Thursday, December 29, 2005

Social Snowflakes & Human Action

Steven Horwitz:
"When I see that snowflake, it engages my reverence for the beauty of the undesigned order of the natural world. Look at the symmetry and detail of that snowflake, and then consider that is the product of undesigned natural processes. I find it an object of awe that natural processes can produce a thing of such detail, complexity and beauty. It is said that only God can make a snowflake. Well for those who understand the science, or who are atheists, we know that you don't need God to do so. But even to an atheist like myself, the spontaneous order of nature can (and should!) generate the same awe, reverence, and wonder that the contemplation of God generates in those who believe. Unfortunately, whenever my wonder at the beauty of nature is engaged, it is with a tinge of frustration.The frustration I feel is that so many smart and caring people seem unable to see and appreciate the identical processes of undesigned order in the social world. 'Social snowflakes' are all around us, yet precious few seem to be able to understand and appreciate them to the degree we do the snowflakes found in nature. And too many people think that these 'social snowflakes' require a 'Creator.'"

[ . . . ]
"My fervent wish for the 21st century is that more smart and caring people can begin to see and appreciate "social snowflakes." People who are so willing to accept the existence and beauty (and benevolence!) of undesigned order in the natural world should be more willing to open themselves to the possibility that there are processes of undesigned order at work in the social world too. These people know that no one can make a snowflake, but seem blind to the fact that much of the innocent blood that was spilled in the last century was because too many people thought they could intelligently design the social world. Not repeating those mistakes will require a renewed aesthetic appreciation of, and deep desire to understand, the awesome beauty and complexity of the undesigned order of "social snowflakes.""

Most Excellent Rent Seeking

Today's WSJ editorial page includes a discussion of the recent Congressional defeat of the "Byrd Amendment:"
"The repeal of the protectionist Byrd Amendment in Congress's year-end reconciliation bill is more than a rare legislative victory. It's closer to a Christmas miracle.

Named after the West Virginia Senator who snuck it into law without debate in a 2001 appropriations bill, Byrd directs antidumping and countervailing duties into the pockets of U.S. companies that petition for the tariff protection. Byrd was nothing more than a wealth transfer from U.S. consumers and industries that use imports to a small network of savvy protectionists. The miracle is that repeal happened even with all that concentrated 'interest' flowing to politicians who supported Byrd.

Ohio-based ball bearing manufacturer Timken raked in the most Byrd money this year, more than $62 million, while Timken subsidiary MPB Corporation was second with almost $19 million. Ball bearing maker Emerson Power Transmission Corp. finished third with better than $16 million, ahead of candle maker Lancaster Colony Corp. with winnings of $11 million. Total 2005 Byrd distributions were $226 million, 80% of which went to just over 30 companies."
Of course, it is good news to hear that Congress rejected this amendment this time around. But, is this not the epitome of rent seeking? In 2001 Congress passed a law that directed "antidumping and countervailing duties into the pockets of U.S. companies that petition for the tariff protection." It seems Congress had "loaned" it's power to tax to various private companies. Do you suppose this could possibly be consistent with the Constitution?

Wednesday, December 28, 2005

Three Roles of the Market

Frederic Sautet:
"If you were to summarize in three points what the fundamental roles of the market are; what would you say? Austrians have a comparative advantage in this exercise, as they are the only ones with a truly realistic and fully coherent market theory. There is actually too much to say and it is hard to summarize it all in three points – which is also why it is interesting to try.

In my view, the market’s three main roles are:

* A knowledge discovery process via entrepreneurial competition;
* A feedback process via the profit and loss system; and
* The result of the first two leads to an accountability role providing governance."
Notice that there is no mention of "allocate" or "ration" resources. The view of the market presented by these 3 fundamental roles is a view of the market as a dynamic process. Thinking of markets as allocating resources relies on a very static view of the market. These days I thinking it is much more important to think of the market as a dynamic proces.

Wednesday, December 21, 2005

Cheney Defends Policy Of Domestic Spying

In the Wall Street Journal today:
"Vice President Dick Cheney on Tuesday vigorously defended the Bush administration's use of secret domestic spying and the expansion of presidential powers, saying, 'it's not an accident that we haven't been hit in four years.'"

Note the assertion in this "news" article of an expansion of presidential powers. Perhaps such assertion in the lead sentence of the news story is more commentary than statement. The best I can figure out at this point is there has been no expansion of Presidential powers. It seems most likely to me that Congress was exceeding its Congressional power with its efforts to make FISA relevant to the activities of the President as Commander in Chief. Of course, that's my sense of the debate at this point. Apparently the Supreme Court has not opined in relevant ways to date. That observation alone seems to me to imply that there has been no expansion of Presidential powers. After all, if no clear statement has been made in the past, then the limits of the President's powers must currently be ambiguous in this area of Constitutional interpretation.


Byron York explains how President Clinton approached FISA:
"In the end, Congress placed the searches under the FISA court, but the Clinton administration did not back down from its contention that the president had the authority to act when necessary."
I decided to take a quick look at FISA. My take is consistent with my earlier discussions of the Constitution. It seems to me that FISA is primarily about the gathering of foreign intelligence as a matter of routine government operation in the name of national security. Further, it seems to me that when Congress explicitly authorizes the President to use military force under the War Powers act, it is the equivalent of Congress declaring war. As such, intelligence activities at a time of war should be thought of as falling under the President's powers as Commander in Chief. I believe this is essentially what President Clinton argued, and what I understand is the position of President Bush.

But, President Clinton went farther by asserting that the Commander in Chief powers were his even if we were not involved in war. It seems the idea is that as Commander in Chief, the President has the power to act in ways that protects the national security of our country, even if the country has not committed military forces to a war against an enemy. This may well be the best definition of the President's power as Commander in Chief.

Of course we people are discussing the law and the Constitution as it has been interpreted. Much of the discussion that I've seen seems to suggest the Judicial branch of government accepts the idea that the Court has no power to constrain the President's power as Commander in Chief. So, it seems to me there are two key questions: (1) Did the President authorize secret monitoring activities as a means of carrying out the war authorized by Congress against our self-avowed enemy? (2) Does the President's Commander in Chief power embody all activities by which the President seeks to protect the national security of our nation? My own answer to the first question is yes (unless there is evidence the President used the pretense of war to spy on Americans he wanted to know about)? My answer to the second question is that at this point I tend to think it is best to include national security in general under the President's power as Commander in Chief.

Wealth of Nations

Ronald Bailey discusses a new study by the World Bank:
"Where is the Wealth of Nations? convincingly shows what countries need to do to create wealth and lift billions of people out of abject poverty. Establish the rule of law and educate people. The big question that the World Bank researchers don't answer is : How can the people of the developing world rid themselves of the kleptocrats who loot their countries and keep them poor? "
Is it possible that Iraq will lead the way?

Toward Freedom In The Arab World

Anthony Bradley:
"Regardless of one’s view of the war in Iraq, we all can agree on the desirability of a dignity-oriented freedom for individuals and families in the Arab world. Economic, political, and religious liberty, however, do not come in a valueless vacuum. Freedom rings when society is ordered so that all people, rich and poor alike, are free to pursue economic and moral goods. The same ordering that led to freedom in the Western world are the same ancient, time-tested truths that will bring liberty to all people everywhere in the world.

The Fraser Institute’s recent report, titled “Freedom In the Arab World,” reminds us that economic freedom will inhabit the Arab world when individuals are free to acquire property without the use of force, fraud, or theft and can freely use their property to do goods things. Additionally, sustained economic freedom in the Arab world will exist when individuals are free to use, exchange, or develop their property in ways that benefit them without violating the identical rights of others.

As history demonstrates, individuals or families having freedom to determine their own economic destiny liberates them from government dependence and long-term dependence on charity. This reminder is especially apt in developing economies all over the world. Positive changes in national economic growth rates rise only as both rich and poor alike are provided equal structures for pursuing goods."

What's Broken? Congress? The Army?

I agree with Glenn Reynolds:
"MAJOR JOHN TAMMES, an Illinois National Guardsman recently returned from Afghanistan, responds to Rep. Murtha's 'broken army' comments, and he's not happy:

Unmitigated crap. And I don't say this out of defensiveness or service pride - I'll tell you about how far we have had to come in a bit. First, though, a little material for you to mull over. . . .

As anyone who has read this blog knows, The Inner Prop and I served in Operation Enduring Freedom V (Afghanistan, March 2004-March 2005). We stood at the end of the longest sustained supply line in the history of human conflict. We were in war-torn Central Asia. Af-frickin'-ghanistan. We had decent food, e-mail, phone (OK, sometimes they weren't always working, but almost all the time) excellent medical support, good pay, regular (if slow) mail. We had a PXs at most of the larger bases, and coffee places sprang up too. We had so damned much ammunition that we needed to build a bigger ammunition supply point at Bagram, AF. We had so many vehicles that we were constantly squabbling over where to put them all - and we had enough up-armored ones too. Our supply warehouses were stuffed with clothing, boots, body armor and the like. 'Living hand to mouth' is the worst lie of the bunch.

The constant stream of re-enlistments was a revelation to me. When I was the Executive Officer of the garrison at Bagram Airfield (a job I gladly traded away after 5 months) I had to find room to more than double the size of the Retention Office. I personally administered the oath of re-enlistment to an E-5 and an E-7. The E-5 was a mother of two young children and the E-7 was eligible to retire when we got home!

Broken? Hardly. Is it difficult work? Yes."
Read the whole thing.

My own opinion is that Congress is 'broken.' But not, alas, living hand-to-mouth. CONGRESS IS BROKEN.

Tuesday, December 20, 2005


This evening I heard Jonathan Alter of Newsweek discuss the NSA story with Hugh Hewitt on Hewitt's radio show. Just before a commercial break Jonathan and Hugh were both expressing their views over each other, but, I'd guess I heard Mr. Alter say that the President was secretly spying on the American people. I think I've heard or read others make the same kind of statement.

My earlier post on this topic, NSA1, considered the war powers of Congress, the Commander in Chief powers of the President, and the lack of clear powers by the Supreme Court to constrain either Congress or the President with respect to these powers. My thoughts were that if the NSA was told by the President to secretly spy on members of the enemy, then such actions would fall easily within the Commander and Chief powers of the President. The suggestion that the President was secretly spying on the American people leads me to think some people may see the issues differently. Imagine that, eh?

This time I want to start by considering what it would mean for the President to "secretly spy on the American people" through the use of warrantless phone taps. My first guess about what this means is that the wire taps at issue must have involved phone conversations of 2 citizens of the United States. Such phone conversations could easily be characterized as "spying on 2 of the American people," and therefore as "spying on the American people." But, suppose one of the people involved in the secretly monitored phone conversation was not a citizen of the United States. Could we clearly characterize this secret monitoring as "spying on the American people." In general, I don't think we clearly can. One possible reason for secretly monitoring the phone conversation might be that the government thought that one of the people involved in the conversation was not a citizen and was an enemy of the United States. Another possible reason for secretly monitoring the phone conversation might be to keep track of the American citizen who was on the phone. If this was the case, then that would indeed look like spying on a member of the "American people." I think in that case it is clear that such secret "spying" would be unconstitutional unless it were authorized by court order.

With this I am led to the Fourth Amendment:
"The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized."

If the subject of investigation in monitored phone calls is a citizen of the United States, then the Fourth Amendment seems relevant to me. This Amendment in our Bill of Rights is the reason I suggested just above that secretly monitoring a U.S. citizen without a warrant would be unconstitutional. Of course, the NSA story itself is about circumstances in which the subject of investigation in the monitored phone calls is not a citizen of the United States. Further, the subject of "investigation" is thought to be a member of enemy forces. I don't believe the right spoken of in the Fourth Amendment is a right held against our government when the person involved is not a citizen of the United States. And, certainly, I don't think the Constitution grants such a right "against unreasonable searches and seizures" to a member of an enemy we are at war against. Further, I hope relatively few of my fellow Americans would want the Constitution to extend such rights to members of enemy forces, and particularly when the enemy has already successfully killed fellow Americans within the borders of our country.

Now, perhaps there is still a concern regarding conversations between a member of the enemy and an American citizen. I can't imagine the concern is defined with respect to the enemy. So, there may be a concern that the American citizen should not be secretly monitored in such conversations without a warrant. If so, then I'm not sure that makes much sense to me. The subject of investigation is not the citizen, but the enemy. It seems coincidental that the monitored conversation of a member of the enemy turns out not to be another member of the enemy, but an American citizen. I suppose some might assert that in such cases we should say the secret monitoring of the American's conversation is an unreasonable search, unless the monitoring was authorized by Court order, which would also require some probable cause to believe the citizen should be monitored. I cannot agree with such an assertion because, a coincidence seems neither reasonable nor unreasonable in general. Coincidences happen. Further, when the very purpose of the secret spying on people involves a member of enemy forces, I think it is quite reasonable to listen in on any conversations by that enemy that we can. If such a conversation happens to include a fellow American, I cannot conclude that government has unreasonably searched that fellow American.

The NSA story seems only to involve "spying on a member of the enemy" without a warrant. Such a warrant seems to me not to be needed in general because the President has the power of Commander in Chief to carry out a war against the enemy. For some reason the President's critics seem more concerned with politics than with fighting a war against an enemy that has killed fellow Americans right here at home. Certainly if the President has authorized warrantless "spying" on the phone conversations of Americans, and such conversations did not involve the belief that at least one party to the conversation was a member of the enemy, then such actions by the President would clearly be unconstitutional. At this point, all I've heard in the story is that the President authorized monitoring phone conversations of the enemy without a Court's prior approval. When the issue involves waging war against the enemy, I don't think the Constitution gives the Judicial branch of government the power to constrain the means by which the President uses his power as Commander in Chief.


I've been listening and reading many offer analysis of the NSA wiretaps. I hear some calling for impeachment. Others profess profound shock and concern that our President would authorize secret actions in the name of war and in the name of protecting us from an enemy that declared war on our system of political economy years ago. Many of the lawyer and law professor blogs are ablaze with analysis. And, yes, I understand that the wiretaps being discussed involved one participant to a phone call that was a citizen of the United States. I would like to make an informed judgment about this controversy, but I'm afraid the public conversation is likely to be so filled with inaccuracies and even outright lies, that I'm not optimisitc that an informed judgment on my part is possible. But, I'm going to start by taking out my copy of the Constitution.

Article 2, Section 2:

"The President shall be Commander in Chief of the Army and Navy of the United States, and of the Militia of the several States, when called into the actual service of the United States. . . ."
So, what do we suppose the words mean? My first thought is that the President has power which has been granted from We The People to be Commander in Chief. Second, this granted power would be called, I think, a "plenary power." That means that neither Congress, nor the Judiciary, shares any of the power of the President as Commander in Chief. It is a power that, in terms of this part of the Constitution, has no constraints on it that are written down. This is unlike the power of Congress to regulate interstate commerce because this Congressional power is constrained by the Necessary and Proper Clause of Article 1, Section 8.

I look next at Article 1, Section 8 to consider the powers of Congress, and I find:

"The Congress shall have Power . . . .To declare War. . ."

Now it seems to me the language we find in the Constitution says that Congress, not the President, has the power to declare war. This power seems to me to be much like the President's power as Commander in Chief in that there are no written constraints or limits on this power. And, neither the President, nor the Supreme Court, can declare war.

If we put both these clauses together, Congress declares war, or in the more modern language of today, Congress authorizes the President to use military force. The President, on his own power, cannot authorize the use of military force, and the President cannot declare war. Likewise, Congress has no power to implement the use of military force that has been authorized, nor does Congress have the power to check or constrain the choices of the President as Commander in Chief. Further, since the Supreme Court is not mentioned in either of the Constitutional clauses, it would seem that the Supreme Court has no power to constrain Congress in the ways it authorizes the use of the country's military, nor does it have the power to constrain the President in the ways in which the Commander in Chief power is carried out.

Of course, I haven't studied Supreme Court opinions on these aspects of the Constitution. But, perhaps that isn't too relevant, since it is my belief that any of us should be able to read the words written in the Constitution and have a darn good chance of knowing what the Constitution means.

What could all of this mean for Presidential authorization of wiretaps by the National Security Agency? It seems to me that we should see the National Security Agency as falling within the realm of Commander in Chief power, especially if the National Security Agency is acting against an enemy for which Congress has authorized the use of the country's military power. Wiretaps to monitor phone calls by such an enemy, even if those phone calls include another person located within the United States (whether this person is a citizen or not), would seem to me to involve the President's use of the Commander in Chief power to wage an authorized war against the enemy. As such, it would seem that we should not think either Congress or the Supreme Court have the Constitutionally granted power to constrain the President's choices to secretly monitor the phone calls of the enemy.

Now I understand that people are talking about various statutes and various Judicial opinions as being relevant. The talk seems to be asserting that this President broke the law. But, if the relevant law attempts to constrain the President's waging war against an enemy for which force has been authorized by Congress, then it would seem to me such a law was not a law because it would be unconstitutional.

In other words, I'm thinking that my reading of the Constitution suggests that the real issue with respect to secret NSA wiretaps is whether or not: (1) the President has been authorized to wage war against an enemy, and (2) do the wiretaps involve secretly monitoring individuals who the President believes are among the members of this enemy. If the President authorized secret monitoring of the enemy, I can't imagine that such an action is inconsistent with these clauses in the Constitution. Nor, can I imagine that a large percentage of my fellow Americans would not want the President to secretly monitoring our enemy.

Do I misread the words of our Constitution? Do I misread the nature of the secret wiretaps?

Monday, December 19, 2005

Media Bias Economics

From UCLA News:
"While the editorial page of The Wall Street Journal is conservative, the newspaper's news pages are liberal, even more liberal than The New York Times. The Drudge Report may have a right-wing reputation, but it leans left. Coverage by public television and radio is conservative compared to the rest of the mainstream media. Meanwhile, almost all major media outlets tilt to the left.

These are just a few of the surprising findings from a UCLA-led study, which is believed to be the first successful attempt at objectively quantifying bias in a range of media outlets and ranking them accordingly.

'I suspected that many media outlets would tilt to the left because surveys have shown that reporters tend to vote more Democrat than Republican,' said Tim Groseclose, a UCLA political scientist and the study's lead author. 'But I was surprised at just how pronounced the distinctions are.'

'Overall, the major media outlets are quite moderate compared to members of Congress, but even so, there is a quantifiable and significant bias in that nearly all of them lean to the left,' said co‑author Jeffrey Milyo, University of Missouri economist and public policy scholar.

The results appear in the latest issue of the Quarterly Journal of Economics, which will become available in mid-December."
Hmmm. If it's published in QJE, it has to be right, eh?

Wednesday, December 14, 2005

Constitutional Radicalism

Noah Graubart writes:
"Thomas' radicalism on this front is perhaps best demonstrated by his 2004 dissent in Elk Grove Unified School District v. Newdow, the infamous Pledge of Allegiance case. The majority of the Court held that Michael Newdow -- the father who sued over his daughter's school's practice of reciting the pledge in class -- lacked standing to challenge the pledge because his ex-wife, not he, was the child's custodial parent entitled to bring such actions. Thomas disagreed with that assessment. He also went one giant step further, arguing that the First Amendment's Establishment Clause does not even apply to the states. That this is a radical conclusion in itself is probably obvious (most scholars would also probably call it dubious, at best). What is more striking, though, is that Thomas felt it appropriate to make the argument at all. The majority did not even reach the merits of the case. The portion of Thomas' dissent discussing the First Amendment, therefore, was entirely gratuitous -- a fact that is indicative of his unwillingness to let sleeping dogs lie when it comes to precedent. Furthermore, Thomas' approach undercuts decades of precedent presuming that states are limited in their ability to establish religion. The school district did not even take this radical position, although the amicus brief of Phyllis Schlafly's Eagle Forum did (always a good indicator of the reasonableness of a position). As troubling as the idea of the Baptist State of Kentucky may be, it is equally troubling to know that Justice Thomas is so cavalier about introducing such an interpretation."

I'm bothered by the suggestion here that Justice Thomas has a radical view of the Constitution. I think it is certainly the case that Constitutional jurisprudence at this stage has said the First Amendment's Establishment Clause applies to the states. Justice Thomas apparently thinks this clause in the Bill of Rights does not apply to the states, and Mr. Graubart says such a conclusion is "radical" and suggests that other scholars would "probably call it dubious at best."

I'm concerned by this because it seems clear to me that such a position was the original meaning of the Constitution. After all, at the time the Bill of Rights was ratified there was at least one state (Mass. I think) that had an official government religion, and if my memory serves me, there were perhaps two other states with official government established religions. Ratification of the Bill of Rights did not make those state religions unconstitutional. And, this seems sensible to me since these are the words actually written as the First Amendment: "Congress shall make no law respecting an establishment of religion. . . " Surely, different language, e.g. "Congress, as well the states, shall make no law respecting an establishment of religion", could have been written that would have made the establishment clause applicable to state governments. But there are no such words written in my copy of the Constitution.

Further, as I understand the history of Constitutional jurisprudence, the Supreme Court's opinions for many years were precisely this -- the Bill of Rights does not apply to state governments. The reason the establishment clause is now thought to apply to state governments is that the 14th Amendment was ratified. The Supreme Court, over time, has come to the position that the 14th Amendment changed the Constitution to say, among other things, that the Bill of Rights no longer constrains just Congress, but it constrains state governments as well. Unfortunately, the 14th Amendment does not itself, include words that directly say something like: "The Constitution is now amended to include the constraints found in the Bill of Rights to state governments as well as to Congress." If you read the 14th Amendment, perhaps you will wonder whether ratification of the 14th Amendment really did change the Constitution so that state governments were to be constrained by the Bill of Rights.

Can an interpretation of the Constitution really be said to be radical if such a view was once, and for quite a long time, the clear view on which the Supreme Court reached opinions? Can it really be dubious to assert that the establishment clause does not apply to the states when the actual language in the Constitution mentions only Congress and not state governments? Perhaps we could more easily argue that when there are no specific words and clauses in the Constitution that say the establishment clause constrains state governments, that the present state of Constitutional jurisprudence in this area is "dubious at best?"

Perhaps when the Constitution is changed in ways that are not the result of the formal ratification process it is only to be expected that people will argue interpretations and even assert some interpretations (by others of course) are radical and dubious. But, it does seem difficult to me to assert that a view of the Constitution is radical and dubious when I have my own copy and the words I read sound very much like what is asserted to be radical and dubious.

Monday, December 12, 2005

Schumer's Checks & Balances

From the WSJ today:
"'Sen. Frist has thrown down the gauntlet at a time when the country least needs it,' said New York Sen. Chuck Schumer, a Democratic member of the Judiciary Committee. 'The American people know that checks and balances are an integral part of our government.'"

Interesting. I suppose Senator Schumer is referring to his role as Senator in checking and balancing the power of the President to put a person on the Supreme Court. And, of course, such a "check and balance" is of value. But, in reading Senator Schumer's comment, I was reminded of something he said during the process of Senate consenting to Justice Roberts. Senator Schumer was concerned that Justice Roberts seemed to think the Congressional power to regulate interstate commerce was a limited power, whereas Senator Schumer seemed to think the power to regulate interstate commerce meant that he and has colleagues in Congress could regulate any aspect of economic activity. This suggests to me that the power of the President isn't the only relevant issue regarding "checks and balances" in question with respect to new members of the Supreme Court. Specifically, Senators will be voting to consent or not to the appointment of a new Supreme Court justice who will later make decisions about the Constitution that will either serve to check the power of Congress (and Senator Schumer) or that will not check the power of Congress.

Saturday, December 10, 2005

Consensual Capitalist Acts

Don Boudreaux:
"Proponents of immigration restrictions, and especially of the so-called “Minutemen” who police against “illegal” immigrants, often make the following argument:

Whether current levels of immigration are good or not, the fact is that many immigrants are in the United States illegally – that is, without the permission of the government. Breaking laws is wrong. Therefore, anyone in the U.S. illegally is a wrongdoer and should return to his own country. If he then applies for and receives permission to enter the U.S. legally, then he’ll be welcome.

Minutemen help government enforce laws on the books; therefore, they should be applauded.
(The wording above is mine, but if you survey much of the anti-immigration, pro-'Minuteman' literature -- including some of the comments on this blog-post -- you'll find it, I believe, to be a fair rendition of a much-used argument.)

This argument is weak.

First, it fails to appreciate the fact that unjust laws deserve to be broken, or at least don’t deserve to be obeyed. Wasn’t it noble to violate the fugitive-slave laws and Jim Crow legislation? (I understand, of course, that there’s some danger in a decentralized system for deciding which laws are worthy of respect and which laws aren’t. But there’s also danger in a centralized system for declaring which laws should be obeyed.) My moral sense is that politicians, bureaucrats, and “Minutemen” have no business telling me which peaceful persons I can befriend or make love to in my own home or hire in my own factory. My moral sense tells me also that foreigners are not morally obliged to obey American politicians who would keep them from engaging in consensual capitalist acts on these shores."
Would you say this is a sound position based on the normative perspective of liberty? Or would liberty suggest that the citizens of the United States have agreed to a "social contract", while illegal immigrants have not?

"More Freedom Than Any Other People"

Alex Kozinski:
"Dr. Buchanan advances a vision of government—especially the federal government—that I find attractive. There is, alas, a lingering nostalgia for the vision of the minimalist state as a purer form of government, one that advances everyone’s economic well-being while maximizing personal freedom. While I have a romantic attachment to this vision, I’m far from convinced that it would achieve the goals set for it—that we’d be living in a better world today if only we repudiated the New Deal, or had never adopted it in the first place. Whenever I try to imagine what such a world would look like, I look at the world we do live in and recognize that we don’t have it so bad at all. We have the world’s strongest economy by far; we are the only superpower, having managed to bury the Evil Empire; and we have more freedom than any other people anytime in history. We must be doing something right."

Could it be true that "we have more freedom than any other people anytime in history"? The Index of Economic Freedom does not rank our system of political economy at the top of the heap today, and it seems to show economic freedom on the decline in our system of late. Could it really be true that the people of the United States prior to the Democrat Supreme Court's of FDR and Truman had less economic freedom than we do today? Could it really be true that the people of the United States had less economic freedom during the "economic due process era" of Supreme Court constitutional jurisprudence than we do today? Can it really be true that we have greater freedom today when government can take a person's house to become the private property of another, than the people of the United States had when the Supreme Court said this could not be done?

Tuesday, December 06, 2005


Have you heard there are people arguing over Wal-Mart? A commentary at puts the issues in perspective. Consider:
"But even if you buy into the myths, there's no getting around the fact that somewhere out there, millions of people are spending billions of dollars on what Wal-Mart puts on its shelves. No one is making them do it. To the extent that mom-and-pop stores are threatened by Wal-Mart, it's because the same people who supposedly so value their Main Street hardware store find that Wal-Mart's selection, or prices, or parking lot--something about it--is preferable. Wal-Mart can't make mom and pop shut down the shop any more than it can make customers walk through the doors or pull out their wallets. You don't sell $300 billion a year worth of anything without doing something right.

What about the workers? In response to long-running criticisms about its pay and benefits, Wal-Mart's CEO, Lee Scott, recently called on the government to raise the minimum wage. But as this page noted at the time, Wal-Mart's average starting wage is already nearly double the national minimum of $5.15 an hour.

So raising it would have little effect on Wal-Mart, but calling for it to be raised anyway must have struck someone in the company as a good way to appease its political critics. (Bad call: Senator Ted Kennedy quickly pocketed the concession and kept denouncing the company.) The fact is that the company's starting hourly wages not only aren't as bad as portrayed, but for many workers those wages are only a start. Some 70% of Wal-Mart's executives have worked their way up from the company's front lines."
Note first, the attention to Wal-Mart isn't forcing anybody to buy its products. Nor is it forcing people to stop buying at the "Mom-and-Pop" stores. Nor is it forcing people to become employees.

Second, note Wal-Mart's average starting wage, and the observation that 70% of Wal-Mart's executives worked their way up in the organization.

Third, consider the following:
". . . the vanguard of the Wal-Mart haters is composed of unions that have for decades kept retail wages and prices artificially high, especially in the supermarket business. Those unions have had next to no success organizing Wal-Mart employees and see Wal-Mart's push into groceries as a direct threat to their market position. And on that one score, they may be right.

But seen in that light, it becomes clear that much of the criticism is simply a form of special-interest lobbying in socially conscious drag. And why an outside observer should favor the interests of unionized supermarket employees over those of Wal-Mart shoppers and employees is far from clear (unless you're a politician who gets union contributions)."
So, the criticism of Wal-Mart is in support of the interests of unions, and unions, by their nature are, coercive. Further, note that government has historically, with legislation, thrown it's coercive power behind the unions. Thus the arguments over Wal-Mart seem to involve those on one side who point to the voluntary actions of buyers, employees, and Wal-Mart, versus those on the other side who want to use force and coercion to interrupt those voluntary actions.

Friday, December 02, 2005

Everything Changes

Jason Potts:
"I ended the last post with the notion that, in an evolving economy, everything changes, and that that is the reason government cannot do anything useful with respect to innovation policy. So let me say that I am not down on the role of government. I see absolute certainty in its role in providing law & order, defence, property rights, and that is all."

[. . . .]

"Economic evolution (as driven by innovation) is an ever ongoing process. There is no end. There never can be an end. Economic evolution (and economic development and growth) is an ongoing process. The point is that in an economic system, everything eventually changes because everything is eventually subject to competitive challenge. No economic activity is an island. No policy can ever hope to be specific."
It seems to me that this is correct. Unfortunately, the static models of economics cannot capture this aspect of economic activity. The idea of economic efficiency, since it evaluates consequences or results, fits very well the static models of economic activity. But, it does not fit at all well with the truly dynamic and evolutionary nature of the economy. The static models combined with the idea of economic efficiency encourage us to think government can find policies that will get efficient results from economic activity. Instead, I think recognizing that "no economic activity is an island" should lead us to emphasize process rather than consequence when we examine public policy and government. Paying attention to process leads us to emphasize individual liberty, not economic efficiency as pareto optimality.

Wednesday, November 30, 2005

Urban Planning

Jane Jacobs:
". . .for while [Ebenezer]Howard was not planning cities, he was not planning dormitory suburbs either. His aim was the creation of self-sufficient small towns, really very nice towns if you were docile and had no plans of your own and did not mind spending your life among others with no plans of their own. As in all Utopias, the right to have plans of any signficance belonged only to the planners in charge. . ." [The Death and Life of Great American Cities, p. 17]
Enough said.

Give Me Liberty Instead

Jason Potts:
"What should an economy maximize? We normally say utility or some such if we are microeconomists, or savings and investment if we are macroeconomists. These objectives define our welfare assumptions. Recently, there's been a lot of discussion as well as noise and confusion about the ethics and welfare meaning of economic growth (Norberg, Hamilton, et al). Yet all of it eventually drills down to the meaning of income and wealth. Recently even economists have revived the criteria of happiness.

But what if all of this is wrong. What if the proper welfare and objective function is actually a flow, and moreover an ephemeral flow. What if instead of maximizing income or wealth, the proper liberal market maximand is novelty.

This is what evolutionary economists believe. And it is also true that neoclassical growth theorists and mystics alike always insist upon there being a something that is maximized. It might be some notion of eternal goodness and welfare, or it might be some notion of growth. Yet the great development economist Amarta Sen says that what should be maximized is forward opportunity. The great uber-economist Friedrich Hayek says the same thing, noting that this means the growth of knowledge. And theoretical evolutionary biologists all insist (since Fisher) that what evolution maximizes subject to reproduction constraints is variation."
I think the question is a good one: "But what if all of this is wrong?" I'm thinking that the answer isn't to maximize novelty. Not because I suspect novelty isn't really valued. Rather, I'm not so sure we should think the "market" is supposed to ideally maximize anything.

I also suspect that Hayek might well disagree that he thought the "market maximand" was forward opportunity. I suspect Hayek might well have said that the market is not supposed to ideally maximize anything.

My suggestion is that the goal is generally individual liberty, and therefore I value "the market" because this is a realm of daily life that, of itself, is the very essence of liberty. Even when government coercively seeks to force the market in one direction or the other, "the market" tends to move of "it's" own accord. Individuals don't like to be forced, so they move their activity and their choices away from the force and in the direction of some other realm of daily life that allows liberty. The significance of the market seems to me to be liberty, and the icing on the cake that is the market is that, as Smith and Hayek taught, spontaneous order emerges from the realm of individual liberty we call "the market."

Why Liberty's Important

H.B. Phillips, quoted in The Constitution of Liberty by F.A. Hayek, offers an explanation as to why liberty is so important.

Throughout history orators and poets have extolled liberty, but no one has told us why liberty is so important. Our attitude towards such matters should depend on whether we consider civilization as fixed or advancing. . . . In an advancing society, any restriction on liberty reduces the number of things tried and so reduces the rate of progress. In such a society freedom of action is granted to the individual, not because it gives him greater satisfaction but because if allowed to go his own way he will on the average serve the rest of us better than under any orders we know how to give.

Individual liberty is important for the well-being of everyone else. So simple, yet so true.

Windfall Accounting Tax

From an editorial in today's WSJ:
"But wait, this time it's worse. The current Senate proposal would actually require oil companies with daily production of 500,000 barrels or more to disregard generally accepted accounting principles, by revaluing their oil inventories. GAAP accounting (and current tax law) allows oil firms to value barrels of oil sold at what it costs to replace that barrel.

The Senate bill would require the companies to revalue their inventories by $18.75 a barrel -- an arbitrary number if there ever was one. In effect, this means that Congress is creating the illusion of higher oil profits, and thus raising the tax liability of oil companies by an estimated $5 billion next year. This would be on top of the 35% tax rate they already pay on their actual profits."
Isn't this just about par for the course? Could our fearless elected leaders really consider mandating that oil companies value a barrel of oil at $18.75 for the purposes of calculating a tax burden? And, I wonder who benefits from such a law?

Wednesday, November 16, 2005

Liberty or Efficiency

Peter Boettke:
"James Buchanan has just published a paper that everyone should read -- 'Cost, Choice and Catallaxy: An Evaluation of Two Related But Divergent Virginia Traditions,' in Charles Rowley and Francesco Parisi, eds., The Origins of Law and Economics (Edward Elgar, 2005). Rowley organized a lecture series over several years which brought to GMU all the founding fathers of law and economics and the current leaders in the field. These lectures are now published in this wonderful volume.

In his essay Buchanan seeks to explain the similarities and differences between himself and Coase with respect to the economic analysis of the law. Coase is an opportunity cost thinker, as is Buchanan, but Coase according to Buchanan is an objectivist while Buchanan states that: 'I have been, I hope consistently, almost throughout my whole career, a subjectivist, a stance that will not allow me to lay down normative criteria for courts or for anyone else.' Buchanan's position cuts at the core of the cost/benefit analysis that is crucial to standard law and economics. As might be expected from Buchanan, he directs his subjectivist critique of cost/benefit and equilibrium analysis and argues instead for a subjectivist, process and constitutional perspective."
These days I'm with Buchanan, and I think it is important to consider the differences in perspectives. The idea is that while both Buchanan and Coase emphasize opportunity costs, the subjectivist stance of Buchanan is that opportunity costs are subjectively known by each individual decision maker, and not something that can be objectively observed and measured by an external perspective. Coase takes this objectivist stance that opportunity cost can be measured by an external observer.

If law and economics is a field of study that relies on economic efficiency analysis, then it will have to be a field of study that accepts the objectivist position. Without the belief that we economists can measure the relevant benefits and costs that individual actually perceive when making decisions, we would be unable to pursue empirical efforts to identify public policies that are efficiency.

Of course, this is precisely Buchanan's position. Because he finds individual values and opportunity costs to be subjective and understand by individual decision makers but not objectively measurable by economist, Buchanan says he cannot "lay down normative criteria for courts or for anyone else." Instead he emphasizes process and decisions about government from a constitutional perspective, not from the perspective of the normative properties of allocative consequences.

My suggestion is that individual perceptions of well-being, economic value, and opportunity cost are indeed subjective. Perhaps we might think we are able to estimate such values at the margin in various ways, but the models that lead us to such conclusions are static, not dynamic and evolutionary. Our lives are not static and determinate. Individual lives are dynamic and adaptive, evolutionary and emergent. Combine subjective individual values of benefits and costs with a dynamic view of economic life and the conclusion seems to me to be to leave economic efficiency behind, and emphasize liberty and process.

Our Budget Woes

From today's Wall Street Journal editorial:
"In one corner are the Republicans, who propose to 'cut' entitlements over the next five years by $35 billion (Senate) and $59 billion (House). GOP 'moderates' were so spooked by even this amount that last week they forced their leadership to pull the budget from a scheduled vote on the floor. The Republicans could not corral even a single Democratic vote for a budget they say contains savage cuts. To which we can only respond: what cuts?

The reality is that over the next five years the total federal budget is expected to exceed $13.855 trillion. The Republican faux-Slimfast plan basically erases the rounding error, or the $0.055 trillion, and leaves the $13.8 trillion untouched. To put it another way, the GOP plan reduces the increase in the federal budget by a microscopic 0.25% over the next five years. The new prescription drug bill by itself adds some $300 billion to the budget over this same five years, or six times what this 'deficit reduction' bill would save.

In the other corner are the Democrats who supposedly learned 'fiscal discipline' at the knee of Robert Rubin. Not quite. Their Congressional leaders, Nancy Pelosi and Harry Reid, have denounced even these paltry GOP savings as 'shameful' and 'immoral.' They even brought a dozen Katrina Hurricane victims to Washington, trotted them out in front of the national media, and proceeded to lambaste Republicans for shredding the social safety net.

The hypocrisy here is nearly immeasurable. Earlier this year when President Bush tried to fix Social Security with private investment accounts and slower benefit growth for high-income seniors, his critics said the health care cost 'crisis' was more urgent. But now liberals are assailing even the tiniest slivers in Medicare and Medicaid as shameful and anti-poor.

Here's a reality check on the state of the safety net: For the past five years federal spending on anti-poverty programs has increased by 41%. Medicaid, which provides health care for the poor, is scheduled to grow by 7.9% a year, and under the GOP plan it would grow by 7.5% a year. Either way the program expands by more than double the rate of inflation through 2011. Meanwhile, we still await those Democrats who fancy themselves as deficit hawks to propose even one remotely serious entitlement reform."
What are we to do? Both sides of the political isle seem to embrace more spending and larger national government. Years ago David Stockman wrote a book about the national government budget, and he argued that "we" (meaning citizens and taxpayers) got what we wanted, i.e., big national government. Is this really what "we" intended to do -- elect a bunch of politicians to spend our money like drunken sailors?

Tuesday, November 15, 2005

Avian Flu - What To Do

Have you been hearing about the avian flu? Are you wondering what public policy should be regarding avian flu? You might be interested in Tyler Cowen's analysis. He has several suggestions for what to do. Here are his don'ts:
"We should not do the following:

1. Tamiflu and vaccine stockpiling have their roles but they should not form the centerpiece of a plan. In addition to the medical limitations of these investments, institutional factors will restrict our ability to allocate these supplies promptly to their proper uses.

2. We should not rely on quarantines and mass isolations. Both tend to be counterproductive and could spread rather than limit a pandemic.

3. We should not expect the Army or Armed Forces to be part of a useful response plan.

4. We should not expect to choke off a pandemic in its country of origin. Once a pandemic has started abroad, we should shut schools and many public places immediately.

5. We should not obsess over avian flu at the expense of other medical issues. The next pandemic or public health crisis could come from any number of sources. By focusing on local preparedness and decentralized responses, this plan is robust to surprise and will also prove useful for responding to terrorism or natural catastrophes."

Tuesday, November 08, 2005

Owning Water & Marketing Water

Over at St. Maximos' Hut:
"This goes to the argument in Thomas Woods' The Church and the Market that says that moral arguments that do not recognize economic realities are not effective moral arguments. I find this position compelling.

Thus it seems to me that we ought to be able to demand that opponents of markets bear the burden of proof on showing how alternative institutions will provide a superior outcome on both moral and practical terms."

The issue underlying this blog post seems to be whether or not to use markets to allocate water. This may be another illustration of an inaccurate or imprecise discussion of "market." I suspect that the mistake in analysis here is to actually characterize the policy concerns as whether to market water or not. I suspect the real issue is whether to have individuals own water on terms like any other private property ownership, or whether to have government own the water.

I don't think we can have something owned in a way other than private ownership. The question then is whether individuals own water or government is the only private owner. If individuals do not own water, then either no one owns water and it is an open access resource, or government owns water. Government in the western United States seems to allow individual ownership, yet it does not allow the voluntary transfer of that ownership. I think this means government really owns the water and has decided on rules by which it will exclude some people from using water while allowing others.

The government can give up ownership and allow individuals to own and trade water, or it can continue with it's own ownership. If government continues it's own ownership, then the policy discussion should more explicitly discuss the rules government should choose with respect to excluding and allowing access and use of its water.

Do you think this is a crazy way of thinking about water in the West?

Monday, November 07, 2005

Endangered Species or Habitat?

Chris Bruce:
"There are at least two variants of the argument that biodiversity should be increased. The weak goal seeks only to weigh costs against benefits when choosing the level of protection to be given to endangered species. The strong goal requires that every endangered species be protected, regardless of expense.

Many environmentalists implicitly or explicitly espouse the strong goal, and it is this goal that is embodied in the Endangered Species Act (ESA). What I wish to argue here is, first, that the public has not supported this view. To the extent that they have accepted that increasing biodiversity is a desirable goal, it is the weak goal that they have adopted, not the strong goal. Second, I argue that environmentalists’ support for the strong goal is only the public expression of a deeper goal: the protection of natural landscapes."

[. . . .]

Dozens, if not hundreds, of examples can found of situations in which environmental groups had pressed unsuccessfully for preservation of a habitat, not because it was believed that the habitat was home to an endangered species, but because the proponents wished to preserve the natural landscape. When an endangered species was found to live in the habitat, the presence of that species was used to justify the preservation of the species’ habitat. For example, opponents of suburban growth have discovered new allies in the pygmy owl on the outskirts of Tucson; the golden-cheeked warbler in the Balcones Canyonland on the edge of Austin; Preble’s meadow jumping mouse habitat near Denver; and Orcutt grass and fairy shrimp in Sacramento. And the spotted owl has provided a trump card for those who had previously fought unsuccessfully for preservation of old growth forests in Washington and Oregon.

In none of these cases can the sincerity of the proponents of endangered species protection be questioned. But in each case, and in many others, it is clear that preservation of natural landscapes was of at least as much importance as preservation of species. My argument here is that, in the public debate, it is important to recognise what the true, underlying goal of public policy is. In this case, I suggest that we would be advised to place less emphasis on species and more on landscapes.
Do you think this is a plausible hypothesis? If so, can we expect to preserve landscapes through the regulation and prohibition of land uses, or should we expect government to have to purchase the land parcels that make the landscapes? I think purchase would be required, at least if we are interested in effectiveness and in justice.

Friday, November 04, 2005

Entirely Market Forces

Earlier this week I blogged on issues that were suggested by:
"While everyone understands that some spheres of life should not be subject entirely to market forces. . ."
I'm not sure I did a very good job with my thoughts in that earlier post. I think maybe I can do better today.

It seems to me that the perspective presented by such a sentence is likely to be backwards. Let's start be considering what market forces involve. Fundamentally, market forces involve a buyer and a seller making an exchange. The interaction between people involved in "market forces" is a voluntary interaction. The realm of market forces involves the realm of voluntary action in our lives. Of course, not all voluntary action is going to be described as part of a market. Not all aspects of our lives involve exchange. Market forces involve voluntary interdependent actions that we characterize as exchange.

One reason we talk about "market forces" is because we are interested in the role of government and public policy in our lives. A fundamental difference between market forces and government (public policy) is that while markets are voluntary, government is inherently coercive.

When considering a statement like "some spheres of life should not be subject entirely to market forces", we are led to ask: What spheres of our lives should not be subject to market forces? Because I see the market as part of the "spheres of our lives" that are characterized by voluntary individual behavior, I don't think this question is really very informative. I think our starting point, or our default position, should be voluntary choices. It seems quite easy to justify voluntary choices and voluntary behavior, at least if such voluntary behavior does not harm others. I think a better way to put the relevant question is: What spheres of our lives should be subject to coercion or coercive forces? If one chooses to interact with others in exchange and through prices, or if one chooses to interact with others without prices and without exchange, either way the interactions are voluntary. It seems to me quite difficult to be concerned about the voluntary realms of our lives. The really important questions involve what realms of our lives we think it is appropriate to be subject to coercion or coercive forces. I believe the answers to such questions will point to the appropriate role for government in our lives.

As I said earlier this week, I think most will agree that it is wrong, in general, to coerce (or aggress against) another person. There is one exception to this general principal: coercion or force may be used against another in self-defense. The police power role for government fits this idea of self-defense. That is, we turn to government and give it the power to protect us from harm to our person or our property that would be caused (or has been caused) by another.

The really interesting and important questions do not involve what spheres of our lives we want to be characterized by voluntary choices and behavior, but what spheres of our lives do we want to say that it is acceptable for coercion to be used to interrupt what would otherwise by the voluntary spheres of our lives.

Thursday, November 03, 2005

Undercover Economist

Peter Boettke:
"Tim Harford's The Undercover Economist has just been published. It is not a principles of economics text, but it is perhaps the best book currently available in its genre. In my opinion there is more economic intuition behind this book than Freakonomics -- a judgment which might shock some readers. But the persistent and consistent applications of opportunity cost reasoning and explaining how order emerges out of the behavior of individuals even though it is not anyone's intention to promote the overall order is revealed throughout The Undercover Economists in a vareity of illustrative stories from throughout the developed and developing world. We get stories of wonderful unintended desirable consequences within some regimes, and the horror of unintended undesirable conseuqences in others. Harford's work is one which champions 'looking out the window' and making sense of what is seen through the economic way of thinking. In many ways this is what it is all about, and once you 'get it' it is wonderfully addictive and transformative. Economics is the mind-quake everyone needs to make sense of the world around us, and on the basis of that understanding arrange our political, legal social and economic affairs so we can simultaneously achieve liberty, peace and prosperity."

Monday, October 31, 2005

Subject Entirely to Market Forces

Of late, there have been many times that I have wondered about the way "the market" in used in conversation. I think our conversations about "the market" may not always be very useful, and perhaps this is because we aren't very careful about what is meant by "the market." I just read what I think is another illustration of this posted by Jason Scorse over at Environmental Economics Now, I don't really mean to pick on this specific essay. I simply want to use the way reference is made to "the market" to try to illustrate my concerns. Consider the following paragraph:
"We are living at a time when there is a strong backlash against environmentalism and pieces like, “The Common Good” do little more than add fuel to the fire. The majority of Americans are generally supportive of environmental causes, but become wary when environmentalists spend an exorbitant amount of time criticizing the capitalist economic system that has propelled America to such prominence and virtually unparalleled material well-being. While everyone understands that some spheres of life should not be subject entirely to market forces, using overly broad and ill-defined notions of what constitutes the “commons” is more likely to convince people that environmentalists are leftover communists than to draw rightful attention to the many serious problems plaguing open-access resources (it’s also simply sloppy thinking). In addition, with conservatives in charge of all the branches of the Federal Government rallying against the “encroachment of the market system” is clearly not a winning strategy."

Note the suggestion that everyone understands that not all areas of life should be "subject entirely to market forces." I'm not quite sure what this means, and I suspect I might not agree with the suggestion.

It seems human nature to "truck, barter, and trade" as Adam Smith may have put it. It seems to me that even in oppresive systems of political economy, market forces are at work. Individual behavior and response to personally experienced conditions and objectives can be influenced by government policy and thereby government coercion, but the tendency to exchange with others is ever present in human behavior. When government is too coercive, the exchanges tend to move away from the watchful eyes of government and its coercion [see DeSoto for some illustrations]. I see market forces as the realm of life in which people voluntary exchange with one another. Since market forces are characterized by voluntary exchange, it is hard to understand why we would agree to oppose such forces in any area of life, unless of course, there is reason to believe the person or property of others is harmed as a direct result.

I think the real issue regarding government concerns, first, seeing that government and economy are not separate spheres in our lives, but rather co-evolving spheres that make a system of political economy, and second, seeing that government is by nature inherently coercive. The question then is not government or markets, but rather, in what ways do we think it is acceptable to use coercion.

I think most agree that it is wrong to coerce others, e.g., it is wrong to harm others or to take what belongs to others. I think most would also agree that it is acceptable to use coercion (or to use force) in self defense; to protect yourself and your property from harm by the coercive and forceful actions of others. In this regard, I think all would agree that the at least one role for government coercion is to mirror the individual use of coercion for self-defense. Government which uses its coercion as "police power" to enforce laws against harm to person or property by others is widely regarded as legitimate.

The question really seems to me to be: Are there other circumstances for which we think the use of coercion is acceptable in our lives?

The market is the realm of voluntary, uncoerced interactions between people. Beyond the use of government coercion to enforce property rights and voluntary contracts, are there really other government actions that we think acceptable for the use of coercion in our lives? Why should we want to have coercion used to inhibit and constrain what would otherwise be the voluntary and uncoerced interactions between ourselves and others (i.e. the market)?

Saturday, October 29, 2005

Butterfly Economics

I was browsing a book this morning, Butterfly Economics, and discovered the following in the opening paragraph:
"Scientific research can often seem obscure and even pointless to outsiders. This is not so much due to the intellectural difficulty involved in understanding such activity, for it is widely accepted that this will inevitably be the case. It is rather that many of the topics which are examined seem to be almost designed to incur the scorn and wrath of the lay person. Before sitting down this morning to write these very words, for example, my eye fell on a report in a serious British newspaper. An American psychologist had been visiting the country to carry out a study of rams in the English Lake District. His research was complete. 'Ten per cent of all rams', he proclaimed solemnly, 'are homosexual.' Readers no doubt took consolation from the fact that this finding was obtained at the expense of the American taxpayer and not themselves."
Alas, what consolation for the American taxpayer?

The 2nd paragraph was equally interesting:
"Nor are such examples confined exclusively to the sciences. I have long admired Emily Bronte's novel Wuthering Heights. The opening chapters, in which Lockwood first encounters the ill-tempered Heathcliff and his assorted household, seem to me to be one of the finest pieces of comedy in the whole corpus of English literature. Realizing that not everyone shares this opinion, and in order to improve my understanding, I recently opened a modern work of literary criticism on Bronte's masterpiece. It was completely impenetrable. Many of the individual words were quite new to me, and whole sentences, indeed whole pages, appeared to lack any coherent meaning. I sought solace in the preface, where I learned that the density of the text was deliberate. 'The analysis of literature and culture', declared the author, 'is a task no less difficult, and not less demanding of a specialized language, than the study of sub-atomic particles.' I hastened immediately to a textbook on orthodox economic theory in an effort to restore my sanity."

Thursday, October 27, 2005

Katrina & K-12 Vouchers

It is reported in the Wall Street Journal that there is a proposal to pay for school districts to take displaced students in the aftermath of Katrina.
"There's no shortage of bills in Congress to provide school aid for victims of the Gulf Coast hurricanes. But by far the best proposal out there is the Family Education Reimbursement Act, if for no other reason than its express goal is to circumvent the bureaucracies that make it so difficult to speed federal relief to displaced students and the schools that take them in.

The measure was introduced last week by House Education Committee Chairman John Boehner of Ohio and Bobby Jindal of Louisiana, both Republicans, and its implementation couldn't be simpler. To create an account, parents could register on the Web, through a toll-free number or by signing up in person at a school. The accounts would provide up to $6,700 for each child, which is the average expenditure in states that have been enrolling the bulk of Katrina's 372,000 displaced students.

Next, parents would provide the account number to the school enrolling their child, and the school would use that information to get reimbursed. That's it. No endless paperwork for the families. No lengthy reimbursement procedure for the schools. Instead of forcing a school that has graciously opened its doors to refugees to make an extra funding request to the district, which in turn must go to the state, which in turn must go to the feds, the legislation provides a user-friendly alternative.

All schools would be eligible -- public, private, parochial or charters. And the accounts would be portable. The money would follow the child in case a displaced family decides to move back home or relocate somewhere else. And in a welcome nod to fiscal conscientiousness that has been all too rare in Congress, at the end of the school year any unused funds would go back to the Treasury. The program would be administered by an agency -- preferably a private one -- that could be up and running in as little as a month's time."
Hey, this sounds like a voucher, we can't be doing things that way. It might work and things could then get out of hand. Vouchers in Colorado for higher education. Now vouchers proposed for helping children after Katrina. People may be starting to see there is wisdom in education vouchers, eh?

I note these vouchers would be for $6700, or the average cost per student at the schools displaced students are enrolling in. I wonder if we should be concerned about what is going on here, even if vouchers are being used? After all, these students are displaced because of Katrina, and that means local government in the damaged areas are not having to educate these students. Isn't there tax revenue that has been collected for the affected school districts? And, even if not, why isn't the responsibility for educating these students falling on local government? It seems that the hurricane hasn't changed the nature of education funding in our federalist system. Perhaps the $6700 should be a loan to local government?

Tuesday, October 25, 2005

What's A Blog Worth?

The Volokh Conspiracy reports:
"Paul Caron reports that The Volokh Conspiracy is worth $1.3 million (OK, probably not enough to justify a corporate jet, even if it was a sensible estimate). From his lips to God's ears.
I checked . . . Economics and Liberty is worth only $1700.

Friday, October 21, 2005

Barred Owls v. Spotted Owls

In the WSJ [subscription required]:
"But at least we have the owls, right? Wrong. Scientists are struggling to explain why, more than 10 years after a halt of logging on the 'old growth' trees in which spotted owls are supposed to thrive, the bird's population has continued to plummet -- declining by 7% a year in Washington. The answer, biologists are beginning to admit, is … another owl. Barred owls migrated into spotted owl territory decades ago, and have a nasty habit of killing the smaller birds, driving them out of their homes, or mating with them -- producing impure offspring. 'We're seeing two species duke it out. It's too early to tell if [spotted owls] will survive,' federal wildlife biologist Eric Forsman was quoted as saying last year." [Kimberley A. Strassel, "Owls of Protest," Wall Street Journal, October 19, 2005, page A12]
It is also reported that after the spotted owl was listed as endangered the result was an 80% decrease in logging on 24 million acres. A Congressional committee apparently found that more than 900 mills, with at least 130,000 employed, closed. It is also reported that there were some who thought the barred owls might be a problem as a rival species back in 1992.

There seems to have been a significant economic loss associated with a government policy that now appears may have been misguided. I wonder if government has a response to the barred owl threat to the spotted owl?

Vaccine Shortages

There is an interesting commentary in today's WSJ [subscription required]. John Berlau explains that SEC rules offer disincentives for corporations who might otherwise be interested in making flu vaccines:
"Under the policy, even if the total cash due is paid up-front for a product, 'revenue should not be recognized until final delivery has occurred.' And 'delivery generally is not considered to have occurred unless the product has been delivered to the customer's place of business.' The SEC bulletin makes clear this is generally the case even when 'customers may not yet be ready to take delivery of the products for various reasons.'

The upshot of this policy is that no matter how much cash the government puts in vaccine-makers' hands for making drugs for the stockpile, they cannot include this money in their official sales until it is actually delivered to doctors when and if there is a disease outbreak. This period can last more than a year. While one part of government is urging manufacturers to have a reserve on hand for a flu outbreak, another is telling them that they won't show any gain on their books for doing so. In fact, companies that contribute to the stockpile will take a paper loss for this part of their business, because the SEC is not about to let them postpone 'recognition' of their costs of making the vaccines. And because of other regulations and trial lawyers always eager to pounce on 'deceptive' accounting, it is difficult for companies to communicate with investors about this distorted earnings picture.

As a result, vaccine maker Aventis (now Sanofi-Aventis) specifically cited the SEC policy as the reason it dropped out of the stockpile for children's vaccines in 2004. 'We are unable because of the financial issues … to proceed until this is resolved,' Christine Grant, the firm's vice president for public policy, told UPI. Merck did not drop out, but a vice president commented to USA Today, 'Imagine, for all the products sold, if we couldn't record them as revenue. Our shareholders would not be pleased.'

Since the flu vaccine shortage of last year, government health officials have talked to the SEC about the changing policy for vaccines. But in the era of Sarbanes-Oxley, the commission hasn't budged. It is possible that a firm might have to return money if a batch of vaccines spoiled in the stockpile. But this usually wouldn't make a dent in revenues reported to shareholders. Rather, it's the current accounting policy that paints the distorted picture to investors by making vaccine makers look less attractive than other firms even when they have a solid cash flow."

Corruption & Prosperity

Jennifer Roback Morse:
"Why do some countries develop economically, while others stagnate? Both the World Bank Institute and economist Alvaro Vargas Llosa point to the problem of corruption as one of the major culprits. They say that the most important “natural resources” for economic development are not raw materials like oil or coal, but moral qualities like the even-handed enforcement of law, and the transparency of government."

Avian Flu

Silviu Dochia:
"I can't help but feel like the authorities are in denial and are focused on the wrong 'measures'. The avian flu virus cannot be contained at this stage: it will be with us for a long time. Import bans and border checks are symbolic, more than anything. And despite the statements of some politicians, we can do very little 'to ensure the virus does not mutate'. These are the facts. What is important is that we accept this reality and deal with it in a responsible way, by being as ready as we can for the likely emergency."
Any thoughts on whether this is crying "the sky is falling?" Do you think the "authorities" can handle the threat?

Thursday, October 20, 2005

Cheeseburgers and the power of responsibility

As seen on CNN this morning, 'Cheeseburger Bill' puts bite on lawsuits. Apparently the threat to the fast food industry from class action lawsuits is strong enough to warrant a bill in the House. The article quotes Rep. Bob Filner (D-California) as stating " Congress has allowed the need of big corporations before the need of our children".

OK, I could understand maybe if by some stretch of the imagination these companys were slanging their wares on street corners to our innocent children on the way to school. You know "C'mon kid, all the cool kids are eating Big Macs" style.

However, I refuse to believe that Congress has put the needs of corporations before our children. If anyone has a hand in 13 year olds getting obese in record numbers, I think the statement should be edited to say parents have put the need of big corporations before the need of their own children.

How exactly does a 13 year old get their plump little fingers on a Big Mac anyway? Is there some blackmarket or playground trade in these items. No. They get scooped up from school by one parent or another, shuttled to the nearest drive-thru and given their mid-afternoon Happy Meal for the day before going home to play 9 hours of video games.

With the power of convenience comes the power of responsibility. Parents, how about we take a little more responsibility for the health of our children? The length of time it took for you to write a letter to Rep. Filner you could have written out a whole family health plan to work a couple of pounds off yourself and little Johnny.

And Congress, I know that this is a great opportunity to show that you care about our youth. But how about some more meaningful legislation? How about a comprehensive education reform bill giving power back to the states? Some of them might even make sure that athletics are not the first thing cut from school programs. Or even better, some states might get a voucher program together that will give parents the choice, and not just between McD's and Burger King.

Wednesday, October 19, 2005

Cities: Economy-Ecology

Jason Potts writes about the economy of cities by borrowing from ecology:
"Economic theory has always had a blind-spot when it comes to geographical spatial analysis. Price signals go a long way in abstract, yet the connective or associative distribution of economic activities remains a not much studied and, indeed, barely recognized economic phenomena.

Yet it is the heart of economics. The spatial (or generic) distribution of activities is the current state of the order (or division of labor) of an economic system. Any economic order means an organizational distribution of who is doing what and in what order. While we may attribute localized clustering to spatial features of a place (e.g. a great port or beach) there is yet a stronger force of social gravitation.
I think this is good stuff for us to think about. Standard economic analysis is static, and yet, real economic activity is probably better described as a dynamic complex process that evolves.

He suggests borrowing the idea of ecological hotspots in which diversity is concentrated, and he speculates that we might see cities as hotspots where economic diversity is concentrated. I also like his suggestion that:

"So, evolutionary economists need to understand how cities form as economic attractors."

Miers Nomination

I was going to wait till the confirmation hearing to decide whether or not to support the latest Supreme Court nomination. Over the past week I've been leading toward the conclusion that I could not support Harriet Miers. Today's commentary by Robert Bork has led me to conclude that I don't support her nomination. Consider this from Robert Bork:
"But that is only part of the damage Mr. Bush has done. For the past 20 years conservatives have been articulating the philosophy of originalism, the only approach that can make judicial review democratically legitimate. Originalism simply means that the judge must discern from the relevant materials--debates at the Constitutional Convention, the Federalist Papers and Anti-Federalist Papers, newspaper accounts of the time, debates in the state ratifying conventions, and the like--the principles the ratifiers understood themselves to be enacting. The remainder of the task is to apply those principles to unforeseen circumstances, a task that law performs all the time. Any philosophy that does not confine judges to the original understanding inevitably makes the Constitution the plaything of willful judges."
Should the confirmation hearing actually take place, I suppose I might change my mind. But I cannot support the nomination of anyone to the Court that does not understand, and is not clearly committed to, the principles people thought they were putting into our Constitution when the text or its amendments were ratified.

Tuesday, October 18, 2005

Iraq's Economic Prosperity

Michael Rubin
". . .Other indicators suggest Iraqis have confidence in their future. The Iraqi dinar, freely traded in international currency markets, is stable.

When people fear for their future, they invest in gold; jewelry and coins can be sewn into clothes and smuggled out of the country. When people feel confident about the future, they buy real estate. Property prices have skyrocketed across Iraq. Decrepit houses in Sadr City, a Shiite slum on the outskirts of Baghdad, can easily cost $45,000. Houses in upper-middle-class districts of Mansour and Karrada can cost more than 20 times that. Restaurant owners spend $50,000 on top-of-the-line generators to keep open despite the frequent blackouts. In September 2005, there were 40 buildings nine stories or higher under construction in the Kurdish city of Sulaymani. Five years ago, there were none. Iraqis would not spend hundreds of thousands of dollars on real estate if they weren't confident that the law would protect their investment.

Iraqis now see the fruit of foreign investment. A year ago in Baghdad, Iraqis drank water and soft drinks imported from neighboring countries. Now they drink water bottled in plants scattered across Iraq. When I visited a Baghdad computer shop last spring, my hosts handed me a can of Pepsi. An Arabic banner across the can announced, "The only soft drink manufactured in Iraq." In August, a Coca-Cola executive in Istanbul told me their Baghdad operation is not far behind. Turkish investors in partnership with local Iraqis have built modern hotels in Basra."
Do we have some "leading economic indicators" described here? For economic prosperity people need to expect that government will enforce property rights and contracts over time. Without such assurance, people see few incentives to invest because the returns to investment occur after a period of time. Rubin's commentary suggests that with people purchasing land and with foreign investors creating new investments, Iraq's future may well include an increasingly prosperous economy over time.

Saturday, October 15, 2005

Nothing Short of Idiocy

We may admit that the director or the board of directors are people with superior ability, wise, and full of good intentions. But it would be nothing short of idiocy to assume that they are omniscient and infallible.

Ludwig von Mises

Wednesday, October 12, 2005

The Court, Commerce, & Water Pollution

The Supreme Court has decided to review whether pollution of intra-state waterways is within the Congressional power to regulation interstate commerce. In the Wall Street Journal [subscription required]:
"Wading into a long-running environmental dispute, the Supreme Court agreed to decide how deeply within state lines the federal Clean Water Act extends.

In a pair of cases from Michigan, developers contend Congress never intended to regulate 'intrastate' waterways with scant connection to interstate commerce. And even if it did, they say, Washington lacks the constitutional power to reach that far.

The implications are broad. 'We're talking about thousands of property owners nationwide,' covering as much as 100 million acres of intrastate wetlands in the contiguous U.S., said Reed Hopper, an attorney with the conservative Pacific Legal Foundation in Sacramento, Calif., which represents one of the developers." ["High Court to Examine the Scope Of Federal Clean-Water Laws , by Jess Bravin, WSJ, October 12, 2005, page A4]
Perhaps the reference to wetlands is more to the point, than is "intrastate waterways." The article in the Washington Post explains:
"At the center of the debate is the Clean Water Act, which gave the federal government authority to block pollution in 'the waters of the United States.' At the time, this jurisdiction was premised on Congress's power to regulate interstate commerce on the country's 'navigable' waters.
Since then, federal regulators have defined the waters of the United States to include wetlands that are 'adjacent' to larger rivers or lakes, but there is dispute about the precise meaning of 'adjacent.'
The government views wetlands as part of complex ecosystems that must be kept clean to preserve the quality of the larger bodies of water they ultimately feed. Property owners, supported by such organizations as the National Association of Home Builders, say this is a sweeping definition that rubs out state and local land-use authority -- and adds to the cost of housing.

The court tried to avoid the constitutional issue in 2001, when it ruled that the federal government could not use the Clean Water Act to protect small, shallow ponds in Illinois just because they are used by migratory birds.

In that case, the court implied that the Clean Water Act required a 'significant nexus' between a wetland and an 'adjacent' larger body of water. [Charles Lane, "Court to Rule on Federal Regulation of Wetlands, Washington Post, October 12, 2005, page A04]
It seems to me that wetlands within a state should not be considered within interstate commerce, and therefore Congress should not, constitutionally, have the power to regulate such land. I hope Roberts remembers his hapless toad.

Tuesday, October 11, 2005

Thomas Schelling

Here is a description of the work of one of yesterday's Nobel prize winners, which is offered in commentary in the WSJ [subscription required] by David Henderson:
"Mr. Schelling did it as a true social scientist, with spectacular results. His thinking led to important insights in areas ranging from nuclear war to figuring out meeting places to traffic jams to racial segregation. His specialty was understanding the behavior of real humans, and game theory was one of his tools. But it was just that -- a tool. Instead of using formal proofs, Mr. Schelling first told illustrative stories and then, using words, showed why things happened the way they did. As Harvard economist Richard Zeckhauser wrote in a 1989 tribute, Mr. Schelling 'stayed away from the Journal of Advanced Economic Gobbledygook' and played 'his games in a world that is richer than most game theory analyses.'"

Saturday, October 08, 2005


In the words of Alexander Hamilton, by way of commentary by Randy Barnett:
"To what purpose then require the co-operation of the Senate? I answer, that the necessity of their concurrence would have a powerful, though, in general, a silent operation. It would be an excellent check upon a spirit of favoritism in the President, and would tend greatly to prevent the appointment of unfit characters from State prejudice, from family connection, from personal attachment, or from a view to popularity. . . . He would be both ashamed and afraid to bring forward, for the most distinguished or lucrative stations, candidates who had no other merit than that of coming from the same State to which he particularly belonged, or of being in some way or other personally allied to him, or of possessing the necessary insignificance and pliancy to render them the obsequious instruments of his pleasure."

Congressional Spending
"Congress's approval ratings have plummeted this year in almost direct inverse proportion to the amount of money it is spending. "
Could this possibly be true?


Tom Sowell:
"When it comes to taking on a tough fight with the Senate Democrats over judicial nominations, Senate Majority Leader Bill Frist doesn't really have a majority to lead. Before the President nominated anybody, before he even took the oath of office for his second term, Senator Arlen Specter was already warning him not to nominate anyone who would rile up the Senate. Later, Senator John Warner issued a similar warning. It sounded like a familiar Republican strategy of pre-emptive surrender.

Before we can judge how the President played his hand, we have to consider what kind of hand he had to play. It was a weak hand -- and the weakness was in the Republican Senators.

Does this mean that Harriet Miers will not be a good Supreme Court justice if she is confirmed? It is hard to imagine her being worse than Sandra Day O'Connor -- or even as bad."
I haven't decided yet what I think of the President's latest Court nomination. I do tend to agree with Sowell that the President has taken on many tough issues, and that the Senate Republicans have, as a group, shown less than stellar leadership.

On the other hand, being told that this nominee shares the President's judicial philosophy, that she is an evangelical Christian supported by people who seem only interested in 1 issue (Roe v. Wade), and that she is a strict constructionist, doesn't really lead me to support the nomination. I want to know what she says about: the commerce clause, the meaning of necessary and proper, whether the 9th and 10 amendments have been redacted from her copy of the Constitution, if she thinks Congress's power to tax is unconstrained, and if she thinks "public use" = "public purpose." If she doesn't have my understanding of the words in the Constitution, then the reasons I hear in the public debate in support of her nomination mean nothing to me.


Captain's Quarters:
"If Miers' evangelicalism remains the top selling point of her nomination, then I submit that the White House has already lost this battle. They need to stop promoting religion as a legitimate point of consideration on Miers' curriculum vitae, or else conservative nominations will face nothing less than an Inquisition on every confirmation -- an Inquisition endorsed by the foolishness of short-sighted conservatives."
I don't really care if Meirs is an evangelical, a catholic, or an aethist. It seems to me that if her support for this nomination is based upon her commitment to a faith, and thereby upon a particular view of abortion, then her support is essentially no different from supporting a "living constitution" view of constitutional interpretation. The reason for my conclusion is that her support seems to be based upon her personal ethics that she will bring to the Court that abortion is wrong. This seems consistent with the "living constitution" approach that says judges are supposed to re-interpret the Constitution over time according to changes in cultural views. In contrast, I want someone on the Court who brings a commitment to the original meaning of the words that have been ratified as our Constitution. With that commitment, a justice might find that abortion is or is not constitutional based upon the meaning of the words, and not because the justice personally thinks abortion is right or wrong, or because the justice discovers that the culture thinks abortion is right or wrong.

Friday, October 07, 2005


Peggy Noonan:
"No one can know how the experience of the court will affect someone--the detachment from life as lived by the proles, the respect you become used to, the Harvard Law Review clerks from famous families who are only too happy to pick up your dry cleaning and listen to the third recounting of your boring anecdote. Everyone wants you at dinner. You notice that you actually look quite good in black.

And you become used to the idea that unlike everyone else in the country, you have job security. A lifetime appointment. When people have complete professional security they are more likely in time to show a new conceit. I don't know why this is, but I think it's connected to the fact that they're lucky, and it seems somehow hardwired in human nature that when people are lucky they come to think they deserve it: It's not luck, it's virtue. And since it's virtue my decisions are by their nature virtuous. I think I'll decree that local government, if it judges it necessary, can throw grandma out of the house and turn her tired little neighborhood into a box store that will yield higher tax revenues. Thus Kelo v. New London is born. I decree it.

But I'm thinking of something different. I've noticed that we live in an age in which judges and legal minds seem to hide their own judicial philosophy from themselves. And that might explain why a Harriet Miers has reached the age of 60 and no one seems to know what she thinks.

Having a philosophy is all too big and too dangerous--paper trails, insights inadequately phrased that come back to haunt. Lawyers with ambition seem to have become adept at hiding their essential intellectual nature from themselves. They break the law down into tiny chewable pieces and endlessly masticate them. They break it down into small manageable bits, avoiding the larger abstractions. It's one of the reasons they're so boring.

In a highly politicized climate it's not really convenient for lawyers to know their deepest beliefs and convictions. Robert Bork, serious thinker and mature concluder, became bork, living verb. Or rather living past-tense verb.

Only reluctantly and only with time do lawyers now develop a philosophy. They get on the court, and reveal it to us day by day. And reveal it, one senses, to themselves."
So, why not have a public debate about a Court nominee's approach to understanding what the Constitution means? Get it all out in the open. Stop worrying about what a nominee might decide about a specific case. Let the Senators and the nominee tell the public what they think the commerce clause means, what public use means, what necessary and proper means. Let the chips fall where they may in the Senate. Perhaps the "We the People" attitude of the Constitution would be better served.