In his Zelman dissent, Justice Breyer reasons that public school vouchers are unconstitutional because they "risk" creating "a form of religiously based conflict potentially harmful to the Nation’s social fabric." That is, they are unconstitutional because there is a possibility that they could lead to tension among religious groups. Justice Breyer speculates that such programs might lead different religious groups to feel that they are not getting a fair shake:Who's tending the Constitution these days, if a Supreme Court justice is not?How will the public react to government funding for schools that take controversial religious positions on topics that are of current popular interest–say, the conflict in the Middle East or the war on terrorism? . . . Efforts to respond to these problems not only will seriously entangle church and state, but also will promote division among religious groups, as one group or another fears (often legitimately) that it will receive unfair treatment at the hands of the government.As I read Breyer's Zelman dissent, his perception of a risk that the law could have a harmful result that touches on religious practice is enough to strike it down.
Contrast Breyer's Zelman dissent with his dissent in Heller. Here, the polarity of the culture wars has been reversed. And so has Justice Breyer's approach: Now he reasons that the possibility of a positive social impact of the law makes it constitutional. The political philosopher of Zelman is replaced with a careful and cautious social scientist who runs over pages and pages of statistics and scientific studies in Heller. So long as the legislature had a possible basis for thinking that restricting the constitutional right was a good idea, Breyer explains, the law should be upheld:These empirically based arguments may have proved strong enough to convince many legislatures, as a matter of legislative policy, not to adopt total handgun bans. But the question here is whether they are strong enough to destroy judicial confidence in the reasonableness of a legislature that rejects them. And that they are not.To be clear, I'm not suggesting that Justice Breyer is alone in taking different approaches depending on which side of the culture wars the challenged law happens to fall. Plainly he is not. At the same time, I do think the contrast between these two dissents provides an unusually clear case of the difference.
It's an interesting mirror image, I think. When the culture wars pointed one way, Justice Breyer thought that a "risk" of a "potentially harmful" adverse result was enough to strike the law down. When the culture wars pointed in the other direction, so did the burden of proof: now Justice Breyer must have his "confidence" in the reasonableness of the legislature "convincingly" "destroyed" before he would vote to strike down the law.
Monday, June 30, 2008
1. Liberals tend to be tens of thousands of dollars in debt.but there's hope:
2. Many liberals are unemployed truck drivers with no health benefits.
3. The education system is failing the children of liberals, all of whom are flunking out.
4. Liberals cannot control their children.
But bad as things are, they could be worse. Over on the Howard Stern show, they're selling an apparatus that will allow you to shave your back hair all by yourself. No more embarrassing trips to the barber shop, and no more begging your girlfriend to shave your back. They even promise it will make you smell better, as Howard's listeners' backs are not only prodigiously hairy, but painfully malodorous.
I can't speak as to the political persuasions of regular Stern listeners, but I'm not likely to join their ranks anytime soon. After all, as a card-carrying liberal I have massive personal debt, the endless job search, and my uncontrollable failing children to deal with.
Salamon’s book provides a vivid snapshot of the effects of the U.S. health-care system, where “cancer is a growth industry” and where first-year residents learn that Occam’s razor doesn’t apply to medicine.
Previous BS installment here.
Statistics are like a bikini. What they present is suggestive, but what they conceal is vital--Aaron LevensteinMegan McArdle writes:
But many of the worst statistics come out of women's study and feminist advocacy. There are the appallingly shaky statistics on the number of rapes based on badly designed surveys manipulated with statistical methods so crude that Bayes must be spinning in his grave fast enough to power a high-speed monorail between New York and LA. The confident assertions that abortions have not increased significantly since legalization, when the pre-Roe figure is obviously unknowable, and the data we do have--on pregnancies--points firmly in the other direction. The various numbers on domestic violence that are thrown around with abandon even though a moment's thought is enough to dismiss them as ridiculous--the infamous Super Bowl claims being only the worst of the breed. And, of course, the silly assertion that we know how many women are helped with guns vs. hurt by them, when the data needed to decide such a claim are unavailable, and the coding problems enough to make Jesus weep.
Someday, there may be futures on futures which will help solve this riddle.
UPDATE: Paul Krugman agrees.
So it appears that New Jersey voters don't want a governor who increases taxes and may not want one who cuts spending, but they also want the state's credit rating restored and the budget situation fixed. In other words, they want a fiscal magician.--Stan Collender
Democracy, too, is a religion. It is the worship of jackals by jackasses.--H.L. Mencken
Many of the same people who ridicule the idea that private-sector output is meaningfully reduced by higher taxes are convinced that private-sector output is meaningfully raised by higher subsidies.--Don Boudreaux
For gas to reach a record high as a percent of per-capita disposable income, it would have to sell today for about $5.50 per gallon to reach 14.90% of per-capita disposable income, like it did in March of 1981, when gas sold for $1.42 per gallon, and per-capita disposable income was only $9,500.--Mark Perry
By preventing production and through inflationary monetary policy, maybe the government should be blamed for high oil prices, not speculators?---Mark Perry
If you vote for Democrats on the theory that Republicans are a threat to civil liberties, caveat elector. Bill Clinton and his administration incinerated children at Waco, undertook the policy of "extraordinary rendition," used a grand jury investigation to intimidate journalists at The American Spectator, deported Elian Gonzalez to communist Cuba, and signed the Antiterrorism and Effective Death Penalty Act of 1996, which restricts the habeas corpus rights of American citizens.
Whatever one may think of these particular measures, they would have generated much more opposition from Democrats had they been instituted by a Republican administration. The Keith Olbermanns of the media world outnumber the Glenn Greenwalds, so when an Obama administration curtails civil liberties (justifiably or not), the outcry will be far more muted than it is now. If civil liberties are your top concern, then, you better vote for John McCain.--James Taranto
Friday, June 27, 2008
Sadly, of course, not everyone gets out early, and a lot of innocent, if silly, people get caught up in these games. All I can say is, only suckers play games where they don't quite understand the rules and the percentage seems to be running strongly to the house. If you suspect you're the sucker, no matter how much fun you think you're having, it's time to cash out your chips and close your house account.--Megan McArdle, on dating games
First, on speculation remember that demand and supply are both very inelastic so relatively small changes in either can make a big differrence. That means that speculation, if that is what you want to call it, can shift prices a lot without being very significant in total demand. Because of this point Krugman's analysis is quite right for iron ore but a little off for oil - indeed Krugman's analysis of oil is difficult to square with his analysis of the California electricity crisis ... Finally, on oil - who really cares what the price is? The issue is energy, not oil. I am confident that the long run price of energy will fall. --Alex Tabarrok
Thursday, June 26, 2008
Obama says he believes the Second Amendment confers an individual right, but that reasonable restictions should be permitted. But by what theory is a total ban a reasonable restriction? It is just this sort of flim-flamery which is frustrating, no doubt, both to supporters and opponents. Was he–a supposed Constitutional scholar–not capable previously of explaining his views?UPDATE: Jim Lindgren questions Justice Breyer's dissent (via Glenn Reynolds).
UPDATE: David Hardy questions Justice Stevens' dissent (via Glenn Reyholds).
Politicians favor the cap-and-trade system because it is an indirect tax that disguises the true costs of reducing carbon emissions. It also gives lawmakers an opportunity to control the number and distribution of emissions allowances, and the flow of billions of dollars of subsidies and sweeteners.
Many people believe that everyone has a moral obligation to ask how we can best combat climate change. Attempts to curb carbon emissions along the lines of the bill now pending are a poor answer compared with other options.
Consider that today, solar panels are one-tenth as efficient as the cheapest fossil fuels. Only the very wealthy can afford them. Many "green" approaches do little more than make rich people feel they are helping the planet. We can't avoid climate change by forcing a few more inefficient solar panels onto rooftops.
The answer is to dramatically increase research and development so that solar panels become cheaper than fossil fuels sooner rather than later. Imagine if solar panels became cheaper than fossil fuels by 2050: We would have solved the problem of global warming, because switching to the environmentally friendly option wouldn't be the preserve of rich Westerners.
A low-carbon energy, high-income future is possible. Unfortunately, the political battles we just witnessed in Washington have done nothing to make it a reality.
I am still of the opinion that as long as there is a sizeable minority saying that the market has capitulated, the market has not capitulated.--Megan McArdle
The problem with Citi, I think, is not that it's too big to fail, but rather that it's too big to rescue.--Felix Salmon
A purposive qualifying phrase that contradicts the word or phrase it modifies is unknown this side of the looking glass (except, apparently, in some courses on Linguistics)….[I]f “bear arms” means, as the petitioners and dissent think, the carrying of arms for military purposes, one simply cannot add “for the purposes of killing game.” The right “to carry arms in the militia for the purpose of killing game” is worthy of the mad hatter.--Antonin Scalia, writing for the majority in District of Columbia v. Heller
Fortunately, Mr McCain's crystal ball foretold all of these events.
"You know the economists?'' McCain said June 12 at Federal Hall, near the New York Stock Exchange. "They're the same ones that didn't predict this housing crisis we're in. They're the same ones that didn't predict the dot-com meltdown. They're the same ones that didn't predict the inflation that's staring us in the face today.''
Wednesday, June 25, 2008
You can sell it to Berkshire, and we'll put it in the Metropolitan Museum; it'll have a wing all by itself; it'll be there forever. Or you can sell it to some porn shop operator, and he'll take the painting and he'll make the boobs a little bigger and he'll stick it up in the window, and some other guy will come along in a raincoat, and he'll buy it.--Warren Buffett, on why selling a company to Berkshire is better than selling it to private equity
Tuesday, June 24, 2008
John McCain's proposal that Uncle Sam offer a $300 million prize to whoever develops a battery that "has the size, capacity, cost and power to leapfrog the commercially available plug-in hybrids or electric cars" is silly -- as explained well by the Denver Post's David Harsanyi. (Full disclosure: Mr. Harsanyi interviewed me for his column.) Here are Mr. Harsanyi's closing paragraphs:
But when McCain peddles prize money, he also feeds the perception that industry and scientists aren't already working diligently on energy breakthroughs — with batteries and areas unknown — or that the market doesn't incentivize them to do so.
Worse, McCain makes it seem that a cure for oil is just beyond our grasp. Around $300 million away.
Monday, June 23, 2008
According to research by Daniel Kahneman, the Nobel Prize-winning behavioral economist, quoted in an article in the Washington Post, “being wealthy is often a powerful predictor that people spend less time doing pleasurable things and more time doing compulsory things and feeling stressed.”
People who make less than $20,000 a year, for instance, spent more than a third of their time in passive leisure, like kicking back and watching TV. By contrast, those making more than $100,000 a year (I would call them affluent not wealthy), spent less than a fifth of their time in passive leisure. “The richest people spent nearly twice as much time as the poorest people in leisure activitities that were structured and often stressful — shopping, child care and exercise.”
In short, stereotypes about the leisure class no longer hold true. “In reality,” Kahneman and his colleagues wrote in a paper they published in the journal Science, “they should think of spending a lot more time working and commuting and a lot less time engaged in passive leisure.”
Americans reading that laundry list may note that it sounds a lot like the mindset of the left wing that will dominate the Democratic Party's convention and choose Barack Obama as its candidate in August. From nationalized health care and government-owned refineries to punishing taxes on the rich, Argentina has been there, done that. There are good reasons to find the resemblance disturbing.--MARY ANASTASIA O'GRADY
It's hard to generate intellectual respect for someone who believes that life is an exam composed entirely of multiple choice questions.--Megan McArdle
A year after the Tennessee Center for Policy Research exposed Gore’s prodigious personal use of electricity at his Nashville mansion (20 times the national average), the Center reported this week that Gore’s personal electricity consumption during the past year actually increased by 10 percent.--Steven Milloy
It is weird how so many who claim to like Obama hope he is lying.--Lexington Green
Friday, June 20, 2008
Air resistance increases the faster you travel, which might lead you to think that higher speeds always require more fuel. However, your car's engine is designed for maximal efficiency in converting fuel into motion when you drive at higher speeds. As a result, the typical car gets much better gas mileage if you drive it at 45 mph instead of 15. However, at speeds above 60 mph, the wind resistance becomes a dominant factor, and miles per gallon for most cars starts to decline significantly if you drive faster than 60.
Thursday, June 19, 2008
Barack Obama yesterday named a foreign policy panel to give him advice and possibly fill Cabinet posts if he is elected in November - and it's chock full of former Clinton administration bigs.
Among them are ex-Secretary of State Madeleine Albright, former Defense Secretary William Perry and former Secretary of State Warren Christopher.
UPDATE: There's also this:
HEH: "They told Glenn Reynolds that if George Bush were elected Muslims would face discrimination at political rallies... and they were right!"UPDATE: Tigerhawk chimes in with:
The wire service that shall not be named is reporting that Barack Obama said that Osama bin Laden is still free because of Republican "failed strategies." Perhaps. But that is no different than saying he was both free and able to attack the United States in 1996, 1998, 2000 and 2001 because of Democatic "failed strategies." Free he may be to live in his cave under constant fear of betrayal, but for the last six years -- since Bali, really -- the only targets he has been able to hit are unarmed Muslims or hardened Western military targets that are ready to face him. That is one rather large difference between Republican "failed strategies" and Democratic. I mean, if we're going to be partisan about it.UPDATE: Jon Henke on Obama's "evolution":
- "There are some things we have to do at home to get our house in order. No. 1 is we shouldn't be running up budget deficits." - Barack Obama - May, 2006
- "Obama says he's not going to sacrifice his domestic priorities for deficit reduction. Universal health care, renewable energy, and all he rest won't be sacrificed on the altar of PAYGO." - Ezra Klein, reporting on Barack Obama's Yearly Kos Presidential Forum - August, 2007
- "Our estimate for the ten-year revenue change compared with current law from Senator Obama’s plan is ... a $2.7 trillion revenue loss. ... With interest costs, Obama would add $3.3 trillion to the national debt..." - TaxVox, the Tax Policy Center Blog (Brookings/Urban), on the fiscal impact of Barack Obama's tax plan - June 2008
And so he tells his supporters that he is entitled to break his promise.
“We face opponents who’ve become masters at gaming this broken system. John McCain’s campaign and the Republican National Committee are fueled by contributions from Washington lobbyists and special interest PACs. And we’ve already seen that he’s not going to stop the smears and attacks from his allies running so-called 527 groups, who will spend millions and millions of dollars in unlimited donations,” Obama said.
Excuse me, but Republican Sen. John McCain has put campaign finance reform ahead of his political ambition.
Who is this rookie senator to find fault with the co-author of McCain-Feingold?
In fact, has Obama ever legislated anything? His entire 12 years as an elected official have been devoted to running for the next higher office.
Also, Democratic 527s outspent Republican ones 5-to-1 in the last election.
You can fool some of the people all the time.
They are called Obama supporters.
1. Boom in mass transitOf course, points .2. and .3. will just lead to more carbon emissions from healthier and longer-living people. But .5. will result lead to greater starvation, as farmlands will be yielding fuel instead of food, so I guess that's an offset.
2. Lower obesity
3. Fewer accidents
4. Less commuting traffic
5. Increased biofuels usage in response to subsidies
J.D. Drew's 1.085 slugging in these first 3 weeks of June is greater than Manny Ramirez or David Ortiz's best months.
Our item yesterday on Barack Obama's opposition to educational vouchers prompted an email from a reader at the University of Chicago, who tells us that Obama's daughters attend the Lab School, a private elementary school run by the university. Lynn Sweet of the Chicago Sun-Times noted in July that Obama had acknowledged this during a Democratic debate:What he does not mention, curiously, is that his wife, Michelle, works at the U. of C. Many people affiliated with the U. of C. are eligible for tuition breaks.
So the Obama girls are attending a private school and having part of their tuition paid for by a third party? Sounds like a voucher to us.
No American is ever made better off by pulling a fellow American down, and all of us are made better off whenever any one of us is made better off ... A rising tide raises all boats.--John F. Kennedy
The way CEOs become CEOs in America is a travesty. This is one of our major problems. I use the anti - Darwinian metaphor. The survival of the unfittest ... When the CEO retires the assistant becomes the CEO. And remember what I told you. He’s a survivor. He would never have anyone underneath him as his assistant that’s brighter than he is because that might constitute a threat. So therefore, with many exceptions, we have CEOs becoming dumber and dumber and dumber. We can all see where this is going. It would almost be funny if it wasn’t such a threat to our ability to compete and to our economy in general.--Carl Icahn
Half-empty trains are not environmentally efficient; they are pork. American rail needs a combination of higher carbon taxes to price in the mobile transport externalities, and a government that isn't determined to mess things up. I'm skeptical that we'll get either any time soon.--Megan McArdle
The New York Times reports that an adviser to John McCain accused Barack Obama of having a "Sept. 10 mindset." Obama responded by . . . exhibiting a Sept. 10 mindset:The latest battle began when McCain's advisers held a conference call to attack Obama for comments he made in an interview with ABC News in which he said that he believed that "we can track terrorists, we can crack down on threats against the United States, but we can do so within the constraints of our Constitution," and noted that the United States was able to arrest, try and jail the culprits in the 1993 World Trade Center bombing."And, you know, let's take the example of Guantanamo," Obama said in the interview. "What we know is that, in previous terrorist attacks--for example, the first attack against the World Trade Center--we were able to arrest those responsible, put them on trial."
The Obama antiterror strategy is to wait until terrorists kill American civilians, then arrest them and put them on trial. Of course, when we tried that in the 1990s, the eventual result was another attack on the World Trade Center. This one was far more successful, destroying the complex and multiplying the death toll nearly 500-fold.
Oh, and the men who carried out the attack were never arrested and put on trial, because it was a suicide attack. Another failure of the Bush administration!--James Taranto
Meanwhile, Mr. Dodd continues to insist that, though he knew he was a "special" Countrywide customer, he didn't think he was getting any special financial benefit. But a $75,000 reduction in mortgage payments is no small matter for anyone living on a Senate salary of $169,300. Why else would he be known around Countrywide as a "Friend of Angelo" – Angelo being Countrywide CEO Angelo Mozilo.
Yesterday, nine Senate Republicans led by South Carolina's Jim DeMint sent a letter asking Majority Leader Harry Reid to delay consideration of Mr. Dodd's housing bailout bill in light of its benefits for Countrywide – and Countrywide's benefits for Mr. Dodd. That's an excellent idea, in addition to a Congressional and Justice Department probe of Countrywide, Fannie Mae and the favors they seem to have spread around Washington. American taxpayers need to understand more about who they're being asked to bail out here, and why.
Earlier post here.
In 2001, my first book, "Bias," came out. It was an insider's look at bias in the media. Not one network news correspondent would have anything to do with me. I couldn't get on any of their morning news shows to talk about the book (which was a national best seller), or their evening shows or their weekend shows or even their middle-of-the-night news shows. No one in network television wanted to discuss the issue, no matter how many Middle Americans thought it was important.
Tim understood that without that kind of diversity, journalism would be in trouble. He knew it wasn't good for journalism or America if almost all the people reporting the news lived and worked in the same bubble.
"There's a potential cultural bias. And I think it's very real and very important to recognize and to deal with," he told me. "Because of backgrounds and training you come to issues with a preconceived notion or a preordained view on subjects like abortion, gun control, campaign finance. I think many journalists growing up in the '60s and the '70s have to be very careful about attitudes toward government, attitudes toward the military, attitudes toward authority. It doesn't mean there's a rightness or a wrongness. It means you have to constantly check yourself."
"Why the closed-mindedness when the subject comes around to media bias?" I asked him.
"That, to me, is totally contrary to who we're supposed to be as journalists. . . . If someone suggested there was an anti-black bias, an anti-gay bias, an anti-American bias, we'd sit up and say, 'Let's talk about this, let's tackle it.' Well, if there's a liberal bias or a cultural bias we have to sit up and tackle it and discuss it. We have got to be open to these things."
His many friends in journalism -- the ones who spend their lives inside that comfortable, elitist bubble -- would do well to take those words to heart. Facing up to their biases and making a conscious effort to get rid of what Tim called "preferred positions" on important social issues (for abortion and against guns, for example) would be a lasting tribute to Tim.
We ended our conversation that day with an exchange about the criticism he took from some on the political left for wearing a red, white and blue ribbon on his lapel when he interviewed Vice President Dick Cheney on Sept. 16, 2001. He told me a good friend of his died at the World Trade Center on 9/11, and that the friend's family had asked if he would wear the ribbon, "and I never thought for a second about it."
"It is imperative," he told me, "that we never suggest that there's a moral equivalency between the United States of America and the terrorists. Period. I'll believe that until the day I die."
Which was way too soon.
This past Thursday, Mr. McCain came close to advocating a form of industrial policy, saying, "I'm very angry, frankly, at the oil companies not only because of the obscene profits they've made, but their failure to invest in alternate energy."
Mr. McCain's angry statement shows a lack of understanding of the insights of Joseph Schumpeter, the 20th century economist who explained that capitalism is inherently unstable because a "perennial gale of creative destruction" is brought on by entrepreneurs who create new goods, markets and processes. The entrepreneur is "the pivot on which everything turns," Schumpeter argued, and "proceeds by competitively destroying old businesses."
Most dramatic change comes from new businesses, not old ones. Buggy whip makers did not create the auto industry. Railroads didn't create the airplane. Even when established industries help create new ones, old-line firms are often not as nimble as new ones. IBM helped give rise to personal computers, but didn't see the importance of software and ceded that part of the business to young upstarts who founded Microsoft.Messrs. Obama and McCain both reveal a disturbing animus toward free markets and success. It is uncalled for and self-defeating for presidential candidates to demonize American companies. It is understandable that Mr. Obama, the most liberal member of the Senate, would endorse reckless policies that are the DNA of the party he leads. But Mr. McCain, a self-described Reagan Republican, should know better.
"We've made the decision not to participate in the public financing system for the general election," Obama says in the video, blaming it on the need to combat Republicans, saying "we face opponents who’ve become masters at gaming this broken system. John McCain’s campaign and the Republican National Committee are fueled by contributions from Washington lobbyists and special interest PACs. And we’ve already seen that he’s not going to stop the smears and attacks from his allies running so-called 527 groups, who will spend millions and millions of dollars in unlimited donations." In November 2007, Obama answered "Yes" to Common Cause when asked "If you are nominated for President in 2008 and your major opponents agree to forgo private funding in the general election campaign, will you participate in the presidential public financing system?"I predict that we will see significant backtracking of Obama's campaign promises once he takes the White House, to a much greater degree than Bush (who backtracked on his promises to avoid nation-building, to reform entitlement programs, and to shrink government).
Obama wrote: "In February 2007, I proposed a novel way to preserve the strength of the public financing system in the 2008 election. My plan requires both major party candidates to agree on a fundraising truce, return excess money from donors, and stay within the public financing system for the general election. My proposal followed announcements by some presidential candidates that they would forgo public financing so they could raise unlimited funds in the general election. The Federal Election Commission ruled the proposal legal, and Senator John McCain (R-AZ) has already pledged to accept this fundraising pledge. If I am the Democratic nominee, I will aggressively pursue an agreement with the Republican nominee to preserve a publicly financed general election."
UPDATE: David Brooks really takes Barry to the mattresses.
Wednesday, June 18, 2008
Suppose the dollar were still at parity with the Euro, as it was on 11/23/2002 (actually 1.0030, but who's counting?). In that case, a dollar would buy you (1/.6451)=1.55 times as much. So a gallon of gas would be only $2.667. Whatever way you slice it, though, the effect of the exchange rate on the price of gas turns out to be enormous. Our present search for scapegoats is deeply misguided, but a few people really are personally responsible for the high price of gas. Contrary to popular opinion, though, they aren't CEOs in the oil industry; they're the leaders of the Federal Reserve System. It's easy to point fingers; but sometimes finger-pointing is right on target.--Bryan CaplanUPDATE: Arnold Kling has a nice response:
The fact that the depreciation of the dollar caused some of the increase in the dollar price of oil is correct. However, I tend to shy away from Fed-bashing. The problem is that the Fed has only one instrument (intervention in the short-term money market), and in the economy there are many targets. Anybody can blame the Fed for missing target X. But to be useful, such a criticism has to say what other targets the Fed would have missed had it hit target X.
was Dennis Weatherstone, who passed away last week. A nice professional bio here.
I still remember chatting with him and his lovely wife, Marion, at a 60 Wall Street Christmas party back in 1992. We spoke about General Motors development (on whose board he sat). The consummate warrior poet. My favorite Weatherstone quote:
We don't avoid risk; we manage it.Farewell, Sir Dennis.
(I also worked under his replacement, Douglas "Don't Build Your Bank on the 'Sandy' land" Warner, as well as John "The King of Wall St." Gutfreund and his replacement Deryck Maughan. My other CEOs are not of American banks).
Tuesday, June 17, 2008
Unfortunately, with all the jabbering about cap-and-trade and windfall taxes, this joke is painfully closer to reality than I would like.
During the waning days of communism in the Soviet Union, an inspector was encharged with visiting local poultry farmers and inquiring about the amount of feed they were giving their chickens. Central planning was still in effect and each farmer was allocated 15 Rubles to spend on chicken feed.
One farmer very honestly answered that he spent five of the allocated 15 Rubles on chicken feed. The inspector took this to mean that the thieving farmer pocketed the other ten and promptly had him imprisoned.
Hearing of this through the rumor mill, the next farmer down the road insisted that he spent all 15 Rubles on food for the chickens. The inspector saw this as a case of budget padding and the farmer as a wasteful opportunist. He too was imprisoned.
The third farmer heard of both episodes and was more prepared for the inspector's arrival.
"How many of the 15 Rubles do you actually spend on chicken feed," asked the inspector.Like a true nascent capitalist, the farmer threw his hands in the air and answered, "hey! I give 15 Rubles to the chickens. They can eat whatever they want!"
The investment banks outmaneuvered the watchdogs. With no one watching, the managements of the investment banks did exactly what they were incentivized to do: maximize employee compensation. Investment banks pay out 50 percent of revenues as compensation. So more leverage means more revenues which means more compensation.--David Einhorn
Liberals tend to believe that sexual orientation is determined by genetics but that gender-difference in behavior is not, whereas conservatives tend to believe the reverse.--Matt Yglesias
Morgan Stanley announced their quarter and they did the same thing, although they were incredibly explicit about it. ‘We’re fair-valuing our liabilities, it creates a gain for us, here’s the amount of our gain.’ Lehman wouldn’t even tell you the amount of the gain. This is crazy accounting. I don’t know why they put it in. It means that the day before you go bankrupt is the most profitable day in the history of your company because you’ll say all the debt was worthless. You get to call it revenue. And literally they pay bonuses off this, which drives me nuts.--David Einhorn
Monday, June 16, 2008
The Countrywide Financial sweetheart loan scandal continues to grow, spreading to Senators and other Beltway potentates. We are about to find out if Congress's passion for investigating business ethics extends to conflicts of interest and cash that involve fellow Members.
Take Senator Kent Conrad, the North Dakota Democrat whose office issued a Friday statement saying that "I never met Angelo Mozilo." What he did not say then but admitted under later questioning by a Journal reporter is that, although he may not have had a face-to-face meeting with the Countrywide CEO, Mr. Conrad had called Mr. Mozilo and asked for a loan. The result was a discounted loan on his million-dollar beach house and a separate commercial loan of a type that residential lender Countrywide did not even offer to other customers, regardless of the rate.
So after calling the CEO of a company with various matters before the Senate, asking for a loan and then receiving at least two sweetheart deals, Mr. Conrad now says: "I did not think for one moment – and no one ever suggested to me – that I was getting preferential treatment." Lawyers will immediately wonder if this isn't a version of the "ostrich defense," which judges describe during jury instruction as willful blindness or deliberate ignorance. For what other reason, besides preferential treatment, would one call the CEO of the mortgage company? Does Mr. Conrad call August Busch IV when he wants to buy a six-pack?
Almost as breathtaking is Senator Conrad's attempt to use a charitable contribution for the estimated amount of any mortgage savings – $10,500 – to make the issue go away. So while the Senator says he did nothing wrong, now that his nonmistake has been discovered he'll nonetheless give away the nonspecial treatment cash. There is ample evidence here to warrant an investigation, including subpoenas for relevant documents.
The same goes for Senator Christopher Dodd (D., Conn.), who chairs the very Banking Committee responsible for drafting the laws that govern Countrywide's market. Mr. Dodd is still in denial mode, but so far no one has knocked down the Portfolio.com story that he received discounted loans as part of Countrywide's "Friends of Angelo" program.
In the week since the Journal revealed this program, the key questions have become clear: What did Countrywide CEO Angelo Mozilo receive – or think he would receive – in return for the friendly loans to politicians? And what did Mr. Mozilo get – or think he would get – in return for sweetheart loans to Fannie Mae CEOs Jim Johnson and Franklin Raines? Mr. Conrad says he called Mr. Mozilo at the suggestion of Mr. Johnson, a leading and long-time member of the Democratic Beltway establishment.
The relationship between Countrywide and Fannie Mae goes to the heart of the mortgage crisis. Fannie makes its money by borrowing vast sums at low rates (thanks to an implied taxpayer guarantee on its loans) and then using that cash to buy loans from mortgage originators like Countrywide. Fannie then holds the mortgages and earns interest on them, or pools them into securities for sale to investors.
Fannie has been buying more home loans from Countrywide than from anyone else. In its most recent 10-K report filed with the Securities and Exchange Commission in February, the company reports: "Our top customer, Countrywide Financial Corporation (through its subsidiaries), accounted for approximately 28% of our single-family business volume in 2007, compared with 26% in 2006."
Democrats in Congress are trying to pass a bailout for mortgage borrowers and lenders like Countrywide, and they have been holding reform of Fannie Mae and its cousin Freddie Mac hostage to get President Bush to agree. Mr. Dodd is one of the main hostage-takers. It is time he and Mr. Frank dropped this political ransom-taking and finally subjected Fannie and Freddie to tough oversight. This means giving a regulator the power to set their capital ratios and portfolio securities limits, so that taxpayers have some protection against their potential losses.
Meanwhile, until it is clear how much Countrywide will benefit from Senator Dodd's proposed $300 billion mortgage rescue – and exactly how Mr. Dodd came to do business with Countrywide – Congress should call a halt to legislating bailouts. Taxpayers deserve no less.
I would counter that $100,000 per year in compensation would qualify as rich, if coupled with a net worth (exclusive of primary residence equity) of $2 million or more. After all "Financial Independence" is a major factor to wealth.
Sunday, June 15, 2008
If 5 million die of starvation every year, and we make crops more expensive by incenting farmers to grow corn for fuel, instead of other stuff for food, how many more people end up dying?
In Michigan, you can get basic health insurance through Blue Cross starting at $47.14 per month for those 18-30 years old (about the cost of a basic cell phone plan), and for $138.54 per month for individuals under 65 (not too much more than a cable TV plan with premium channels, and less than two cells phones at the monthly average of $77).
Since most households making $50,000 or more can afford multiple cell phones and cable TV, it would seem like they could also afford basic health insurance, and choose not to buy it. If they say they can't afford health insurance, they should consider cancelling their cell phones and/or their cable TV service. If they choose cell phones and cable TV over health insurance, that's a voluntary choice.
Can we fire our public legislative service?
It's hard to keep church and state separate when you have government schools.--Arnold Kling
But saving plays a less important role in economic progress today than it did in the sixteenth century. Its role in powering economic growth has been taken over, to a large extent, by technology. The great rise in standards of living worldwide is due far more to technological progress than to high rates of savings, that is, to deferring consumption.--Richard Posner
For this reason, the most forward looking and least impulsive college educated individuals want to borrow, not save, when they are young in order to raise their consumption then, and thereby help smooth out their consumption as they age.--Gary Becker
Diseases like malaria that kill over a million people a year get far less attention than drugs to help with baldness.--Bill Gates
If wealthy CEOs will cheat, why won't NBA refs?--Tyler Cowen
Divided government doesn't ensure good government, but it may limit bad government by checking the worst instincts of both parties.--Robert Samuelson
The entrepreneurs are trying to solve our energy problems. What is government doing? Putting a tariff on Brazilian sugar cane, among other things.--Arnold Kling
Friday, June 13, 2008
Thursday, June 12, 2008
Intrade needs to specify the expiry conditions more precisely.
Still, I remain short the contract:
Wednesday, June 11, 2008
Sen. Obama promises to provide "Change We Can Believe In." Sen. McCain suggests that "the choice is between the right change and the wrong change." If it's the war that is the focus of all this talk about change, well, that's understandable, and maybe people really do want change. But if it's the economy, it's hard to imagine that change could happen any faster.
In fact, the U.S. economy (really, the global economy) is transforming at an absolutely astounding rate. We're living in Internet Time, where policies and their consequences travel the world at the speed of light. The normal human reaction to such a rapid pace of change is to be overwhelmed, stressed out, anxious and fearful. As a result, it is probably true that when voters listen to talk about change, what they really hear are promises of "no change," which would be a huge difference from the status quo. They just want things "the way they were."
The problem, if it really is one, is not foreign competition or evil financiers. It is technology and productivity. In the 10 years ending in 2007, durable goods manufacturing productivity averaged an annual growth rate of 4.8%. In other words, if real growth is less than 4.8%, the sector needs fewer workers year after year.
For the economy as a whole, overall U.S. business productivity rose 2.7% at an average annual rate during the decade ending in 2007, 1.7% in the decade ending in 1997 and 1.4% in the 10 years through 1987. Change is everywhere, and it's accelerating.
This has happened before – in the Industrial Revolution – where the political environment bred America's first real populists, people like William Jennings Bryan and Theodore Roosevelt. Bryan was perhaps the best orator of American political history, and like Mr. Obama, he could affect people emotionally. Roosevelt, like Mr. McCain today, was a true American hero and one tough guy. History may not be exactly repetitive, but it sure seems to move to similar rhythms.
Unfortunately for the American economy, the populist movement of the late 19th and early 20th centuries led to a rapid growth in government intrusion into business activity. The populists didn't like the gold standard and demanded more government regulation.
In 1913, the Federal Reserve System was created and the income tax was introduced to pay for a growing government. And then, during the Great Depression – which was caused by the new Fed, trade protectionism and tax rate increases – a massive expansion in government took place. Forty years later, in the malaise of the late 1970s and early 1980s, the U.S. finally figured out what it was doing wrong. By returning to hard money under Paul Volcker, and lower taxes and less regulation under Ronald Reagan, the high-tech leg of the Industrial Revolution began.
The fruits of this are plain to see. Rather than watching the sun set on the U.S., as many believed would happen in the early 1980s, the U.S. has experienced one of the greatest booms in wealth creation in world history. And the impact of our technological innovation has helped lift untold numbers out of poverty.
This technology has created massive amounts of change. Like the Industrial Revolution before it, the current transformation is anything but pain-free. It's what Joseph Schumpeter called creative destruction. Google, Craigslist and Microsoft have been prospering. General Motors, United Airlines and the New York Times have not. In the midst of layoffs in the newsroom, it's hard to see anything good happening in the rest of the economy.
Decades ago the feedback mechanism was slow. The unintended consequences of the New Deal took too long to show up in the economy. As a result, by the time the pain was publicized, the connection to misguided government policy could not be made. Today, in the midst of Internet Time, this is no longer a problem. So, despite protestations from staff at the White House, most people understand that food riots in foreign lands and higher prices at U.S. grocery stores are linked to ethanol subsidies in the U.S., which have sent shock waves through the global system.
This is the good news. Policy mistakes will be ferreted out very quickly. As a result, any politician who attempts to change things will be blamed for the unintended consequences right away.
Both Mr. McCain and Mr. Obama view the world from a legislative perspective. Like the populists before them, they seem to believe that government can fix problems in the economy. They seem to believe that what the world needs is a change in the way government attacks problems and fixes the anxiety of voters. This command-and-control approach, however, forces a misallocation of resources. And in Internet Time this will become visible in almost real-time, creating real political pain for the new president.
In contrast to what some people seem to believe, having the government take over the health-care system is not change. It's just a culmination of previous moves by government. And the areas with the worst problems today are areas that have the most government interference – education, health care and energy.
The best course of action is to allow a free-market economy to reallocate resources to the place of highest returns. In the midst of all the natural change, the last thing the U.S. economy needs is more government involvement, whether it's called change or not.
Democrats in Congress have finally found a federal program they want to eliminate. And wouldn't you know, it's one that actually works and helps thousands of poor children.
We're speaking of the four-year-old Washington, D.C. Opportunity Scholarship Program that provides vouchers to about 2,000 low-income children so they can attend religious or other private schools. The budget for the experimental program is $18 million, or about what the U.S. Department of Education spends every hour and a half.
This fight has nothing to do with saving money. But it has a lot to do with election-year politics. Kevin Chavis, the former D.C. City Council member who sits on the oversight board of the scholarship program, says, "If we were going to do what was best for the kids, then continuing it is a no-brainer. Those kids are thriving." More than 90% of the families express high satisfaction with the program, according to researchers at Georgetown University.
Many of the parents we interviewed describe the vouchers as a "Godsend" or a "lifeline" for their sons and daughters. "Most of the politicians have choices on where to send their kids to school," says William Rush, Jr., who has two boys in the program. "Why do they want to take our choices away?"
Good question. These are families in heavily Democratic neighborhoods. More than 80% of the recipients are black and most of the rest Hispanic. Their average income is about $23,000 a year. But the teachers unions have put out the word to Congress that they want all vouchers for private schools that compete with their monopoly system shut down.
This explains why that self-styled champion of children's causes, Eleanor Holmes Norton, the Congressional delegate from the District of Columbia, is leading the charge to kill the program. Ms. Norton contends that vouchers undermine support and funding for public schools. But the $18 million allocated to the program does not come out of the District school budget; Congress appropriates extra money for the vouchers.
The $7,500 voucher is a bargain for taxpayers because it costs the public schools about 50% more, or $13,000 a year, to educate a child in the public schools. And we use the word "educate" advisedly because D.C. schools are among the worst in the nation. In 2007, D.C. public schools ranked last in math scores and second-to-last in reading scores for all urban public school systems on the National Assessment of Educational Progress.
Barack Obama may have come up with a creative way to solve the housing recession: Let everyone buy property at a discount the way he did from Tony Rezko, and give everyone in America a discount mortgage the way Angelo Mozilo of Countrywide did for Fannie Mae's Jim Johnson. Team Obama's real estate and mortgage transactions are certainly a change from business as usual. They suggest old-fashioned back-scratching below even current Beltway standards.
Tuesday, June 10, 2008
Shifting less than one day per week’s worth of calories from red meat and dairy products to chicken, fish, eggs, or a vegetable-based diet achieves more GHG reduction than buying all locally sourced food.--Christopher L. Weber and H. Scott Matthews of Carnegie-Mellon
UPDATE: Mark Perry had this:
Monday, June 09, 2008
I'd be surprised if the S&P 500 trades below 1300, but I've been hearing a few projections that we will retest March lows (at 1250). That's 11,600 in Dow-speak.
Sunday, June 08, 2008
The current price of U.S. sugar is roughly 20 cents per pound. The price of sugar on the world market is about 10 cents per pound.
Any economist will tell you that the price of our domestic sugar is artificially inflated by strict regulation of imports, a commodity loan program that forces the government to buy up any sugar that domestic producers can't sell and production controls that make it illegal for domestic sugar processors to sell more than their government-assigned allotments, even if they have buyers standing in line.
By keeping domestic sugar prices so high, the current sugar program encourages companies that use sugar in their products to move their factories to countries such as Canada and Mexico where they can buy less-expensive sugar and then just bring the finished products back here.
If you owned a factory that made candy, wouldn't you jump at the chance to cut the cost of your key ingredient in half, especially if you could do so by simply relocating a few miles across the border?
Regrettably, Congress just passed a new farm bill that makes a sweet program for sugar growers and processors even sweeter.
And by mandating a new and costly sugar-for-ethanol program, the bill will require the U.S. Department of Agriculture to purchase surplus sugar for about 20 cents per pound and then resell it to ethanol plants for less than 10 cents per pound.
The sugar program has always been touted as one with no net cost to taxpayers. But this costly new measure requires the government to give away taxpayer dollars.
There is danger that, if the court does not temper its doctrinaire logic with a little practical wisdom, it will convert the constitutional Bill of Rights into a suicide pact.--Supreme Court Justice Robert Jackson
In the long run we are all the Grateful Dead--Paul Krugman
It's not the duration of your life that matters, it's the donation.--Rick Warren
Friday, June 06, 2008
Thursday, June 05, 2008
Peter Morici, former chief economist at the U.S. International Trade Commission, is concerned about the Warner-Lieberman bill pending in the Senate. It would limit U.S. greenhouse gas emissions by 2012 to 2005 levels, and reduce those by 70 percent in 2050.As it stands either all nations cripple their economies voluntarily (not going to happen) or we unilaterally cripple ours (likely with Warner-Lieberman) even though it won't do a thing to ameliorate the supposed global problem.
"Unfortunately, by encouraging energy-intensive American industries to flee to developing countries, this bill would penalize U.S. businesses that could contribute to reducing greenhouse gas emissions and thus accelerate global warming," said Morici in an op-ed article posted at baltimoresun.com.
That's as it stands now. There is a third option which no one seems to want to discuss: we do nothing via government and let the science continue to investigate solutions and the market decide which are worth financing and bringing to market.
Previous BS installment here.
Statistics are like a bikini. What they present is suggestive, but what they conceal is vital--Aaron LevensteinReal Swedish BS, (via Megan McArdle):
Geier adds, with laughable understatement: "Obviously, Sweden does not have the same degree of racial diversity as the U.S. does, but its population is far from 'homogeneous.'" This is a mind-bogglingly imprecise comparison. First, Geier, debunker of myths about Sweden and Swedish socialism, surely knows that the plurality of the foreign-born in Sweden are Finns and Finlandsvensk—Swedish-speaking Finns—who are very much a part of the Nordic welfare tradition. This will soon change, with the influx of asylum-seekers from the Middle East, and we'll soon see how much stress this puts on the "Swedish model." That said, and as Geier seems to concede but not comprehend, the remaining 87 percent are native-born Swedes with, for the most part, a common cultural, religious/irreligious, social, and political heritage.
Sweden does have the highest rate of workers on sick leave in Europe, despite being consistently ranked by the OECD as Europe's healthiest country.
The government figure of 7 percent unemployment was repeatedly mocked by both former Prime Minister Göran Persson's detractors and allies. A study by McKinsey Global estimated the true figure—which included those on sick leave, in early retirement, in jobs programs—to be between 15 and 17 percent.
But Google Pundit Geier again goes back to her blog source, Lane Kenworthy, who writes that "The welfare state is generous, but most able-bodied Swedes of working age are expected to be employed." Yes, they are expected to be employed. But the Swedish daily Aftonbladet reported in 2006, "shocking figures" demonstrated that 109,000 people under 30 were unemployed, an 81 percent increase over 2001. These numbers, supplied by the government, are also almost surely understated.
And the problem of unemployment in Sweden loops back around to the difficulty Sweden has had in integrating its immigrants into the job market. As Swedish economist Esra Karakaya wrote in Aftonbladet in 2006, the unemployment rate among immigrants in Sweden is 29 percent—another staggering figure, in marked contrast to the joblessness rate among immigrants in this country. This, Karakaya convincingly argues, is "because the labor market is governed by rigid job security laws" that are incompatible with a globalized economy.
In other words, Swedish social democracy, and its concomitant hostility to entrepreneurship and overly generous network of financial benefits for immigrants and asylum seekers, is a significant contributor to high unemployment rates.One final point. Amazingly, Geier revels that "the Swedish economy is competitive, the school system offers choice, and pensions are partially privatized" but fails to note—or is simply unaware—that almost all of these policies were either implemented or introduced by the conservative government of Carl Bildt, against the strenuous objections of the Swedish left, after the economy sunk into a deep recession in the 1990s.
(via Mark Perry)
I don't seek the presidency on the presumption I'm blessed with such personal greatness that history has anointed me to save my country in its hour of need. I seek the office with the humility of a man who cannot forget my country saved me.--John McCain
Senator McCain notes that his critics fear that a vote for him is a vote for a third term of the Bush Administration. Not all of that fear comes from the left. Some of it comes from those of us who remember the spirit of bipartisanship and compromise that gave us No Child Left Behind, the unfunded prescription drug benefit for Medicare, ethanol mandates, and zilch on reforming Social Security.--Arnold Kling
Like philanthropy, saving is an act of self-denial that enriches your neighbors (by leaving more goods available for them to consume). But unlike philanthropy, saving is punished by the tax system (via the taxes on interest, dividends, capital gains and inheritance). That's nuts.--Steve Landeburg, via Don Boudreaux
... a compendium of extremely weak Google-fu that betrays a pretty fundamental lack of knowledge ... --Megan McArdle
We pledged to support her to the end. Our problem is not being able to determine when the hell the end is. --Charles Rangel
Global warming may be a problem; maybe not. Cap-and-trade will definitely be a problem.
UPDATE: Felix Salmon, evidently, is not paying attention.
But I think I can put the case for the econ major more succinctly. Here goes: Econ is the highest-paid of all the easy majors.My GPA in liberal arts classes and Johnson Business School was about 0.5 higher than my GPA in my engineering school. My hardest challenges always came from my engineering core or concentration classes. Top college scholars would start Intro to Computer Science and drop it by the second program assignment.
My students often howl in protest when I say this, but come on: Econ does not put the crimp on your social life that CS or Engineering do. It's not even close.
As long as engineers are being paid half of what economics majors or federal workers in this country, well, we are going to have more of the latter.
Wednesday, June 04, 2008
Tuesday, June 03, 2008
Monday, June 02, 2008
In fact, a corporate rate cut would help a lot of voters, though they might not know it. The most basic lesson about corporate taxes is this: A corporation is not really a taxpayer at all. It is more like a tax collector.
The ultimate payers of the corporate tax are those individuals who have some stake in the company on which the tax is levied. If you own corporate equities, if you work for a corporation or if you buy goods and services from a corporation, you pay part of the corporate income tax. The corporate tax leads to lower returns on capital, lower wages or higher prices — and, most likely, a combination of all three.
“So much of modern culture is characterized by stories of self-indulgence and self-destruction,” Clinton writes near the end of Giving, from which he earned $6.3 million and gave away $1 million (or 16 percent) to charity. “So much of modern politics is focused not on honest differences of policy but on personal attacks. So much of modern media is dominated by people who earn fortunes by demeaning others, defining them by their worst moments, exploiting their agonies. Who’s happier? The uniters or the dividers? The builders or the breakers? The givers or the takers? I think you know the answer.”
I used to think he did, too. But substitute the words “my life” for the words “modern culture” and “modern politics” in the passage above, and you’ll have a pretty succinct summary of what Bill Clinton has, at last, become.