Coyote Blog

I have often criticized Aspiring Governor Eliot Spitzer for his overreaching tactics aimed more at keeping himself on the front page (and in the hearts and minds of voters) than in really catching bad guys.  However, one of the reasons Spitzer gets support for his tactics is that there seems to be an enforcement vacuum at the SEC in pursuing corporate and banking fraud.  The Adelphia case brings us a great example, courtesy of Professor Bainbridge.  It appears that the Rigas family is going to get off with forfeiting some of the assets they plundered - no jail time and no fines!

The Securities and Exchange Commission today announced that it and the United
States Attorney's Office for the Southern District of New York (USAO) reached an
agreement to settle a civil enforcement action and resolve criminal charges
against Adelphia Communications Corporation, its founder John J. Rigas, and his
three sons, Timothy J. Rigas, Michael J. Rigas and James P. Rigas, in one of the
most extensive financial frauds ever to take place at a public company.

In its complaint, the Commission charged that Adelphia, at the direction of
the individual defendants: (1) fraudulently excluded billions of dollars in
liabilities from its consolidated financial statements by hiding them on the
books of off-balance sheet affiliates; (2) falsified operating statistics and
inflated earnings to meet Wall Street estimates; and (3) concealed rampant
self-dealing by the Rigas family, including the undisclosed use of corporate
funds for purchases of Adelphia stock and luxury condominiums. The USAO also
announced that it had entered into a Non-Prosecution Agreement with Adelphia and
had settled forfeiture claims against Rigas family members.

Under the settlement agreement, which is subject to the approval of the
District and Bankruptcy Courts for the Southern District of New York, the Rigas
family members will forfeit in excess of $1.5 billion in assets that they
derived from the fraud, including the Rigas family's interests in certain cable
properties.

This is absurd.  The stay-at-home wife of the treasurer of Enron is in the slammer right now but the Rigas's get to walk?  Note that the Rigas's last year were convicted of numerous criminal charges, but there sentencing was delayed so they could negotiate.  I guess they negotiated pretty well.  In my understanding of the cases, this is a much worse case of fraud than Enron.  These guys looted the company for personal gain, and raped their minority stockholders.   Shame on the SEC.

Politicians seem to love the movie business, or so I infer from the rash of proposals of late to subsidize the movie business. 

New York City seems to have been first out of the blocks, with this program to provide tax rebates and free advertising for shooting movies in NYC.  The article tells us this is the only industry being so targeted at this point by NY.  Why?  Why are movie jobs and movie makers somehow better than every other kind?  Maybe its because they think the movies provide good advertising for NYC, like the great light they cast on the city in movies like this and this.

Anyway, the trend got my attention when our own Arizona governor lamented that Arizona is no longer home to as many movie shoots as it once was decades ago.  Far be it for me to suggest that this is probably more of an issue of westerns going in and out of style (since about a majority of movies shot in Arizona were westerns).  Nevertheless, Napolitano is pushing ahead with her plan to improve the net income line of Hollywood studios by subsidizing production in Arizona.

Finally, via Reason, we see that Hollywood is worried that it is being left out of the subsidy competition, by actually paying companies to film in LA:

Mayor James K. Hahn on Thursday announced a plan he hopes will keep Hollywood in
Hollywood "” by paying film production companies to shoot in Los Angeles.

Hahn's proposal, which was inspired by a program that New York City
adopted in December, would use as much as $15 million in public funds to
reimburse companies that make a movie in Los Angeles, paying them 5% of their
production costs or up to $625,000.

OK, so one would think that all these locations have struggling media and production industries.  But in fact, just the opposite is true.  In New York:

But Wylde thinks film is just the tip of the iceberg. The city's entire media sector is growing explosively, she notes. From Time Warner to Hearst to Bloomberg LLP, media firms account for $13 billion in city wages, 50% more than tourism.

And, in LA:

Last year, however, film, video and television production in Los Angeles
actually reached record highs. Entertainment Industry Development Corp. issued
permits for 52,707 location production days "” one day representing a single day
of work on a single project "” a 19% increase over 2003.

Doesn't sound like they are in much trouble.  Their film and media businesses are already growing explosively to record highs.  So why do they need a subsidy?  Doesn't exactly sound like the New England textile business.

Look, at the end of the day, this is about politicians handing taxpayer money to powerful media people, people who have the ability to disproportionately influence public opinions and things like ... elections!  This is a barely disguised campaign expenditure, except for the fact that taxpayers pay the bill.

I wrote more about the idiocy of subsidizing corporate relocations to one's state or city here.

Update:  Match Welch has more

I was wondering if anyone else noticed this.  Greg Scoblete (hat tip: Instapundit)  points out the very different treatment that the Enron and the UN Scandals have gotten in the NY Times:

Notice the care this New York Times editorial takes
when treating Kofi Annan today, all hedged bets and mild condemnation.
It's only Kojo, after all. Confined to those shifty Swiss. Not a big
deal, besides the only people who care are the warmongers angry that
Kofi wouldn't sign on to the Iraq war. Just do better next time.

In other words, par for the Kofi course.*

Now, Enron.  Hang 'em high! Trust no one. Spare no one. Cast the net wide! Wider! The root of all evil. Crush all Imperial CEOs. Ken Lay - why wait for the trial? Even named a disease after it.

They are different:  The UN scandals are much worse:

• The UN is a far more important institution -- at the end of the day, Enron is just a pipeline company, and no one, except their hosed employees, really has missed it
• The UN has overseen a far larger amount of corruption in $ terms.
• Enron enriched some twits in Houston.  UN enriched a brutal dictator who used the money to cement his totalitarian power over his country
• At least as far as I know, Enron employees were not guilty of mass rape.

Disclosure: When I was a first year associate at McKinsey & Co.,
I worked on a study team led by Jeff Skilling (it was at McKinsey that
Skilling developped many of his ideas for the gas-trading business that
catapulted him into a senior position at Enron).  I had great respect
for Skilling's off-the-chart intelligence and ability to synthesize
tons of detail.  If that causes the reader to be suspicious of Skilling's Congressional testimony
, well, I will leave that to the reader's opinion and future court
decisions.  Remember, though, that the
I-was-too-dumb-to-know-what-was-going-on defense did not even work for Bernard Ebbers, and Skilling is a lot brighter than Ebbers.

In a previous post, I wrote:

There were two interesting court decisions today that each can be summarized as "the press does not have rights or legal privileges beyond those granted to any ordinary citizens"

A number of readers were confused by this, as we have always seen the brave reporter on TV or in the movies protecting their information sources under a "shield law".  Many states, but not all, do in fact have shield laws that give reporters some protection against revealing their sources of information under subpoena.  However, there is no such law at the federal level, and any state laws that exist do not apply to federal courts or subpoenas.

However, despite this lack of an explicit federal shield law, most media organizations argue that the Constitution confers such privilege on them anyway.  Per the NY Times, some judges agree:

[Judge Robert Sweet] explained that the United States Court of Appeals for the Second Circuit in New York recognized a qualified First Amendment privilege that protects reporters from being compelled to disclose their confidential sources

This confuses me - I have read the first amendment many times.  I see the stuff about freedom of the press.  I always naively assumed this meant that they had the freedom to publish any old bonehead thing they wanted, including criticism of the government, without any limitations by the state.  I never realized that this meant that they also had the freedom to evade subpoenas and cover up evidence of crimes, things the rest of us would go to jail for (e.g. Martha Stewart).  Does the fact that the same amendment refers to freedom of religion mean that priests can legally cover up wrongdoing?  Do freedom of speech protections mean that bloggers can hide sources from subpoenas?

I find the judge's logic, as reported by the Times, to be scary:

The judge, Robert Sweet, reasoned, correctly, that the subpoenas for the phone records were the functional equivalent of demanding testimony from the reporters themselves, and he took note of the important role of confidential sources in news investigations of the Watergate, Iran-contra, Monica Lewinsky and Abu Ghraib scandals.

In other words, the Judge thought that allowing the press to hide their sources was useful in some cases historically, so he created a new first amendment privilege.  This is the kid of action that irritates the heck out of me.  What the judge just did in this case is legislate.  He saw a need in society and created a new privilege for a class of citizens based on that need.  You may even agree with his logic - in fact, I may even agree in part with his logic - but it is not his job!  He should be saying: "I'm sorry, as useful as such a protection may be, I see no basis for it in federal law or in the Constitution.  If you think you need one, write your Congressman but for now, there is no such privilege".  UPDATE:  If judge Sweet needs an example, here is one from an unrelated case:

U.S. District Judge Henry F. Floyd ruled Monday that the president of the United States does not have the authority to order Jose Padilla to be held indefinitely without being charged.

"If the law in its current state is found by the president to be insufficient to protect this country from terrorist plots, such as the one alleged here, then the president should prevail upon Congress to remedy the problem," he wrote. (hat tip LGF)

Sounds a lot like my suggestion above, huh?  This strikes me as a good judicial practice - rule on the law as it is, rather than what you think it should be.  We actually don't know whether Judge Floyd thinks that it is a good idea for the President to be able to order terrorist suspects held indefinitely, nor should his opinion matter.

Another Update:  Professor Bainbridge has a good post on yet another case of legislating from the bench.  I am lukewarm on the death penalty in general and am opposed the death penalty for minors, but I still think the Supreme Court is dangerously overstepping its bounds here.  The majority opinion talks about practices in other countries and public opinion - what does that have anything to do with Consitutionality? Those are arguments for legislation banning death penalty for minors in the legislature, not for the Court.

By the way, the Times wants to be able to keep secrets, but gets pretty huffy when other people have the same privilege:

Some judge may have looked at the issue, but we have no way of knowing, given the bizarre level of secrecy that still prevents the reporters being threatened with jail from seeing the nine-page blanked-out portion of last week's decision evaluating the evidence.

I found one other point in this same NY Times editorial to be hilarious.  I have not really commented on the Plame affair, because I found it to be pretty boring.  In fact, it is telling that most discussion of the affair ended the day after the elections.  Anyway, I found this note by the NY Times pretty funny:

Meanwhile, an even more basic issue has been raised in recent articles in The Washington Post and elsewhere: the real possibility that the disclosure of Ms. Plame's identity, while an abuse of power, may not have violated any law. Before any reporters are jailed, searching court review is needed to determine whether the facts indeed support a criminal prosecution under existing provisions of the law protecting the identities of covert operatives.

There is nothing wrong with this statement in and of itself - in fact, I agree.  Its funny only because the Times was the one reporting that it was in fact a crime committed:

Officials are barred by law from disclosing the identities of Americans who work undercover for the C.I.A. That provision is intended to protect the security of operatives whose lives might be jeopardized if their identities are known.

Among those who have cried foul are several Democratic senators, including Charles E. Schumer of New York, who have said that if the accusation is true and if senior administration officials were its source, law enforcement authorities should seek to identify the officials who appeared to have violated the law. Mr. Schumer has asked Robert S. Mueller III, director of the Federal Bureau of Investigation, to look into the case.

The Best of the Web pointed out this even more telling statement from a 12/31/04 NYT editorial.  Note the complete lack of uncertainty as to whether there was any crime committed (emphasis added)

The change was announced by the newly appointed Deputy Attorney General James Comey, who turned the case over to a respected career prosecutor, Patrick Fitzgerald, the United States attorney in Chicago. Mr. Fitzgerald is charged with finding out who violated federal law by giving the name of the undercover intelligence operative to Mr. Novak for publication in his column.

Interesting to see how their perspective changed when the subpoenas landed at their door.  "Law enforcement needs to get to the bottom of this as long as, err, they don't ask us to help".

After seeing a piece of my son's history curriculum at school, I realized for about the hundredth time just how poor an understanding most people have about the great industrialists of the 19th century, so unfairly painted as "robber barons".  While it is said that "history is written by the victors", I would observe that despite the fact that socialism and communism have been given a pretty good drubbing over the last 20 years, these statists still seem to be writing history.  How else to explain the fact that men who made fortunes through free, voluntary exchange of products can be called "robber barons"; while politicians who expropriate billions by force without permission from the most productive in society are called "progressive".

To be sure, capitalists of the 19th century sometimes played by rules very different from ours today, but in most cases those were the rules of the day and most of what they did was entirely legal.  Also to be sure, there were a number of men who were fat ticks on society, making money through fraud and manipulation rather than real wealth creation (Daniel Drew comes to mind).  However, most of the great industrialists of the 19th century made money by providing customers with a better, cheaper product.  In the rest of this post, I will look at two examples.

The first is Cornelius "Commodore" Vanderbilt, the person to whom the term robber baron was originally applied (by the New York Times, interestingly enough - some things never change).  While Vanderbilt is perhaps best known for his New York Central railroad, the term was actually applied to him earlier in life in his shipping days, where he made a fortune running steamships in and out of New York City.  Vanderbilt stood accused of overly predatory tactics in moving into rivals territories.  However, in 1859 Harpers Weekly observed (via An Empire of Wealth by John Steele Gordon):

...the results in every case of the establishment of opposition lines by Vanderbilt has been the permanent reduction of fares.  Wherever he 'laid on' an opposition line, the fares were instantly reduced, and however the contest terminated, whether he bought out his opponents, as he often did, or they bought him out, the fares were never again raise to the old standard.  This great boon -- cheap travel-- this community owes mainly to Cornelius Vanderbilt". (sorry, no link available -- I guess they weren't putting their articles online in 1859)

In many ways, Vanderbilt was the Southwest Airlines of his day, and, just like with Southwest today, towns begged for him to serve them because they knew he would bring down rates.  In fact, there is actually another parallel with Southwest Airlines.  In the early days of Southwest, most of the airline industry was regulated such that new entrants competing at lower prices were pretty much excluded by government rules.  Southwest got around these rules by flying only in Texas, where interstate rules did not apply.  Their success in Texas was a large reason for the eventual demise of government regulation that effectively protected fat and inefficient incumbent airlines, with drastically lower fairs the result.

When Vanderbilt first entered the steamship business, most routes were given as exclusive charters to protected monopoly companies, most run by men with friends in the state government.  Vanderbilt took on the constitutionality of these government enforced monopolies and, with the help of Daniel Webster, won their case in the Supreme Court.  Within a decade, the horrible experiment with government monopoly charters was mostly over, much to the benefit of everyone.  While private monopolies have always proved themselves to be unstable and last only as long as the company provides top value to customers, publicly enforced monopolies can survive for years, despite any amount of corruption and incompetence.  Vanderbilt, by helping to kill these publicly enforced monopolies, did more than perhaps any other man in US history to help defeat entrenched monopolies, yet today most would call him a monopolist. 

By the way, there are two charges against Vanderbilt that partially stick.   Those are that he bribed legislators and that he sought out price fixing agreements with his competitors.  Both are true, but both need context. 

To understand the bribery, one has to recognize that NY state passed a law that you could not be convicted of bribery solely on the evidence of the other party involved in the bribe.  In other words, they effectively made bribery legal as long as you were smart enough to do it without witnesses.  The real corruption was in the NY legislature at the time.  While Vanderbilt's motives were likely not always pure, no one who understands the state of NY at the time would deny that Vanderbilt would have been gutted had he not pro-actively played the bribery game himself in Albany in self-defense.

The price-fixing charge is even easier to deal with in context - basically price fixing agreements were entirely legal at the time.  In fact, price-fixing has been thought necessary, particularly in transportation, by politicians of all stripes for centuries - remember as late as the 1970's we had government enforced price-fixing in railroads and airlines.  In the 1930's, FDR via the NRA briefly instituted a government price-collusion scheme on the entire economy.

My other featured industrialist here on hug-a-robber-baron day here at Coyote Blog is John D. Rockefeller.  At one point of time, Rockefeller controlled 90% of the refining capacity in the country via his Standard Oil trust.  He was and is often excoriated for his accumulation of wealth and market share in the oil business, but critics are hard-pressed to point to specifics of where his consumers were hurt.  Here are the facts, via Reason

Standard Oil began in 1870, when kerosene cost 30 cents a gallon. By 1897, Rockefeller's scientists and managers had driven the price to under 6 cents per gallon, and many of his less-efficient competitors were out of business--including companies whose inferior grades of kerosene were prone to explosion and whose dangerous wares had depressed the demand for the product. Standard Oil did the same for petroleum: In a single decade, from 1880 to 1890, Rockefeller's consolidations helped drive petroleum prices down 61 percent while increasing output 393 percent.

By the way, Greenpeace should have a picture of John D. Rockefeller on the wall of every office.  Rockefeller, by driving down the cost of Kerosene as an illuminant, did more than any other person in the history to save the whales.  By making Kerosene cheap, people were willing to give up whale oil, dealing a mortal blow to the whaling industry (perhaps just in time for the Sperm Whale).

So Rockefeller grew because he had the lowest cost position in the industry, and was able to offer the lowest prices, and the country was hurt, how?  Sure, he drove competitors out of business at times through harsh tactics, but most of these folks were big boys who knew the rules and engaged in most of the same practices.  In fact, Rockefeller seldom ran competitors entirely out of business but rather put pressured on them until they sold out, usually on very fair terms.

From "Money, Greed, and Risk," author Charles Morris

An extraordinary combination of piratical entrepreneur and steady-handed corporate administrator, he achieved dominance primarily by being more farsighted, more technologically advanced, more ruthlessly focused on costs and efficiency than anyone else. When Rockefeller was consolidating the refining industry in the 1870s, for example, he simply invited competitors to his office and showed them his books. One refiner - who quickly sold out on favorable terms - was 'astounded' that Rockefeller could profitably sell kerosene at a price far below his own cost of production.   

More here. In fact, many, many of these defeated competitors became millionaires in their own right with the appreciation of the Standard Oil stock they got in the merger.

Eventually the Standard Oil monopoly weakened as most private monopolies do.  Monopolies seldom if ever engage in the price-increase games everyone expects them to, but they do get risk averse and lose vitality over time without serious competition.  This indeed did happen to Standard Oil, and it missed a number of key market turns, such as the Texas oil boom.  By the time is was broken up under the Sherman anti-trust act, Standard's market share had already fallen to 60%.  As would be the case many times in history, the government acted on the economic "threat" of Standard Oil at the very time the market was already doing the job.

Ever since, people have expended a lot of unnecessary energy getting worried about bigness and monopolies in industry.  I always laugh when "progressives" decry the monopoly power of the oil industry to manage prices.  I worked for the oil industry in the 80s, and if they had the power to manage prices they sure were doing a crappy job of it.  If someone thinks that oil companies have been manipulating prices, they have to explain this chart to me.  If prices are manipulated at all, they look like they are being kept low and stable.

Another great example of monopoly paranoia is the near continuous Microsoft-bashing in the courts.  The most famous anti-trust case was the successful case by Netscape and numerous other Microsoft competitors attempting to kneecap Microsoft, nominally for monopolizing the browser market.  Now lets leave aside the obvious issue of just how consumers are getting hurt by being given a free browser by Microsoft.  The plaintiffs apparently successful argument (incredibly) was that through a series of technology and marketing moves, Microsoft prevented competition.  If that is so, if competing with Microsoft is so hard, then why are 30% of my visitors using Firefox when none used it a year ago.  I use Firefox, and you know what, it took me about 5 minutes to download, install it and start running it.  Boom, monopoly gone.  Lots more on anti-trust here.

UPDATE:  Welcome to the Greenwich Public Schools.  Thanks for linking me from your web site.  Despite my Arizona home today, I actually lived in Greenwich for a while growing up.  You can find other essays on capitalism and individual freedoms here and here, or you can check out Dave Berry, who is much funnier than I am.  If you are looking for a stronger defense of free markets than you can find in most public schools, a good place to start is at the Cato Institute.

Steven Malanga has a fascinating analysis of electoral politics in big cities (via reason):

The electoral activism of this New New Left coalition--public-employee unions, hospitals and health-care worker unions, and social-services agencies--has reshaped the politics of many cities. As the country's national political scene has edged rightward, thwarting their ambitions in Washington, these groups have turned their attention to urban America, where they still have the power to influence public policy.

In New York, this public employee coalition makes up a third of the work force and an even larger portion of the voters in the last election. 

An exit poll conducted by City Journal of the 2001 New York mayoral election found that private-sector workers heavily backed Michael Bloomberg, the businessman candidate who had been endorsed by Rudy Giuliani and had run on a pledge of no new taxes (which he broke after his first year in office), while those who worked in the public/health-care/social-services sectors favored his Democratic opponent, who ran on a promise of raising taxes to fund further services. In the race, Bloomberg won among private-sector voters by 17 percentage points, while the Democrat won by 15 points among those who worked in the public/nonprofit sectors

Read it all.

Several months ago in this post, I pointed out that the income tax system has become so "progressive" that:

Half of the people in this country pay more than 100% of the personal income taxes. The other half get, as a group, a free ride (though there are individuals in this group that pay paxes, net, as a group, they do not). We are basically at the point in this country where 51% of voters could vote themselves all kinds of new programs and benefits knowing that the other 49% have to pay for them.

Malanga's article points out the other side of the coin.  We are also increasingly approaching the point where, at last in certain urban centers, half the workers can vote themselves government jobs (and pay raises, pensions, etc) at the expense of the other part of the population.

Yesterday I mentioned employment at will in this post about police officers who were fired for assaulting a handcuffed man and who successfully sued for wrongful termination.

Via George's Employment Blawg comes this article on employment at will and things a small business should consider to reduce the possibility that fired employees will sue:

Here's where things get tricky. In between employment at will and the law is a whole mess of claims, counterclaims, lawsuits, disputations and confusion. It's enough to make anybody scratch their head.

We have had several instances where employees have threatened legal action over termination.  I have observed at least three reasons for this:

• Employees sometimes have a skewed view of the termination process, thinking that a company must hold to some kind of courtroom "beyond a reasonable doubt" standard in amassing reasons for termination.
• The most inept employees never seem to know that they are inept
• Some employees are far more adept at working the system than they are at their jobs.

We do several things to help make things go smoother:

• Unless the violation was outrageous, where we fire on the spot, we try to give employees written warnings and coaching before they get terminated
• Every new employee signs a 60/90 day probationary period letter.  If there are problems, they almost always occur in the probation period -- ie they turn up quickly -- and the probationary period gives us more leeway to quickly terminate.  Update:  This article says why this policy can be a mistake, or at least you have to be careful with it.  This is less of a problem for us since most of our employees only work a 5 month season anyway.
• We don't give references.  I have said that this makes me feel guilty, but negative references about fired employees are a big source of litigation, and frankly, I am sorry to admit, the treat of wrongful termination suit is greatly reduced if the ex-employee finds a good job somewhere else.  Kind of the business version of hot potato.
• Being a seasonal business saves us.  For many employee problems, we limp along until the end of the season when we can terminate the person for lack of work, then we make sure not to rehire them in the spring.

Update: Via Overlawyered, this story in the New York Post (gotta love the headlines) about a teacher fired 17 years ago and still filing suits:

But the Clifton, N.J., instructor never got over it. Instead, he has filed 15 lawsuits in Manhattan federal court and three others in Brooklyn and New Jersey courts, seeking reinstatement and millions of dollars in damages.

Each lawsuit has been tossed out as meritless. But a defiant Malley hasn't gotten the message or doesn't care.

I have written a lot on my frustration with the tort system.  If I had to summarize my issue in one sentence, it is that the system has moved away from assessing damages against parties truly guilty of substantial negligence or malpractice and has instead shifted to granting payouts to the injured, charging whoever happened to be nearby with deep pockets with the cost (see the tort thought experiment here). 

The result in this current system is that the innocent at best get high insurance premiums and at worst have to fight for years against ridiculous suits.  At the same time, the truly harmed fail to get compensation in a system clogged with BS claims, and the worst, truly bad doctors continue to practice.

But, as I said in the title, just because I am passionate about the tort system being broken does not mean that real damages aren't occurring.  For example, this story via Kevin Drum about medical interns:

In New York City residents routinely begin their day at six or seven in the morning, work twelve hours, then stay on call all night. In a practice that I think is particularly cruel, they typically don't get home until noon the following day "” several hours after morning rounds.

I have never, never understood why having interns practice medicine while sleep-deprived makes them better doctors.  This is fraternity hazing, plain and simple (not to mention cost reduction for hospitals).  I find it astounding that this practice still exists today, with the complexity that is modern medicine.  Astonishingly, most doctors seem to support this practice.  I find it even more astonishing that some smart attorney's haven't found a way to bring suit against hospitals for the plainly dangerous practice.  It is a great example of what I said above about what is wrong with the system - OB's are getting sued every day for birth defects they had no power to correct or prevent, but hospitals get away with this clearly dangerous practice?

UPDATE:

Reason has more here.  They make the interesting point that doctors support this hazing because it is a way to deter doctors from the field, in the same way as does occupational licensing, thus raising salaries. 

My company operates campgrounds and other recreational facilities on government lands, and the US Forest Service is our most important partner.  We work day-to-day with about 20 or so district rangers, who are the front-line general managers of the Forest.

My observation over time is that USFS district rangers have a nearly impossible job.  By their enabling legislation, the USFS is tasked with balancing logging, mining, ranching, recreation, forest health and environmental stewardship in running the forest.  In our modern day age of uncompromising special interests and conflict resolution by lawsuit, it is absolutely impossible to make any decision  without sending some party scurrying to the courts.  In particular, environmental groups have become expert at tying up any decision in court, and attempting to block any of the other competing interests.

The current Administration has introduced new rules intended to make this job easier.  As reported in the New York Times via the Commons Blog,

Forest Service officials said the rules were intended to give local foresters more flexibility to respond to scientific advances and threats like intensifying wildfires and invasive species. They say the regulations will also speed up decisions, ending what some public and private foresters see as a legal and regulatory gridlock that has delayed forest plans for years because of litigation and requirements for time-consuming studies.

I hope this is true, because I feel for front line forestry personnel who joined the service mostly because of their love of the outdoors and the environment, and have been forced instead to become amateur lawyers.  However,  I doubt much will change.  I think that intelligent planning and negotiation may be gone forever in working on environmental issues in favor of litigation.

Why Aren't There More Private Schools?  This is a conversation my dad and I have had any number of times - as he has sat on the board of a number of public and private schools / districts and I have, given frequent moves, oven shopped for schooling for my kids.

The first, perhaps most obvious answer is that there is not that large of a market, because few people can afford to pay two tuitions for their kids (i.e. public school tuition via property taxes and then a separate private school payment).  But, I think that that answer is wrong.  This country is tremendously wealthy, both on average and at the top end.  Most really good private k-12 schools are oversubscribed -- with competitive entry requirements and long waiting lists.  We have all heard stories about New York City schools where you have to practically go straight from the act of conception to the admissions office to have a chance to get the kid in.

I have my own experience with this, in many cities, but take Seattle for example.  In the east side suburbs, their are 3-5 high quality private elementary schools, and for the most part, they are all way oversubscribed.  One of them admits something like 6% of applicants.  And charges $10,000+ a year for kindergarten and more for later years.

What other industries are there where 94% of the demand for a $10,000+ product goes unmet by new entrants?  And unmet for decades, not just in a short period of mismatched capacity?  Just look at iPods - how many people jumped into the market with copycat products when they saw the popularity of this product, and Apple's inability to keep up with demand?

But what really got me thinking about this problem was when I moved back to Phoenix.  Despite having my kids in some of the best schools in every city we have lived in, the absolute best is, of all places, here in Phoenix.  How do I know it is the best?  Well, my son went to kindergarten at this Phoenix school, and then we moved to Seattle for two years.   In Seattle, we went to what was supposed to be about the best elementary school on the east side -  Gates sent some of his kids here, as did the McCaws, and many other people who could afford any place they wanted.  At the end of second grade, the school told me my son could have skipped second grade, which means he could have skipped first grade there too.  In two years, he never learned anything more than he learned in one year of kindergarten in Phoenix.

There are two other interesting things about this Phoenix-area private school, beyond just its excellence:

• It is by far the cheapest we have ever attended, less than half what we paid in Seattle and well under the average per-pupil spending in public schools
• It is for profit - not a charity or foundation.  It has no donations, government grants, endowments, etc.  It runs itself for profit, it is inexpensive, and the education is great.

The school is not perfect -- it has a strong focus on academics, without the big theater programs or art programs or photography classes you might find in a large public school, so we have to supplement that stuff outside of school.  But my point is, why aren't there more schools like this?  Why aren't people jumping in to fill this market?  This is more than of academic interest to me.  I am a big supporter of school choice, but to support choice you have to believe that private schools will be created to meet the new demand vouchers would open up.

Thus it is with great interest that I saw this post at Marginal Revolution about the barriers to starting a private school.  They link this article from the Reason foundation.  The Reason Foundation argues that a lot of micro-regulation, particularly zoning, limits private schools, especially when zoning boards are dominated by people who have an interest in protecting public schools from competition.

In the context of my Seattle story earlier, by the way, note this proposal that came out a while back to actually ban private school (and church) construction in large parts of the county that Seattle is in. 

UPDATE:

There were several responses to this along the lines of 'so what - everyone has to navigate basic permitting processes'.  That may be, but my experience is that zoning is stacked against private schools, even before you consider the proposed total ban on private school construction described in the article I linked above.  For example, in the Seattle eastside suburbs, one private school that needed to move to larger quarters was unable to find a site within a 20 mile radius where they were allowed to build a private school.  Residential zoned tracks did not want more traffic from a school, and they were not allowed to have a school with little kids in most commercial zoned tracks.  The point is that private schools face permitting hurdles that go beyond what most businesses face, and, as I mentioned earlier, most zoning boards are packed with people who have a vested interest in not allowing new private schools to be built anywhere.

Here is a scoop for a few folks out there:  6-year-olds do not have the reasoning ability or a sophisticated enough view of the world to be polical activits.  However, they are, given their lack of sophistication, perfect subjects for political indoctrination and great pawns for media-savvy advocacy groups looking for a little airtime.

I saw this story on Fox News today about a group of 2nd graders manipulated by their activist public school teacher and the Rainforest Action Network to protext at Chase Manhattan in New York against logging and oil drilling.  Apparently unable to get anyone with a high school education or a adult reasoning level to support their cause, the RAN turned to first and second graders:

"I celebrate the world, I celebrate the rainforest, and I care [about] the reality of what is happening with my students, which is only fair, and I let them make their own choices," said teacher Paula Healey.

Right.  Six-year-olds are in the perfect position to formulate their own opinion on sophisticated issues.  Even if the kids did have adult decision-making faculties, I would bet a gazillion dollars that Ms. Healey never brought any contrary opinions into the classroom, exposure to which is necesary for most of us to "make their own choices".

This is entirely inappropriate at this age in the Public Schools.  In my mind, this is just another reason for school choice - if there are parents who disagree with me and consider it a good use of a first grader's time to carry a picket sign about issues s/he can't possibly comprehend at a NY bank, then they should be able to send their kids to a school that so specializes, but the rest of our kids can be left alone to learn trivial stuff like math and reading.

Apparently blue state Democrats, who a couple of months ago were bashing Bush for his "tax cuts for the rich", have a new-found concern about...taxes being too high on the rich.  Specifically, as in this post on BlogCritics, the AMT is apparently hurting blue state rich folks disproportionately:

There is certainly a measure of rich irony in hearing stalwart Democrat Congressman Marty Meehan fretting (in front of microphones and camera of course) that the Bush administration's future tax policies will hit the well-to-do among his constituents. Says Meehan, "if this tax is not fixed, virtually every four person family in Massachusetts making $75,000 a year will have its taxes automatically increased by the AMT".

Duh.  I have been saying for years that the AMT, particularly without indexing, will soon constitute a huge stealth tax increase.  Which is why I hate this kind of unprincipled partisanship out of the Republicans:

Some Republicans have suggested leaving the minimum tax in place because those hardest hit tend to be in states that did not support Bush, including Massachusetts, California, and New York. "˜"˜It is a tax of people living in "˜blue' states,'' said Grover Norquist, the conservative activist who heads Americans for Tax Reform.

Wrong.  Taxes on the rich, even with recent tax cuts, are unbelievably high, even after the Bush tax cuts.  As I wrote here, the wealthiest 10% already pay 2/3 of the income taxes.  It is time for AMT reform.

The "news" today is that Eliot Spitzer has announced he is running for governor of New York.  This is about as surprising as the "revelation" that Barry Bonds took steroids.  Duh.  The "AG" job is not nicknamed "Aspiring Governor" for nothing.  Also, Spitzer represents the worst of a new trend of AG's using their prosecutor role to engage in lawsuits more for their media and publicity value rather than an sense of public service.  Why else would Spitzer involve himself and the AG office in a compensation dispute between two private parties, except for the fact that the two private parties are very high profile in NY.

OK, but what is this Antarctica thing?  Back when I was an undergrad at Princeton, one of my fondest memories was of a bizarre Student Body Governing Council (USG) election.  The previous USG administration, headed by none other than fellow Princetonian Eliot Spitzer, had so irritated the student body that, for the first time in memory, the usually apathetic voting population who generally couldn't care less who their class president was actually produced an energetic opposition party.  Even in his formative years, Spitzer was expert in using his office to generate publicity, in this case frequent mentions in the student newspaper that finally drove several students over the edge.

The result was the incredibly funny and entertaining Antarctic Liberation Front.  I wish I had saved their brochures, but their proposals included things like imposing a dawn to dusk curfew on the school and funding school parties by annexing the mineral rights between the double yellow lines of the US highways.  All of this was under the banner of starting jihad to free Antarctica.  The ALF swept the USG election.  This immensely annoyed Spitzer and other USG stalwarts, who decried the trivialization of such an august body.  The pained and pompous wailing from the traditional student council weenies (sounding actually a lot like liberals after the last presidential election) only amused the general student population even further.  After a few student-council-meetings-as-performance-art, the ALF resigned en mass and life went back to being just a little bit more boring.

If you think I am exaggerating in saying that the Spitzer-led student council types had a whiny reaction to this bit of fun, you should know that Spitzer was still whining about it 20 years later to the New Yorker magazine.  Virginia Postrel, also a Princetonian at the time, had a similar reaction to mine here, and fisks the New Yorker article.

Back in Texas in the 1980's, a number of large tottering banks merged, in an attempt at survival.  The result was called two drunks propping each other up, and it seldom worked.  The classic example is the Pennsylvania-New York Central railroad merger which ended in one of the most catastrophic bankruptcies of all time, and the largest industry nationalization in US history.

It was exactly these precedents that occurred to me today when I heard that Sears and Kmart are merging.  Scrappleface apparently was thinking the same thing, but is much funnier than I am.

UPDATE:

Other good examples in the comments.  I fell over laughing at "the EU".

The workers compensation program in Florida is broken. In a previous post, I discussed why, almost no matter how broken it is, workers comp is still better than an alternate world without it. Sometimes, though, Florida tests me on this.

If you don't know, Florida is one of a couple of states (California and New York are others) that national carriers of workers comp insurance avoid because it is such a mess. Fraud is high, costs are high, benefits are low.

I found a new reason to dislike Florida workers comp today. Apparently, there are lawyers out there in Florida advertising that a worker will never get their fair shake out of the insurer unless they hire a lawyer. We have an ex-employee who was injured in a vehicle accident while at work. A claim was filed, and the workers comp system is processing the claim (though a bit delayed due to 4, count them 4 hurricanes to hit Florida in one month). So, for some reason, the employee has hired a lawyer. I do not know what he will get with the lawyer, but this is an awful trend, because the only redeeming feature of the workers comp system is that it keeps lawyers and their costs out of it. I have no idea how the lawyer gets compensated, but I am sure at some point, I will be paying his fees one way or the other. If the employee is paying for him directly, I really feel bad for the employee, because I don't know what value he is getting for his money.

So, the lawyer, putting in a good 15 seconds of work (which he probably bills an hour or two for) pulls a xeroxed set of discovery questions and sends them to me. There are thirty four questions, all with things I have to look up or xerox and send to him. None of them are tailored to this case, so most will end up being irrelevent and all my info gathering a waste of time. So, not only is there the cost of the attorney's fees adding to the process, but the externalities of the cost of my and my employees' time to feed him with data. All to probably get the same recovery for the patient the system would have given him without intervention.

This is what I really dislike about the law profession nowadays. They are the only people except for the government who can arbitrarily demand a ton of my time calling up data that no one will ever look at. Other people try this - for example, some vendors have sent me huge credit applications that would take weeks to complete - but in their case I can say "no" and tell them if they insist, they don't get my business. Lawyers and the government, though, can demand arbitrarily intrusive and time-consuming document collection and there is not a thing I can do about it.