Coyote Blog

My post on libertarians and Republicans, and ones like it on other sites, has generated a lot of response from folks arguing about whether there is a true schism emerging in the Republican Party.  I am not a Republican, so I am not on the inside.  Strong libertarians like me (read this if you want to know what that means) can pretty safely be treated as a fringe, so I haven't really been in a position to argue that the Republicans mights truly be in trouble.

However, yesterday I had the chance to interact with a number of family friends.  Included were a number of men, many in their 60's-80's, who have been lifelong classic Chamber of Commerce Republicans, including two that ran Fortune 100 companies.  These were classic red state Republicans, many of whom had been active in the party at some point in their lives.  And, almost to a man, they were disenchanted with the Republicans.  They cited trade protectionism, profligate spending, and Tom-DeLay-type capture by the system.  These men, all who would call themselves religious, were frustrated at the apparent capture of the Party by religious interests.

Several of these folks pointed me to this editorial by John Danforth as representing what is frustrating them about the Administration and the Party.

    During the 18 years I served in the Senate, Republicans often disagreed with
  each other. But there was much that held us together. We believed in limited
  government, in keeping light the burden of taxation and regulation. We encouraged
  the private sector, so that a free economy might thrive. We believed that judges
  should interpret the law, not legislate. We were internationalists who supported
  an engaged foreign policy, a strong national defense and free trade. These were
  principles shared by virtually all Republicans.

    But in recent times, we Republicans have allowed this shared agenda to become
  secondary to the agenda of Christian conservatives. As a senator, I worried
  every day about the size of the federal deficit. I did not spend a single minute
  worrying about the effect of gays on the institution of marriage. Today it seems
  to be the other way around.

    The historic principles of the Republican Party offer America its best hope
  for a prosperous and secure future. Our current fixation on a religious agenda
  has turned us in the wrong direction. It is time for Republicans to rediscover our roots.

For those of you who don't know and might mistake Mr. Danforth for some rampaging secularist, former Senator Danforth, beyond having gone to the greatest undergraduate institution in the world, is a pro-life .

I encourage you to read it all. 

In a surprise move, the US House of Representatives, the arm of the government Constitutionally tasked with initiating any new taxation authority, today passed a resolution "apologizing for the way [the Congress] has historically mishandled Americans' hard-earned income".  In part, the resolution reads:

For years, we in Congress have held closely to the notion that we know better than the average American how to spend his or her money.  Facilitated by economists like John Maynard Keynes, we the Congress have increased the government's share of the economy to over 30%, and have invented taxes on about anything, in part by portraying every tax cut a subsidy for the rich, rather than a return of hard-earned income to the productive. 

We have taken the money you might have spent on private schools to fund a public school system that lags most of the Western world.  We have taken the money you might have used to pay your cable bill to pay for a alternative to Nickelodeon and the Discovery Channel, but for effete snobs.  We have taken the money you might have used to buy a new car or a vacation to gift billionaire sports team owners with new stadiums and to subsidize millionaire farmers who have never actually done any farming....[note the resolution continues with examples for another 16 pages]...

We are sorry.

Finally.

I wrote before of the cost that licensing imposes on the economy.  I love Milton Friedman's take on licensing and certification:

The justification offered is always the same: to protect the consumer. However, the reason
is demonstrated by observing who lobbies at the state legislature for
the imposition or strengthening of licensure. The lobbyists are
invariably representatives of the occupation in question rather than of
the customers. True enough, plumbers presumably know better than anyone
else what their customers need to be protected against. However, it is
hard to regard altruistic concern for their customers as the primary
motive behind their determined efforts to get legal power to decide who
may be a plumber.

Now, from Ohio (and via Cafe Hayek) comes this attempt to regulate auctioneers:

Besides costing $200 and posting a $50,000 bond,
the license requires a one-year apprenticeship to a licensed auctioneer, acting
as a bid-caller in 12 auctions, attending an approved auction school, passing a
written and oral exam. Failure to get a license could result in the seller being
fined up to $1,000 and jailed for a maximum of 90 days.

Keep Friedman's quote in mind.  Note that under this system, auctioneers have an automatic veto over new competition, since all potential competitors must find an existing auctioneer to take them on as an apprentice.  Imagine the consumer electronics business - "I'm sorry, you can't make or sell any DVD players until Sony or Toshiba have agreed to take you on as an intern for a year".  Yeah, I bet we'd see a lot of new electronics firms in that system - not.

It gets better, though.  The law is written in a way that it applies to Ohio residents trying to sell on eBay:

Here's the response offered by state Senator Larry
Mumper, author of the legislation: "It certainly will not apply to the casual
seller on eBay, but might apply to anyone who sells a lot," he said. "If someone buys and sells on eBay on a
regular basis as a type of business, then there is a need for
regulation."

This is the kind of regulation mentality that is killing us.  eBay has a great rating system, and while the system sometimes trips for small sellers (since they can just start a new account) but big volume competitors ruthlessly protect their reputation on eBay because it is so visible.

Over the last two days, Phoenix put out an order to boil tap water before drinking and not to bathe or shower.  Many restaurants closed for the two day period, and many many people went out and loaded up on expensive bottled water.

What I found interesting was that through the whole "crisis", and now after the fact, Phoenix officials continued to say that they thought the water was safe, that they had not gotten any bad test results, but that people still shouldn't use the water "as a precaution".

Given the current state of liability and torts, I probably would have done the same in their shoes, but is this really the world we want?  There are costs to shutting off water in a city of 2 million plus people.  Shouldn't those costs be justified by some real risk? 

When I was an engineer, my job was often to rule on whether some condition was "safe".  Every day I had to make decisions like "should we shut this part of the plant down, or can we keep running it safely".  Certainly we wanted to err on the side of safety, but ruling every little concern as cause for shutdown would have caused the plant to be shut down almost all the time.  In that job, I had to take responsibility and make a decision, balancing risks and costs.  People want to say that shutting the plant (or the water system) at every hint of a problem is the "responsible" thing to do -- but in fact it is just the opposite.  It is an avoidance, both of decision-making and responsibility.

Unfortunately, no one wants to make such decisions anymore.  My wife's mammogram had something on it the doctor said he was 100% sure was just an artifact of the photography, but to cover his butt he said he had to get her to go have a biopsy (painful, expensive, and time-consuming) which was of course negative.  We are loading the economy down with risk-defense costs, an invisible tax that is already hammering the medical field.

But beyond just the costs, at what point does this hair-trigger defensive posture lead to a chicken-little syndrome where no one pays attention to warnings any more?  I know that the next time we get a warning about Phoenix water, I will be much less likely to be careful, because I remember that the last time nothing was really wrong with the water.  How many people pay attention to homeland security alerts any more?  Do you even bother to read warning labels any more, on the off chance it is a useful warning and not a "this toaster should not be used as a water ski" type warning?

Todd Zywicki at Volokh has an interesting post on what is driving hybrid car purchases in certain cities.  While certain segments are driven by environmentalism and fuel economy, the real boom in certain cities has come with the legal change in some cities allowing single persons in hybrid cars to use the carpool lanes.

"'I'd say 95 percent of the people who buy a Prius say it's to get into HOV,'" said Jay Taye, sales manager at Ourisman Fairfax Toyota. "'They talk about the tax break and the HOV, and once in a while they say they prefer it for the gas mileage as well.'"

By the way, he links an absolutely dead-on article about public transit in the Onion here called --"Report: 98 Percent of Commuters Favor Public Transportation For Others"

The link between the Onion article and the Washington Post story referred to by Zywicki is that what people really want is a fast commute in their car, and they are willing to pay for it.

Several years ago, I sent in a proposal to the Arizona Dept. of Transportation for their new HOV lanes in the Phoenix area, though I never got a response back.  I suggested that HOV lanes probably did not really increase carpooling, since they probably just shifted vehicles that would have already been carrying 2+ people into the faster lane.  Why should I get this artificial subsidy of a dedicated lane when I am driving my kid to a soccer game but not when I am driving myself to do productive work?  Either way, the lane is not changing my behavior.

Anyway, I suggested that instead, AZ DOT should create a number of special passes for exclusive use of the HOV lane.  The number of passes should be set as the largest number that could be issued while keeping the HOV lane moving at the speed limit at rush hour.  Maybe 5000?  Anyway, they would have the stats to set the number, and it could be adjusted over time.  I proposed that they then auction off these passes in a dutch auction once a year.  I posited that the clearing price might be as high as $1000, thus raising $5,000,000 a year that could be used for other transportation projects.

I have friends that said I was crazy, that no one would spend $1000.  Back then, I argued it in two ways.  First, thousands of people in town spend not $1000 but tens of thousands of dollars, in the form of purchasing a nicer-than-basic-car, to make their driving experience better.  In those terms, to the Mercedes or Lexus owner, $1000 was nothing and in fact the price might go higher.  Second, if each pass holder saved 15 minutes per commute, or 30 minutes per day over 250 work days, they would save 125 hours of their time each year.  Bidding just $1000 for this would mean that people would have to value their free time (since commuting generally comes out of free and family time) at $8 an hour.  I certainly value my free time at a MUCH higher rate than this.

This article cited above effectively adds another data point to what people might pay.  To buy a Prius, they are spending at least $5000-$10,000 more than a similar car that can't go into the HOV lane, and probably even more when you consider features they may be giving up to have the car.   

Today, I would bet that the clearing price for 5000 such passes may be $3000-$5000, thus increasing the annual revenue to the city/state as high as $25,000,000.

By the way, though it is a bit different than what I am suggesting, the best related plan that I know of that has actually been executed succesfully is congestion pricing in central London.

UPDATE:  Dang, reading up further in Volokh, Zywicki anticipated my post with a similar one here.

Most "progressives" who reject capitalism do so in part because they do not trust the bottom-up organic progress and social structure that comes with capitalism.  They prefer top-down god-like statist technocratic control.

This is an interesting article contrasting the rejection by liberals and progressives of creationism in the complex systems within nature to their embrace of it in economics and society.

Just as in the natural world, society and the economy is self-organizing, and arises without any sort of central direction or central planning. This is a view that has been put forward by economists and social thinkers such as Frederick Hayek, Adam Smith, David Hume and many others and, like its non-creationist counterpart in the realm of biology, has the advantage of empirical support.

Cool article.  I have written on similar thoughts here.  Listen closely to about any politician today, liberal, conservative, progressive, etc and you will hear, in almost every statement, a distrust of individual decision-making.  Ironically there are many liberal professors out there who will explain to you all evening how termites can build an elaborate mound without any centralized control, but will deny to the death the suggestion that individual humans can build a strong economy and social structure without central control. 

When I get an odd or inappropriate Christmas gift, I usually get a good chuckle with the family and then try to figure out who to recycle it to next year (though the Chia Shrek may be a keeper).

When economists get a bad gift, they try to quantify deadweight loss to the economy.  And, according to Marginal Revolution, the number is substantial.

Update:  more here at TCS

Many in the left to far-left eschew the liberal title nowadays (since they consider liberals now to be wimps and too moderate, like that Clinton guy) in favor of the term "progressive".  This term has gone in and out of favor for over a century, from the populists of the early 1900's to the socialists of the more modern era.

Most "progressives" (meaning those on the left to far left who prefer that term) would freak if they were called conservative, but what I mean by conservative in this context is not donate-to-Jesse-Helms capital-C Conservative but fearful of change and uncomfortable with uncertainty conservative. 

OK, most of you are looking at this askance - aren't progressives always trying to overthrow the government or something?  Aren't they out starting riots at G7 talks?  The answer is yes, sure, but what motivates many of them, at least where it comes to capitalism, is a deep-seated conservatism. 

Before I continue to support this argument, I must say that on a number of issues, particularly related to civil liberties and social issues, I call progressives my allies.  On social issues, progressives, like I do, generally support an individual's right to make decisions for themselves, as long as those decisions don't harm others. 

However, when we move to fields such as commerce, progressives stop trusting individual decision-making.  Progressives who support the right to a person making unfettered choices in sexual partners don't trust people to make their own choice on seat belt use.  Progressives who support the right of fifteen year old girls to make decisions about abortion without parental notification do not trust these same girls later in life to make their own investment choices with their Social Security funds.  And, Progressives who support the right of third worlders to strap on a backpack of TNT and explode themselves in the public market don't trust these same third worlders to make the right decision in choosing to work in the local Nike shoe plant.

Beyond just the concept of individual decision-making, progressives are hugely uncomfortable with capitalism.  Ironically, though progressives want to posture as being "dynamic", the fact is that capitalism is in fact too dynamic for them.  Industries rise and fall, jobs are won and lost, recessions give way to booms.  Progressives want comfort and certainty.  They want to lock things down the way they are. They want to know that such and such job will be there tomorrow and next decade, and will always pay at least X amount.  That is why, in the end, progressives are all statists, because, to paraphrase Hayek, only a government with totalitarian powers can bring the order and certainty and control of individual decision-making that they crave.

Progressive elements in this country have always tried to freeze commerce, to lock this country's economy down in its then-current patterns.  Progressives in the late 19th century were terrified the American economy was shifting from agriculture to industry.  They wanted to stop this, to cement in place patterns where 80-90% of Americans worked on farms.  I, for one, am glad they failed, since for all of the soft glow we have in this country around our description of the family farmer, farming was and can still be a brutal, dawn to dusk endeavor that never really rewards the work people put into it. 

This story of progressives trying to stop history has continued to repeat itself through the generations.  In the seventies and eighties, progressives tried to maintain the traditional dominance of heavy industry like steel and automotive, and to prevent the shift of these industries overseas in favor of more service-oriented industries.  Just like the passing of agriculture to industry a century ago inflamed progressives, so too does the current passing of heavy industry to services.

In fact, here is a sure fire test for a progressive.  If given a choice between two worlds:

1. A capitalist society where the overall levels of wealth and technology continue to increase, though in a pattern that is dynamic, chaotic, generally unpredictable, and whose rewards are unevenly distributed, or...
2. A "progressive" society where everyone is poorer, but income is generally more evenly distributed.  In this society, jobs and pay and industries change only very slowly, and people have good assurances that they will continue to have what they have today, with little downside but also with very little upside.

Progressives will choose #2.  Even if it means everyone is poorer.  Even if it cuts off any future improvements we might gain in technology or wealth or lifespan or whatever.  They want to take what we have today, divide it up more equally, and then live to eternity with just that.   Progressives want #2 today, and they wanted it just as much in 1900 (just think about if they had been successful -- as just one example, if you are over 44, you would have a 50/50 chance of being dead now). 

Don't believe that this is what they would answer?  Well, first, this question has been asked and answered a number of times in surveys, and it always comes out this way.  Second, just look at any policy issue today.  Take prescription drugs in the US - isn't it pretty clear that the progressive position is that they would be willing to pretty much gut incentives for any future drug innovations in trade for having a system in place that guaranteed everyone minimum access to what exists today?  Or take the welfare state in Continental Europe -- isn't it clear that a generation of workers/voters chose certainty over growth and improvement?  That workers 30 years ago voted themselves jobs for life, but at the cost of tremendous unemployment amongst the succeeding generations?

More recently, progressives have turned their economic attention to lesser developed nations.  Progressives go nuts on the topic of Globalization.  Without tight security, G7 and IMF conferences have and would devolve into riots and destruction at the hands of progressives, as happened famously in Seattle.  Analyzing the Globalization movement is a bit hard, as rational discourse is not always a huge part of the "scene", and what is said is not always logical or internally consistent.  The one thing I can make of this is that progressives intensely dislike the change that is occurring rapidly in third world economies, particularly since these changes are often driven by commerce and capitalists.

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.

In fact, over the last 20 or so years, progressives have become surprisingly mute on repression and totalitarianism the world over.  In the 1970's, progressives criticized the US (rightly, I think) for not doing more to challenge the totalitarian impulses of its allies (the Shah of Iran comes to mind in particular) and not doing enough to end totalitarianism and repression in other nations (e.g. South Africa, Guatemala, El Salvador, etc etc) 

Today, progressives have become oddly conservative about challenging totalitarian nations.  By embracing the "peace at any cost" mantra, they have essentially said that they can live with anything, reconcile anything, as long as things remain nominally peaceful (ie, no battles show up on the network news).  Beyond just a strong anti-Americanism, the peace movement today reflects a strong conservatism -- they want to just leave everyone alone, no matter how horrible or repressive, and hope that they will in turn leave us alone.  They fear any change that would stir things up.

There are any number of other examples of the strong conservative streak in the progressive movement.  Here are a few more that come to mind:

• Despite at least 40 years of failure in the public schools, progressives vociferously oppose any radical changes to the public education system.  In particular, they resist any program involving school choice, as they are totally condescending in their utter lack of faith in the average parent's ability to make the right choice for their family.
• Progressives refuse to even consider the possibility that individuals should be trusted to make their own decisions regarding some portion of their Social Security retirement funds.  They can couch their opposition in a lot of fear talk about benefit cuts, but at the end of the day (and take this from someone who has had this argument with numerous liberals and progressives)  the argument always boils down to "we don't trust people to make investment decisions that are as good as the ones we would make for them".

Well, I have again written too long, and I'm tired.  If you are not ready to rush to defend the barricades of capitalism, you might read my post from last week called "60 Second Refutation of Socialism, while Sitting at the Beach".  Most of what I have written here has been said far more eloquently by others.  Of recent writers, Virginia Postrel, in the Future and its Enemies, has written a whole book on not just capitalism but dynamism and progress in general, and why people of all political persuasions tend to be scared by it.  Brink Lindsey addressed many of these same issues as well in his book Against the Dead Hand.  Of course, the Godfather of individual choice and societal dynamism is Friedrich Hayek.

Why am I not surprised to hear this from a Florida attorney.

"Litigation is the No. 1 growth area. It's always recession-proof," said Peter Prieto, executive partner of the Miami office of Holland & Knight, in an interview.

If only our economy was litigation-proof. We operate in Florida because there are a lot of great recreation opportunities there - you can't transport them out of state. I am not sure why anyone else who could move their business out of Florida actually stays there.

Jeb gets a lot of press for being smarter than his brother George W., but George made a lot more progress on tort reform than Jeb has in his state.

courtesy of overlawyered.com

UPDATE#1

The world's whales, porpoises and dolphins have no standing to sue President Bush . Umm, I guess this is good news, though on the other hand what does it say that this even came up before a Circuit court of appeals (the ninth, of course).

UPDATE#2

Fixed link

Congratulations to Edward Prescott, our hometown hero from Arizona State, who shares this years Nobel Prize in Economics.

Why is it that the Nobel committee gives its highest economics prizes to people who consistently put more intellectual nails in the coffin of socialism, then go out of their way to give the "soft" prizes, such as literature and peace, consistently to communists, socialists, and enablers of totalitarianism?

UPDATE

Marginal Revolution has a good roundup on what exactly this economics prize was won for. I should have been more specific when I said "more intellectual nails in the coffin of socialism". The link explains it better, but one argument against free markets is that recessions are proof of market failure and a "better" system would not have them. Prescott and Kydland, among other things, show how:

Recession may be a purely optimal and in a sense desirable response to natural shocks. The idea is not so counter-intuitive as it may seem. Consider Robinson Crusoe on a desert island (I owe this analogy to Tyler). Every day Crusoe ventures out onto the shoals of his island to fish. One day a terrible storm arises and he sits the day out in his hut - Crusoe is unemployed. Another day he wanders out onto the shoals and finds an especially large school of fish so he works especially long hours that day - Crusoe is enjoying a boom economy. Now add into Crusoe's economy some investment goods, nets for example, that take "time to build." A shock on day one will now exert an influence on the following days even if the shock itself goes away - Crusoe begins making the nets when it rains but in order to finish them he continues the next day when it shines. Thus, Crusoe's fish GDP falls for several days in a row - first because of the shock and then because of his choice to build nets, an optimal response to the shock.

UPDATE #2

This is very timely. Our new Nobel Laureates did a lot of work on short term / long term economic paradoxes. For example, they work a lot with problems such as prescription drug regulation, where people can be made happy in the short term (lower prices) but really unhappy in the long term (via forgone research and therefore fewer new drugs). Interesting given that Kerry/Edwards are advocating just such a short term fix that would lead to long-term disaster. The press made a big deal out of how the Nobel Committee slapped Bush in the face with its Peace Prize to Jimmy Carter. Don't hold your breath waiting for anyone to point this one out.

I am not an economist, and would rather not stray too far off track, but the recent payroll numbers are raising interesting questions about the nature of business and employment in this country. Recent jobs growth numbers and unemployment numbers have been fine, with about the same unemployment numbers as we saw in November of 1996 when both parties agreed that the economy was pretty good.

However, as the total jobs growth numbers have lagged GDP growth, a number of people have scratched their heads to wonder why. One interesting fact is that when you survey households rather than employers, the jobs growth numbers look substantially better. Many are pointing to this household survey to say that the economy is changing - that more people are starting their own business or consulting and so are missed in the payroll numbers. This is a good theory, but its force is mitigated by the fact that the sample size, survey process, and error rates for the household survey are all much worse than the payroll survey.

Heritage Foundation argues that the household data is right and is better reflecting reality. Economic Policy Institute argues the opposite.

As a relatively new convert from the corporate world to small business, I can tell you that anecdotally, a good number of the people who left (voluntarily or not) the corporate world early in this decade have not gone back, and are, like me, now self-employed. I just had my 15th business school reunion and the proportion of small people self-employed or running small businesses is up a startling amount since the 10th reunion.