think it's important to vote for somebody who at least has the intention of giving everything back to the private sector. I see no inclination for Obama to do that. In fact it would not surprise me, to see him calling for more nationalization in his first term.”
This is something Reason’s Obamanauts seem to be missing. The reasons given for selecting Obama range from trite (“I believe in hope and change and unicorns;” “he’s the coolest to watch on television;” “has run a less brain-dead, faux-populist campaign than the Republican”) to, it strikes me, wildly out of proportion – usually a vague reference to “civil rights” as if the U.S. were in some sort of police state. But the changes that could come with Obama – nationalized health care in particular – will be very hard ever to repeal.
It is no secret that libertarians in particular are pretty disgusted with the GOP, but I am hopeful that now, late in the day, libertarians may be figuring out what an Obama presidency with a Democratic congress would really mean for liberty. Over at the Volokh Conspiracy, Todd Zywicki notes that there has been a, “general perception among libertarians that there is really no difference between McCain and Obama … . McCain and Obama both are pretty statist, Obama moreso on the economy, McCain moreso on foreign policy. And McCain-Feingold is a true abomination. In which case it is a toss-up… .,” Zywicki admits that that’s where he was, until recently. “I have slowly come to the conclusion,” he writes, “that as bad as McCain is, Obama really is much, much worse than I realized for a long time. Maybe I'm just slower at this than others, but it really took a long for it to sink in to me exactly how far left Obama really is. On every single issue that I am aware of, he seems to be at the far left end of the Democratic Party spectrum. I mean really out there.”
“Given the history of the world over the past 25 years I think I just had assumed that no serious politician or thinker would in this day and age hold the sorts of views that Obama seems to hold. Raising taxes in a recession, protectionism, abolition of the secret ballot for union elections, big spending increases, nationalized health care, and most appallingly (to my mind) the potential reimposition of the "Fairness Doctrine"--I mean this is pretty serious stuff. And when combined with a Democratic Congress, I think we may be talking about (to use Thomas Sowell's recent phrase) a "point of no return." I guess I just assumed that Obama would be sort of Bill Clintonish--"the era of big government is over" and all that stuff. That he would have absorbed the basic insights of recent decades on taxes, trade, regulation, etc.”
Zywicki concludes: “from what I can tell none of those libertarians or conservatives who are Obama supporters are attracted to him because of his positions (other than those who care strongly about the Iraq war and foreign policy), but rather because of who he is. Obama is a compelling personality. But in reading these encomiums to him, I haven't seen any explanation as to how Obama's policies on tax, trade, spending, or regulatory would be friendlier to individual liberty than what is likely to be McCain's … . As someone observed somewhere recently, this is about the first time in history that you have endorsements from people who endorse Obama on the hope that he won't do what he says he'll do rather than because of what he says he'll do.”
Meanwhile, another longtime libertarian friend, David Bernstein, is issuing a similar warning at Volokh Conspiracy. Bernstein places an emphasis on judicial appointments, writing:
“Libertarians have been heavily involved in some of the most important constitutional Supreme Court litigation of the last two decades, either in terms of bringing the case, being among the most important advocates of one side's constitutional theory, or both. Among the cases in this category are Lopez, Morrison, Boy Scouts v. Dale, U.S. Term Limits, Grutter, Gratz, Kelo, Raich, Heller, and probably a few more that I'm not thinking of offhand. With the minor exception of Justice Breyers' vote in Gratz, in each of these cases, the ONLY votes the libertarian side received were from Republican appointees, and all of the Democrat appointees, plus the more liberal Republican appointees, ALWAYS voted against the libertarian side. The latter did so even in cases in which their political preferences were either irrelevant (Term Limits), or should have led them to sympathize with the plaintiff (Lopez, Kelo, Raich)."
Bernstein also notes that McCain is, at least these last few weeks, “running the most rhetorically libertarian presidential campaign I can remember since Reagan's 1980 campaign. Every time I hear a clip on the news, he's denouncing Obama for being a big spender and a taxer. He pledges to freeze most federal spending, and to take on entitlements and the grotesque reverse Robin Hood farm programs that Obama and almost all Congressional Democrats support. If he pulls out a victory, it will be seen as a stunning come from behind victory for those ideas. If he loses, and especially if loses badly, it will look like Americans are okay with "spreading the wealth."
I am really pleased to see guys like Todd and David voicing this stuff, and I hope the more cavalier libertarians at Reason and elsewhere are taking note.
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Posted by Brad Smith at 03:08 AM
The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith
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