Coyote Blog

From Venezuela:  (via Mises)

Venezuela launched a new currency with the new year, lopping off three
zeros from denominations in a bid to simplify finances and boost
confidence in a money that has been losing value due to high inflation....

"We're ending a historical cycle of ... instability in prices,"
Finance Minister Rodrigo Cabezas said Monday, adding that the change
aims to "recover a bolivar that has significant buying capacity."

Prices have risen as Chavez has pumped increased amounts of the
country's oil income into social programs, reinforcing his support
among the poor and helping to drive 8.4 percent economic growth in 2007.

The Central Bank is promoting the new monetary unit with an ad
campaign and the slogan: "A strong economy, a strong bolivar, a strong
country." Officials, however, have yet to clearly spell out their
anti-inflationary measures.

Good to see the government taking meaningful steps.  Next up will be "Whip Inflation Now" buttons. 

The 8.4 percent growth cited above may be illusory, given this:

Venezuela has had a fixed exchange rate since February 2003, when
Chavez imposed currency and price controls. The government has said it
is not considering a devaluation any time soon.

But while the strong bolivar's official exchange rate will be fixed
as 2.15 to $1, the black market rate has hovered around the equivalent
of 5.60 to $1 recently.

Via the New York Times:

Prime Minister Wen Jiabao
responded Wednesday to growing public anxiety about inflation by
announcing that China would freeze energy prices in the near term, even
as international crude oil futures have continued to surge....

Last November, China raised gasoline and diesel prices by almost 10
percent, partly to appease officials at state-owned refineries.
Refiners had complained that price controls were forcing them to
swallow the difference between higher prices for crude oil on the world
market and regulated consumer prices at home for refined products. So
refineries cut back production of gasoline and particularly diesel,
causing long lines at fuel stations around the country.

More on past Chinese problems from gas price caps.  Here is a picture of one such past gas line in China. 

    I got my driver's license in 1978, just in time to spend the first few months of my driving life sitting in gas lines with the family car, a result of a series of market distorting actions by the US government.

Meanwhile, I presume the French and Germans will see no problem with this approach:

The Economist says,
of the state of economics education in France and Germany, "I
desperately hope it's not really this bad." Unfortunately, I think it's
really that bad. When the 35 hour work week was proposed, I was talking
to someone in the French consulate who did economics and trade. "Aren't
you worried that this will raise employer's costs and lead to business
failures or higher unemployment?" I asked.

"That's just Anglo-saxon economics" was his rather stunning reply.  Apparently, in France, demand curves do not slope downwards.

When the government does not allow prices to float in real time in response to changes in supply and demand, then gluts and shortages are inevitable.  When shortages occur, due to prices that are capped or not allowed to move upwards sufficiently quickly, queues and/or spot shortages occur.  When the government decides it does not like this, the jack-booted thugs step in and we have government-enforced rationing.  California, famous for its stupidity in letting wholesale electricity prices float while capping retail prices and thus creating an economic disaster several years ago, is at it again in the electricity market:

What should be controversial in the proposed revisions to Title 24 is
the requirement for what is called a "programmable communicating
thermostat" or PCT. Every new home and every change to existing homes'
central heating and air conditioning systems will required to be fitted
with a PCT beginning next year following the issuance of the revision.
Each PCT will be fitted with a "non-removable " FM receiver that will
allow the power authorities to increase your air conditioning
temperature setpoint or decrease your heater temperature setpoint to
any value they chose. During "price events" those changes are limited
to /- four degrees F and you would be able to manually override the
changes. During "emergency events" the new setpoints can be whatever
the power authority desires and you would not be able to alter them.

In
other words, the temperature of your home will no longer be yours to
control. Your desires and needs can and will be overridden by the state
of California through its public and private utility organizations. All
this is for the common good, of course.

I can't think of anything that better illustrates the tie between free exchange and freedom.  And by the way, how long before the greenies in the legislature suggest using this mechanism even when there are not shortages to turn down everyone's air conditioner, just because they can.

Update: Exercise for the reader -- Figure out how, once this policy goes bad, the state of California will again blame Enron for their failure.

Movie producers sell DVDs cheaper in, say, Taiwan than they do in the US.  This is not an unheard of economic phenomenon -- it happens in every commodity and product.  The reason we don't notice these price differences too much is that traders and arbitragers and shipping companies will target the largest price differentials and take advantage of them by buying and shifting products around until the price differential is less than the transportation and transaction costs.  Basic economics.

However, despite a number of structural advantages that already serve to reduce this cross-flow (e.g. different languages), the media companies are trying to stretch copyright law far beyond what CopyOwner says is legally defensible:

Copyright owners (including the owners of the "works" embodied in
the copyrighted labels on common non-copyrighted goods) like to
discriminate in pricing by creating artificial markets so that
discounts in one market won't be resold at a lower price in over-priced
markets. The thinking goes, "Why let U.S. consumers get the benefit of
prices that are affordable to people in developing countries when we
know we can get more out of the U.S. consumer's pocket?"

The
"first sale doctrine," now codified as Section 109 of the Copyright
Act, makes clear that the copyright owner's right of distribution is
subject to the copy owner's right to sell it to anyone, anywhere, at
any price. And that's great policy. Entrepreneurs who see too big a gap
between the prices charged U.S. consumers and the prices charged
consumers elsewhere for identical copies can buy the cheaper product
and sell it at a profit, while still giving the U.S. consumer a better
bargain.

But that's not why I nearly fell out of my chair. I
was used to these anti-competitive price discriminators ranting about
perfectly lawful gray market goods. What this story does is label these
perfectly legal importers as pirates. That's right. Despite quoting the
Supreme Court in Quality King Distributors v. L'anza Research International,
that "once the copyright owner places a copyrighted item in the stream
of commerce by selling it, he has exhausted his exclusive statutory
right to control its distribution," a ruling that suggests that the
evildoers are those who try to circumvent the law by preventing gray
market imports, they go on to call the importers "pirates"

It is always amazing how big round numbers hold the media in thrall.  Last week we saw the inevitable spate of articles about oil crossing the $100 mark, if only for a few minutes of trading  (actually, the more interesting milestone was somewhere back in the low $90 range when we exceeded the highest past price for oil in inflation-adjusted dollars).

I don't get hugely worked up about gradual commodity price changes.  Oil price increases are signals, signaling marginal consumers to use less and suppliers with historically marginal sources and substitutes to consider their development.  Also, our economic dependence on oil per dollar of GDP has declined, meaning that $100 oil has less impact on the economy than, say, it would have 20 years ago:

I would certainly prefer lower oil prices, and my business suffers to some extent when gas prices rise, but it is not a disaster  (it is interesting that higher oil prices are considered bad in the media, while lower home prices are considered bad in the media).  I know from past experience in the oil patch that oil price bubbles are often followed by oil price drops.  The high oil prices of the seventies were followed by rock-bottom oil prices in the eighties, and subsequent recession in the oil patch (causing the housing bust I discussed here). 

Also, given how we got to these higher oil prices, I tend to take them as good news.  Oil prices are not rising due to some drop off in supply.  Instead, they are rising because of a strong global economy, in particular with millions of people entering the middle class in Asia.  This is GOOD news. 

I have written on peak oil a bunch, so I won't get into it again.  Oil production at worst is going to flatten out for a long time, meaning we will have a steady rise in oil prices over time as the economy grows.  If you want a third party evaluation of peak oil theory, go ask climate catastrophists who believe that CO2 production is an impending disaster for the economy.  These guys know that there are lots of unproduced hydrocarbons out there, and it terrifies them.   Al Gore and James Hansen were running around last week trying to close off Canadian tar sands from development.

Finally, after this series of random thoughts, one more interesting take on this via Megan McArdle:  $100 oil was a stunt

Some observers questioned the validity of the price mark when it
emerged that the peak was the result of a trader "“ one of the "locals"
who trade on their own money "“ buying from a colleague just 1,000
barrels of crude, the minimum allowed, industry insiders said. The deal
on the floor of the New York Mercantile Exchange was at a hefty premium
to prevailing prices.

Insiders named the trader as Richard Arens, who runs a brokerage
called ABS. He was not available for comment. Analysts said he may have
been testing the ceiling of the crude price, but the premium he paid
surprised the market.

Before the $100-a-barrel trade, oil prices on Globex were at $99.53
a barrel. Immediately after the trade, prices went down to about
$99.40, suggesting a trading loss of $600 for Mr Arens.

Stephen Schork, a former Nymex floor trader and editor of the
oil-market Schork Report, commented: "A local trader just spent about
$600 in a trading loss to buy the right to tell his grandchildren he
was the one who did it. Probably he is framing right now the print
reflecting the trade."

I went to a musical called "the Pajama Game" this evening.  I didn't entirely follow the plot, but it seemed to be a documentary about why all of our clothes are made in China.

Here is a public service announcement for those of you who might be younger or who did not live through past housing bubbles (such as the mid-80's bubble in Texas).  Housing bubbles take a long time to sort out.  The typical pattern is that one sees a big build-up of yard "For Sale" signs around town, but no real movement or sales.  What happens is that people selling their houses resist accepting that a change in pricing levels has occurred, and list the homes at the old, higher price levels, particularly when any price cuts would put them underwater on their mortgage.

Eventually, the dam breaks, as sellers are forced to accept lower pricing because they can no longer bear the holding costs any longer.  In Texas, I had at least two friends who just left the keys in the mailbox and walked away, leaving it all to the bank to sort out.  But it can take a really long time for this to play out -- I am talking years, not months, depending on how inflated the bubble got.  From my experience (confirmed in the futures markets here) the bottom will not come until at least a year from now.  In Texas in the 1980's, it took as long as five years for the whole thing to play out and for prices to start recovering.

From Scientific American Magazine - January 2008 via the Mises Blog

...As with living organisms and ecosystems, the economy
looks designed"”so just as humans naturally deduce the existence of a
top-down intelligent designer, humans also (understandably) infer that
a top-down government designer is needed in nearly every aspect of the
economy. But just as living organisms are shaped from the bottom up by
natural selection, the economy is molded from the bottom up by the
invisible hand.

I need to read the whole article, it looks awesome, but in fact yours truly made the same observation over a year ago (emphasis in the original - I was going through an overuse-of-bold-type phase.

So here is this week's message for the Left:  Economics is a
science.  Willful ignorance or emotional rejection of the well-known
precepts of this science is at least as bad as a fundamentalist
Christian's willful ignorance of evolution science (for which the Left
so often criticizes their opposition).  In fact, economic
ignorance is much worse, since most people can come to perfectly valid
conclusions about most public policy issues with a flawed knowledge of
the origin of the species but no one can with a flawed understanding of
economics....

In fact, the more I think about it, the more economics and evolution are very similar.  Both are sciences that are trying to describe the operation of very complex, bottom-up, self-organizing systems.  And,
in both cases, there exist many people who refuse to believe such
complex and beautiful systems can really operate without top-down
control. 

For example, certain people refuse to accept that homo sapiens could
have been created through unguided evolutionary systems, and insist
that some controlling authority must guide the process;  we call these
folks advocates of Intelligent Design.  Similarly, there are folks who
refuse to believe that unguided bottom-up processes can create
something so complex as our industrial economy or even a clearing price
for gasoline, and insist that a top-down authority is needed to run the
process;  we call these folks socialists. 

It is interesting, then, given their similarity, that socialists and
intelligent design advocates tend to be on opposite sides of the
political spectrum.  Their rejection of bottom-up order in favor of
top-down control is nearly identical.

The idea of a congestion charge is a good one.  London, however, is struggling with the implementation.  Apparently, while the number of cars in the congestion zone has gone down, the rush hour congestion has gone up.  Why?  Because the congestion charge does not change by time of day, it is more than high enough to drive out off-hour users, but is not high enough to change the behavior of rush hour drivers.  Basically, they have made the center of London quieter at night.

This is actually not surprising. Economic theory would say that the
demand for travel at rush hour is more inelastic (i.e., less
susceptible to fees) than travel at other times of the day. (If it were
not inelastic, people would be willing to drive in such congestion.) If
fees don't change during the course of the day, they will have the
greatest effect during the hours that are more elastic. A properly
designed fee should temper peak-period demand; a fixed fee instead
tempers off-peak demand.

And, as I can attest from my last visit to London, where I was actually dumb enough to drive a car into town, the way they have implemented the system is not very amenable to time of day pricing. 

The Democrats of late seem to be pining for the "Ward Cleaver" economy of the 1950's, lamenting that a) the middle class is worse off today financially, b) it takes two income earners to "survive" today rather than one and c) the middle class faces more risk without any additional reward.  Rather than refute all this mess in detail yet again, I will leave you with this quiz, via TJIC, from Tamara K:

1) The balance on Ward Cleaver's three most frequently used credit cards is?

2)
Does Wally have an Xbox3 hooked to a flatscreen TV in his room, or is
he making do with an old Play Station hooked to a hand-me-down 19" Sony?

3)
In addition to electricity, water, and the telephone, the Cleaver's
largest monthly bill is: a. Cellular Service, b. Cable TV, c. Broadband
Internet Access, or d. Late Fees At Blockbuster.

4) The Cleaver's timeshare is in: a.) Destin, or b.) Gatlinburg.

5) June's bread maker was made by: a.) Sunbeam, or b.) Krupps.

6)
The amount of money Ward loses annually playing Powerball, Online Slots
at home, and Texas Hold 'Em on vacation in Branson, Missouri is: $____
(Round to the nearest dollar.)

In my previous post on urban planning, I mentioned the increasingly popular idea of sustainability through poverty.  Don Boudreaux responds to the currently hip idea that somehow we need to revert to a more local economy with local food production.  This is absolutely absurd, for any number of reasons.  I'll just list three:

• It doesn't work.  The total energy used for transport, say of food products, is a small percentage of the total energy used in the total production process.  The energy transportation budget is generally smaller than efficiency gains from scale or from optimizing location.  For example, a wheat farm in Arizona on 50 acres is going to use a lot more energy (and water, and fertilizer, and manpower) than a wheat farm on a thousand acres in North Dakota.
• It leads to poverty.  Our modern society, our lifestyles, our lifespans all are a result of the fantastic increases in efficiency we have reaped from the division of labor.  A push to localize all production reverses the division of labor.  Many products, such as semiconductors, become outright impossible on a local scale.
• It leads to starvation.  It is hard for us to imagine famine in the wealthy nations of the world.  Crop failures in one part of the world are replaced with crops from other parts of the world.  But as recently as the 19th century, France, then the wealthiest nation on earth but reliant on local agriculture, experienced frequent crop failures and outright starvation.

More on the food-miles stupidity here.  And an interesting study that shows that processed foods greatly reduces waste and trash to landfills was here.

Update: More on food miles here at Reason

James Pethokoukis argues that we might have spent a lot of the $1.3 trillion cost of the Iraq war on containment of Iraq had we fought the war.

I will admit I have not seen the studies, but I declare right now that there is NO WAY.  If we really would have spent $150 billion a year containing Iraq in absence of a war, we should be spending similar magnitudes today on other similar regimes on which we have chosen not to declare war, like Iran, North Korea, Venezuela, etc.  But demonstrably we are not.  One might argue that oil prices would be lower, I guess, but one could also argue that the post-9/11 recession would not have been as deep without a war.  I am sure there is a broken window fallacy in here somewhere.  This reminds me nothing so much as the tortured economic studies that purport to show a gullible populace that it makes sense to build a billion dollar stadium for the hapless Arizona Cardinals because the city will make it all back in future revenues.  Sure.

I am not going to argue the justifications for the Iraq war here.  What I will say is that folks who have enthusiastically supported the war should understand that the war is going to have the following consequences:

1. In 2009 we will have a Democratic Congress and President for the first time since 1994.
2. The next President will use the deficits from the $1.3 trillion in Iraq war spending to justify a lot of new taxes
3. These new taxes, once the war spending is over, will not be used for deficit reduction but for new programs that, once established, will be nearly impossible to eliminate
4. No matter what the next president promises to the electorate, they are not going to reverse precedents for presidential power and secrecy that GWB has established.  Politicians never give up power voluntarily.  [if the next president is Hillary, she is likely to push the envelope even further].  Republicans are not going to like these things as much when someone of the other party is using them.

Over the last few years, there has been a lot of arguing back and forth about income mobility.  Typically, folks, particularly on the left, look at changes in median incomes and declare that since median incomes aren't moving much, there is not income mobility.  I have criticized this approach to the problem on a number of occasions.  For example, I have argued that median income numbers are skewed downwards because tens of millions of low-skill new immigrants have entered the job market over the last several decades.  As I wrote here,

If you really want to know what the current median wage is on an apples
to apples basis back to 1970, take the current reported median wage and
count up about 10 million spots, and that should be the number -- and
it will be much higher.

What you really have to do is take the same people, and follow their progress through tax returns or whatever data is available.  What this type study finds, time and again, is that income mobility remains high in this country.  And what happens, time and again, is the media and politicians ignore the study in favor of the more flawed approaches that support their narrative better.

Well, the study has been performed again, and the results are the same:  Income mobility remains high in this country, especially for the poorest 20%.

They say a picture is worth a thousand words, and in one chart 60% of the hot air in the Democratic Presidential debates is refuted.

By the way, it is worth noting the drop in income of the top 1%, because it helps to point out a flaw in the usual income distribution numbers we see.  In 2002, I showed no income on my 1040 (because I was starting a new business).  In the income distribution numbers for 2002, my family and I showed up in the bottom 20%, living on less than a $1 a day.  Of course, that is an absurd characterization.  On the opposite end of the scale, imagine a small business owner plugging along making $80,000 or so a year, comfortably middle class, and then in one year sells his business for $1 million.  In that year's statistics, he is rich.  The next year when his capital gains go away, it looks like he has gotten poorer, when no such thing happened.

Of course, some are still struggling, though my suspicion is that this is less related to structural issues in the economy or availability of opportunity than with cultural issues.

Via Tyler Cowen:

The Asian
Development Bank presented official survey results indicating China's
economy is smaller and poorer than established estimates say. The
announcement cited the first authoritative measure of China's size
using purchasing power parity methods. The results tell us that when
the World Bank announces its expected PPP data revisions later this
year, China's economy will turn out to be 40 per cent smaller than
previously stated......The number of people in China living below the
World Bank's dollar-a-day poverty line is 300m - three times larger
than currently estimated.

Well, this is a bit sad, as I would hope everyone likes seeing people emerge from poverty**.  But it is really not surprising.  Strongly state-run economies are notoriously hard to measure from the outside, and westerners systematically overestimated the size of the economy of the old Soviet Union.

**  I make this statement because I am an optimistic guy full of confidence in the generally good intentions of mankind.  Because if I were not such a person, and actually judged people by their actions, I would come to the conclusion that a lot of people DO NOT want people in countries like China to emerge form poverty.  Trade protectionism, apologias for looting dictators like Castro or Chavez, anti-globalization riots, anti-growth initiatives, and calls for rollbacks in fossil fuel consumption all share in common a shocking disregard for people trying to emerge from poverty -- often from folks on the left who purport to be the great defenders of the poor.  I tried to explain the phenomenon before, at least among self-styled "progressives':

Progressives do not like American factories appearing in third world
countries, paying locals wages progressives feel are too low, and
disrupting agrarian economies with which progressives were more
comfortable.  But these changes are all the sum of actions by
individuals, so it is illustrative to think about what is going on in
these countries at the individual level. 

One morning, a rice farmer in southeast Asia might faces a choice.
He can continue a life of brutal, back-breaking labor from dawn to dusk
for what is essentially subsistence earnings.  He can continue to see a
large number of his children die young from malnutrition and disease.
He can continue a lifestyle so static, so devoid of opportunity for
advancement, that it is nearly identical to the life led by his
ancestors in the same spot a thousand years ago.

Or, he can go to the local Nike factory, work long hours (but
certainly no longer than he worked in the field) for low pay (but
certainly more than he was making subsistence farming) and take a shot
at changing his life.  And you know what, many men (and women) in his
position choose the Nike factory.  And progressives hate this.  They
distrust this choice.  They distrust the change.  And, at its heart,
that is what the opposition to globalization is all about - a deep
seated conservatism that distrusts the decision-making of individuals
and fears change, change that ironically might finally pull people out
of untold generations of utter poverty.

I again heard someone on NPR today lamenting the loss of manufacturing jobs in the US.  It got me thinking about a couple of things:

1. When I had my political awakening in high school debate in the 1970s, all of the complaints from the left were about how horrible blue collar workers had it in manufacturing jobs.  At that time, manufacturing jobs were labeled by leftish critics as dirty and dangerous, and, most common, as repetitious and boring (in the Fredrick Taylor legacy).  OK, so now that they all have nice clean service jobs, we are unhappy that they don't have those old manufacturing jobs?  These are folks whose agenda has nothing to do with the words they are actually speaking, and everything to do with creating dissatisfaction to facilitate government takeover of economic functions
2. While I am sure the service sector is overtaking manufacturing (in the same way manufacturing overtook agriculture), to some extent the statistics are misleading.
   

   Let's take an automobile assembly plant circa 1955.  Typically, a
   large manufacturing plant would have a staff to do everything the
   factory needed.  They had people on staff to clean the bathrooms, to
   paint the walls, and to perform equipment maintenance.  The people who
   did these jobs were all classified as manufacturing workers, because
   they worked in a manufacturing plant.  Since 1955, this plant has
   likely changed the way it staffs these type jobs.  It still cleans the
   bathrooms, but it has a contract with an outside janitorial firm who
   comes in each night to do so.  It still paints the walls, but has a
   contract with a painting contractor to do so.  And it still needs the
   equipment to be maintained, but probably has contracts with many of the
   equipment suppliers to do the maintenance.

   So, today, there might be the exact same number of people in the
   factory cleaning bathrooms and maintaining equipment, but now the
   government classifies them as "service workers" because they work for a
   service company, rather than manufacturing workers.  Nothing has really
   changed in the work that people do, but government stats will show a
   large shift from manufacturing to service employment.

3. I am tired of the whole McJobs meme.  Have you been in a McDonalds?  How many middle age auto worker types do you see working there?  None?  What you see are young people and recent entrants to the job market, including new immigrants.  What these people need more than anything is real experience with the basics of holding a job, including showing up reliably, working in a structured environment, following a process, and providing customer service.  Sure, they would prefer that to happen at $60 an hour, what they really need, and are getting, is a credible work experience they can use to go get higher paying jobs in the future.

I missed this two-year-old post from Don Boudreax at Cafe Hayek, but it is an excellent two part look at the 1975 Sears catalog aimed at answering the question, "Are we wealthier today?"  Part 1 just browses the catalog; part 2 is really interesting in that he compares the hours of work required today vs. 1975.  One interesting conclusion is that the comparison can be difficult because even some of the best items in 1975 are not as good as the economy models today.  And he does not mention things like reliability.  How often did the TV repair guy come to your house in the early 70's, with his big box of tubes.  My Sony in my bedroom has been operating flawlessly since 1995.  For example:

Sears lowest-priced garage-door opener: 20.1 hours of work required in
1975 (to buy a ¼-horsepower opener); 8.57 hours of work required in
2006 (to buy a ½-horsepower opener; Sears no longer sells garage-door
openers with less than ½-horsepower.)

Thanks to a reader comes this article from the NY Times that yet again discusses a water shortage and possible government action without once mentioning the word "price."  If water prices floated like gas prices, we wouldn't have to discuss things like these:

Within two weeks, Carol Couch, director of the Georgia Environmental
Protection Division, is expected to send Gov. Sonny Perdue
recommendations on tightening water restrictions, which may include
mandatory cutbacks on commercial and industrial users.

If that
happens, experts at the National Drought Mitigation Center said, it
would be the first time a major metropolitan area in the United States
had been forced to take such drastic action to save its water supply.

But of course politicians love being responsible for resource allocation through command-and-control government, because it creates winners and losers and both will then donate to the next election cycle.  Atlanta already has fairly expensive water, but a quick 50% rate hike about 3 months ago would have likely obviated this shortage while also providing the municipality with additional funds to develop new sources.

I wrote a lot more about water scarcity and the price mechanism, including the observation that Phoenix ridiculously has some of the lowest water prices in the country, here.

postscript: One of the media tricks to make things look worse and panicky is to present asymmetric charts.  For example, the NY Times presents this drought map:

All you see is what one presumes to be normal in white and then a lot of drought.  But in fact, this chart is truncated.  It omits all the data for areas that are wetter than usual.  Here is the chart for September form the NOAA with both over and under precipitation over the past 12 months:

Whoa, that shows a different picture, huh?  Basically, about as much stuff is wetter than normal as drier than normal.  Which is exactly what one might expect in any period.  And by the way, if you look at the last five years, the US is pretty freaking wet:

Today I was working on a bid for a retail concession in a county park in California.  In these bids we usually promise a set percentage of sales as rent in exchange for the concession and use of certain fixed assets.  One of our standard clauses is to exempt gasoline sales (if there are any) from this rent calculation, because gas sales are so horribly low margin.  Considering the licensing, environmental, and safety issues, gasoline is always a money loser for us that we offer either a) because it is expected, as in the case at large marinas or b) because it gets people in the door to buy other stuff.  And I sell gas in rural areas where I have less price competition than in cities.

It is for this reason that I am always flabbergasted at how much time and attention the government and media tend to pay to retail gasoline pricing.  The portion of my business that is clearly the worst, most unprofitable piece, so much so I have to make special contract provisions for it, gets all the attention for price gouging.   It's like the FEC dedicating most of its labor to investigating Mike Gravel's campaign donations.  I mean, why bother, there's nothing there.

Yet another weird SF Fan makes a great point:

On the one hand, there's a movement (actual example here) to eliminate "bundling" in the cable industry (selling access to all of some medium instead of dividing it into pieces).

On the other hand, other people are worried about the possible lack of bundling if net neutrality isn't mandatory.

Is a debate called for? Or is it a matter of "anything capitalists do is wrong"?

He links Megan McArdle whose post quotes extensively from ... me!

I see that the drive to force cable companies to offer their basic cable package a la carte rather than as a bundle is gaining steam again.  This is the dumbest regulatory step imaginable, and will reduce the number of interesting niche choices on cable.

For some reason, it is terribly hard to convince people of this.  In fact, supporters of this regulation argue just the opposite.  They argue that this is a better plan for folks who only are passionate about, say, the kite-flying channel, because they only have to pay for the channel they want rather than all of basic cable to get this one station.   This is a fine theory, but it only works if the kite-flying channel still exists in the new regulatory regime.  Let me explain.

Clearly the kite-flying channel serves a niche market.  Not that many people are going to be interested enough in kite flying alone to pay $5 a month for it.  But despite this niche status, it may well make sense for the cable companies to add it to their basic package.  Remember that the basic package already attracts the heart of the market.  Between CNN and ESPN and the Discovery Channel and the History Channel, etc., the majority of the market already sees enough value in the package to sign on.

Let's say the cable company wants to add a channel to their basic package, and they have two choices.  They have a sports channel they could add (let's say there are already 5 other sports channels in the package) or they can add the Kite-flying channel.  Far more people are likely to watch the sports channel than the kite flying channel.  But in the current pricing regime, this is not necessarily what matters to the cable company.  Their concern is to get more people to sign up for the cable TV.  And it may be that everyone who could possibly be attracted to sports is already a subscriber, and a sixth sports channel would not attract any new subscribers.  It is entirely possible that a niche channel like the kite-flying channel will actually bring more incremental subscribers to the basic package than another sports channel, and thus be a more attractive addition to the basic package for the cable company. 

But now let's look at the situation if a la carte pricing was required.  In this situation, individual channels don't support the package, but must stand on their own and earn revenue.  The cable company's decision-making on adding an extra channel is going to be very different in this world.  In this scenario, they are going to compare the new sports channel with the Kite-flying channel based on how many people will sign up and pay for that standalone channel.  And in this case, a sixth (and probably seventh and eighth and ninth) sports channel is going to look better to them than the Kite-flying channel.   Niche channels that were added to bring greater reach to their basic cable package are going to be dropped in favor of more of what appeals to the majority. 

I think about this all the time when I scan the dial on Sirius radio, which sells its services as one package rather than a la carte.  There are several stations that I always wonder, "does anyone listen to that?"  But Sirius doesn't need another channel for the majority out at #300 -- they need channels that will bring new niche audiences to the package.  So an Egyptian reggae channel may be more valuable as the 301st offering than a 20th sports channel.  This is what we may very likely be giving up if we continue down this road of regulating away cable package pricing.  Yeah, in a la carte pricing people who want just the kite-flying channel will pay less for it, but will it still be available?

Or not.  Via Cafe Hayek and the WSJ, the median new home is 40% bigger than just a generation ago.

I am a big fan of Consumer Reports the magazine.  However, Alex Tobarrok identifies a priceless quote highlighting the befuddled technocrat:

Not so long ago you could count on most washers to get your clothes
very clean. Not anymore. Our latest tests found huge performance
differences among machines. Some left our stain-soaked swatches nearly
as dirty as they were before washing. For best results, you'll have to
spend $900 or more.

What
happened? As of January, the U.S. Department of Energy has required
washers to use 21 percent less energy, a goal we wholeheartedly
support. But our tests have found that traditional top-loaders, those
with the familiar center-post agitators, are having a tough time
wringing out those savings without sacrificing cleaning ability, the
main reason you buy a washer.

How can they "wholeheartedly support" such a goal when they themselves have demonstrated it effectively castrates an important consumer appliance?  How can they support a goal that effectively raises the price of a washing machine that actually cleans clothes to $900 or more?

Robert Samuelson makes the point I made here:

The standard story is that poverty is stuck; superficially, the

statistics support that. The poverty rate measures the share of

Americans below the official poverty line, which in 2006 was $20,614

for a four-person household. Last year, the poverty rate was 12.3

percent, down slightly from 12.6 percent in 2005 but higher than the

recent low, 11.3 percent in 2000. It was also higher than the 11.8

percent average for the 1970s. So the conventional wisdom seems amply

corroborated.

It isn't. Look again at the numbers. In 2006, there were 36.5

million people in poverty. That's the figure that translates into the

12.3 percent poverty rate. In 1990, the population was smaller, and

there were 33.6 million people in poverty, a rate of 13.5 percent. The

increase from 1990 to 2006 was 2.9 million people (36.5 million minus

33.6 million). Hispanics accounted for all of the gain.

Consider:

From 1990 to 2006, the number of poor Hispanics increased 3.2 million,

from 6 million to 9.2 million. Meanwhile, the number of non-Hispanic

whites in poverty fell from 16.6 million (poverty rate: 8.8 percent) in

1990 to 16 million (8.2 percent) in 2006. Among blacks, there was a

decline from 9.8 million in 1990 (poverty rate: 31.9 percent) to 9

million (24.3 percent) in 2006. White and black poverty has risen

somewhat since 2000 but is down over longer periods

This is not a ding on immigration, as readers will know I am a supporter of open immigration.  But it is an important context to have when evaluating poverty numbers.  The drop in black poverty in these numbers is an ENORMOUS piece of good news that I bet you have not read anywhere.

Robert Samuelson makes the point I made here:

The standard story is that poverty is stuck; superficially, the

statistics support that. The poverty rate measures the share of

Americans below the official poverty line, which in 2006 was $20,614

for a four-person household. Last year, the poverty rate was 12.3

percent, down slightly from 12.6 percent in 2005 but higher than the

recent low, 11.3 percent in 2000. It was also higher than the 11.8

percent average for the 1970s. So the conventional wisdom seems amply

corroborated.

It isn't. Look again at the numbers. In 2006, there were 36.5

million people in poverty. That's the figure that translates into the

12.3 percent poverty rate. In 1990, the population was smaller, and

there were 33.6 million people in poverty, a rate of 13.5 percent. The

increase from 1990 to 2006 was 2.9 million people (36.5 million minus

33.6 million). Hispanics accounted for all of the gain.

Consider:

From 1990 to 2006, the number of poor Hispanics increased 3.2 million,

from 6 million to 9.2 million. Meanwhile, the number of non-Hispanic

whites in poverty fell from 16.6 million (poverty rate: 8.8 percent) in

1990 to 16 million (8.2 percent) in 2006. Among blacks, there was a

decline from 9.8 million in 1990 (poverty rate: 31.9 percent) to 9

million (24.3 percent) in 2006. White and black poverty has risen

somewhat since 2000 but is down over longer periods

This is not a ding on immigration, as readers will know I am a supporter of open immigration.  But it is an important context to have when evaluating poverty numbers.  The drop in black poverty in these numbers is an ENORMOUS piece of good news that I bet you have not read anywhere.

Apparently leading technocrat and Mussolini-style-economic-dictator Robert Reich is at it again, arguing the path to freedom requires more government coercion.  Ronald Bailey reminds us that Reich was the one who advocated the US adopt Japanese MITI-style economic management, just before the American economy took off for 25 years and Japan's spiraled into stagnation.  Now, he is arguing that capitalism is the enemy of democracy:

As Freedom House points out the number of countries that qualify as free rose from just 44 in 1972 to 89 in 2005,
even as capitalism expanded around the globe. It has been hypothesized
that as incomes increase in a country (rise of a middle class), the
demand for democratic governance becomes irresistible. This seems to
have been the pattern in South Korea, Chile, and Taiwan. Will the same
thing happen in China? As a negative leading indicator---whatever Reich
predicts, the opposite occurs-don't be surprised if China becomes a
democracy in the next decade.