Coyote Blog

After spending gobs of electrons on this post about the US trade deficit explaining why it is not a debt, and is not even necessarily bad, I got a depressing number of comments and emails like this one:

The trade deficit is a debt. We cannot get the dollars back we have
spendt unless we export to get them back. It is called an external debt
for a reason. It is called a current account debto for a reason.

Aaaaargh.  It is depressing that we can get such economic ignorance, particularly in a self-righteous way.  The crappy media coverage of these issues has people convinced that it just has to be this big old debt out there someone is going to have to repay someday. 

OK, I will try again.  But in response to this specific post, it is only called "external debt" or "current account debt" rather than "deficit" by really, really sloppy media people who have no idea what they are talking about (unfortunately, there are a lot of these).  And a deficit is not a debt, though it can sometimes create a debt.

I try to be very respectful of my readers.  I never delete a comment, unless it is spam/bot stuff or in a few cases where commenters have asked me to.  So it is only with the deepest respect that I say the following:  Please do not bother to comment on this post if a) you do not understand the difference between the federal government deficit and the trade deficit and/or b) you do not understand the difference between an account deficit and a debt.  Seriously.  Just take my word for it that you need to educate yourself a bit first, and then feel free to leap into the debate.  (Update:  This was a poor tone to adopt, see here).

First, A Thought Experiment

This is not meant to constitute proof, but for those who are concerned that the trade deficit is potentially disastrous for our economy, I can only ask, When?  Because we have been running a substantial trade deficit as a nation for over a quarter of a century, and by all accounts, over that same time period, we have had just about the strongest economy in the world.  In fact, I would propose that the causation is more likely just the reverse.  Because we have had a strong economy, with extraordinary wealth creation, we have taken some of that wealth and spent it on goods from other nations.  And because we have the safest nation in the world in which to invest, demand for our local investments tends to shift exchange rates in a way that increase the trade deficit.

In the late 80's and early 90's, everyone was in a panic about Japan.  We were running a massive trade imbalance with Japan.  They were going to buy all of our real estate.  Their government was tipping the scales in their own favor.  They were purposefully depressing the yen to encourage exports.  Blah, blah, etc, etc.  And you know what happened?  They subsequently went into a decade and a half long recession they are only just now climbing out of, and we had one of the strongest economies in history. 

How do the Dollars Get Back?

With a couple of exceptions that don't really change our conclusions, dollars do follow a closed loop.  In other words, if we send them to China or India, they generally eventually come back.   The question is how.  To understand this, it is first important to understand that the balance of trade deficit only measures some monetary flows.  In particular, it looks at the balance between manufactured goods traveling between two countries.  If the US has a $20 billion trade deficit with China, it means that they shipped $20 billion more of manufactured goods to us than we shipped back to them.  It includes some but not all services.  It does not include goods or securities or investments purchased by foreigners that remain on US soil.

To understand how the dollars come back from China in a closed loop is to, in a sense, ask the question of what monetary flows are not included in the trade deficit.  If we have a trade deficit with China, there are a number of things it can do with its extra dollars:

1. It can do nothing with them - just hold them in a big pile
2. It can lend the money to people buying their products
3. It can buy certain US services
4. It can buy US goods, but not take them out of the US
5. It can buy US public and private securities and real estate

Lets look at each in turn

1.  China can do nothing with them - just hold them in a big pile

Two words:  In-Sane.  By just holding them, they would effectively be sticking them in a mattress and foregoing any interest or investment income.  It's just not going to happen.  And don't say, well they could just put the dollars in a Chinese bank.  Fine, but the only way the Chinese bank is going to pay interest on dollars in the bank is if they turn around and invest the dollars in dollar-denominated investments.  One way or the other, the money, if it does not buy anything else, will get invested, which we will deal with in point 5.

I know there are paranoiacs that worry that the Chinese, despite the financial disincentives, will hold these dollars anyway in a big vault or something out of spite.  Gee, hurt me, hurt me.  Holding our dollars in a big mattress in Peking does nothing to hurt us.  And dumping them all on the market simultaneously may sound scary to conspiracy theorists, but in practice it would hurt them worse than it would hurt us, and the pain would be relatively short-lived  (just ask the Hunt brothers about this strategy).

2.  China can lend the money to people buying their products

I suppose that for those who don't get the federal deficit and the trade deficit mixed up, this is what they assume is happening, that Americans are borrowing from the Chinese to finance manufactured goods purchases.  The only problem is that it is not happening, at least to a greater extent than any normal purchase-financing arrangements.  Take corporations such as Wal-mart, a huge buyer of Chinese stuff.  Is Wal-Mart going into debt to buy Chinese stuff?  No, and certainly not to the Chinese. 

Well, are individual Americans going into debt to buy Chinese.  Maybe, but the key point is that they are not going into debt because what they are buying is Chinese.  They are going into debt because Americans, for whatever reason good or bad, are saving less and choosing to buy more on credit.  This would be happening if what they were buying was Chinese or American made.  In other words, American consumers may have debt, but that debt would exist even if we had no trade deficit with China.  It is a personal choice people are making that has no relation to the source of goods.

3.  China can buy certain US services

Note that many US services are not included in the trade deficit calculations.  If Chinese companies engage McKinsey & Co. consultants in the US to figure out how to sell more stuff to Wal-mart, those payments for services are probably bringing dollars back to the US from China, but aren't included in the trade calculations.  This really is just a subset of point four:

4.  China can buy US goods, but not take them out of the US

Many, many of the dollars the Chinese end up with come back to us in this way.  As did many of the dollars the Japanese had in the eighties.  If a Chinese company uses dollars not to buy US goods and take them back to China, but buy them and consume them in the US, then this does not show up in the trade numbers.  Chinese and Japanese companies bring their US dollars to the US to build factories and infrastructure.  This is sometimes why it is said that the trade deficit is not a measure of differences in cash flows, but of a difference in where goods are consumed. 

If you flip the equation around, the Chinese have a wicked balance of stuff deficit.  They are sending a lot more manufactured goods to the US than they get back.  I could argue that Chinese workers are getting hosed, since they only get to enjoy a fraction of the goods they produce for themselves, since a large portion of the product of their labor is sent overseas for others to enjoy.  Hmmm, doesn't sound so bad that way.

5.  China can buy US public and private securities and real estate

Of course, what happens with a lot of the US dollars the Chinese find themselves with is that these dollars get invested in US investment vehicles, from real estate to government bonds to private equities.  There are several points that need to be made here:

a.  Just Because Chinese invest in US Government Bonds does not make them or the balance of trade responsible for this debt

As I intimated above, a lot of people get the US federal budget deficit confused with the trade deficit.  Making this confusion worse, the Chinese use a lot of the dollars they earn in trade to buy US Government Bonds that help finance the federal budget deficit.  Now, by buying a lot of government bonds, one might argue that the Chinese lower interest rates and make government borrowing easier, thus making the federal budget deficit worse since there is a ready source of debt financing. 

While there may be a link here, it is tenuous at best.  If the government was a private company, then its borrowing level might rationally fluctuate up and down based on interest rates and capital availability.  But the US Government is not this rational.  It runs a budget deficit primarily because legislators and bureaucrats alike have the incentive to spend other people's money to protect their jobs and power base.  This happens equally at 3% interest rates and 9% interest rates.  It happens equally if guys from Peking or Omaha are buying government bonds.  In fact, one could argue that Chinese reinvestment of their trade dollars in US securities actually marginally reduces the government debt by reducing interest costs.

This same argument holds equally true for Chinese investments in private debt.  Chinese dollars may increase borrowing slightly, but only because the influx of their cash reduces borrowing costs.

b.  Chinese Ownership of US Assets is GOOD

In the Japanese scare of the 1980's, everyone was freaked out that the Japanese were buying up American assets and real estate.  During that time, while I almost never play the race card, it was almost impossible not to come to the conclusion that some racism had to be involved in this fear.  America had welcomed, in fact, had prospered, via foreign investment for years.  For a century, the US has been the safest place for foreigners to put their money,something we should be proud of  -- A sign of strength, not weakness.

But suddenly, everything was different because the new buyers were Japanese.  Note the following:

Despite the notoriety of
Japanese investors, the British have the largest U.S. direct investment
holding"”with the Dutch not far behind"”as has been the case since
colonial times. In 1990 the United Kingdom held about 27 percent of
foreign direct investment in the United States, significantly greater
than Japan's 21 percent. The European Economic Community (EC)
collectively holds about 57 percent. Moreover, according to research by
Eric Rosengren, between 1978 and 1987, Japanese investors acquired only
94 U.S. companies, putting them fifth behind the British (640),
Canadians (435), Germans (150), and French (113).

But no one was complaining about the British, Canadians, Germans, or French.  Only the Japanese.  I have to come to the conclusion that there was some racism involved, with the same primal fears at work that caused us to ship US citizens of Japanese decent off to concentration camps in WWII but we did not do the same of citizens of German or Italian decent.  And in this case, it could not have been security concerns.  Since 1945, Japan is one of the most pacifistic nations in the world- we probably face a bigger security threat from Belgium than we do from Japan.

I get the same feeling today with the China panic that I did twenty years ago with Japan.  Its a race and a culture we don't understand well, so we get xenophobic.  People lament that China is a real security threat, and that certainly is true to an extent.  But ask yourself this - Is China more or less of a threat to hurt us if their economy, their financial prosperity, and most of their assets are tied to the US?  Is China more or less stable now that their people are not starving and they are rapidly developing the largest middle class in the world?

Conclusion

If you are still having trouble understanding, the problem may be that you insist on thinking of economics as zero-sum.  This is the fallacy of 18th century mercantilists, who saw the economy as a big fixed tank, and if more flowed overseas than flowed back, the tank level would fall until the country was bankrupt.  There are at least two key fallacies here:

1. Wealth is not zero-sum.  It is created.  It is expanded.  Some can even be spent frivolously on big ass plasma TV's from China and we are still wealthier than we were decades ago.
2. Trading has value in both directions.  As mentioned above, looking at only the currency side of trading misses a lot.  By definition, in a free trade, both sides believe the trade increases the value to themselves, or they would not have made the trade.  So trading per se, no matter what the currency flows, can only lead to wealth creation, not its destruction.

Postscript - New Mercantilism

Lamenting the trade deficit is always a precursor to interfering with free trade.  It is important to note that free trade has always led to prosperity, while protectionism has always led to stagnation. 

Several protectionists today are trying to make the argument that OK, that might have been true in the past, but today is different, and today, free trade is uniquely bad.  Economist Paul Craig Roberts made this argument, that, as Don Boudreaux summarizes it:

the American standard of living is threatened by the world's growing
prosperity, improved education, better governance, and greater fluidity
of capital and resources to move in search of higher returns

Boudreaux, a writer at the fabulous Cafe Hayek, does a good fisking of this argument, but I think I can demolish it even faster.  By this logic, California would be better off if the eastern part of the US was suddenly impoverished and made educationally backwards.  This is absurd.   Sure, the industrial east suffered some temporary dislocations as the south modernized and competed for factories.  But this was only temporarily.  As the south got richer, it wasn't a contest between regions for a fixed number of factories, the number of factories and jobs grew, so that all parts of the country had more. 

Is there anyone who thinks that half of the US would be better off
economically if the other half were turned into a third world nation?  Is there any company executive that thinks they could survive if half their market went away?  So why is half the world better off if the other half is impoverished?  If you are saying, gee, the only reason I can come up with is that zero-sum fallacy Coyote keeps talking about, go to the head of the class.

Update:  In comments and emails, my readership educates me that citizens of German and Italian decent were interned in WWII as well.  While I knew that Germans and Italian POW's were interned in large numbers in the US in WWII, I was not aware of internship of US citizens with German or Italian blood, though the programs for these nationals do seem more limited than the west coast movement of Americans of Japanese decent.   My first and second generation German immigrant family members never reported being harassed in any way, either publicly or privately, during the war and most all served either in the US military or war production industries.  I will still stick by my core point that investment in the US by Asian nationals is not treated the same as investment by European or Canadian nationals.

I have also gotten a number of emails and comments on the differences between various trade and current account deficit indicators.  I tried to avoid getting into all that, assuming, I think rightly, that it would just clutter up the argument and would not substantially affect the conclusion.  Just for the record, though, there are many different metrics, that range from narrow measures of manufactured goods flows to much broader measures of capital and services flow.  You can assume that 90% of the time, the media article you are reading about the deficit probably does not correctly describe the metric it is using.

Vioxx went to 3 for 6 in jury verdicts today as Merck lost a case in Texas (WSJ $).  Merck got hit with $7 million in damages plus $25 million in punitive damages, presumably since Merck was so clearly at fault as to be considered to have acted recklessly.  With that in mind, consider a couple of facts in the case:  First, the plaintiff..

died of a heart attack after taking Vioxx for less than a month.

I know what you are thinking.  How, after less than a month of use (and maybe as little as a week), could any plaintiff prove their heart attack was from Vioxx?   I mean, out of the thousands of people who took Vioxx, some statistically were due for a heart attack even had they not taken the drug.  Having one event (the heart attack) follow another (Vioxx use) does not prove causation, after all.  I guess the jury decided that this guy was not at risk for a heart attack otherwise.  Of course, they admitted that:

Mr. Garza, a Vietnam veteran who was 71 years old when he died in 2001,
had a history of smoking, had suffered a prior heart attack in 1981 and
had quadruple bypass surgery in 1985.

But I'm sure that had no bearing on his heart attack.  It must have been from the week of Vioxx.  His lawyers mitigated this by arguing:

he had a stress test shortly before his heart attack that showed he was in good health

Do you know how many men die of heart attacks within months of having a clean stress test?  A lot.

The plaintiffs initially asked for a billion dollars, so I guess if only by comparison the verdict was reasonable.  I wrote more about the danger of making uninformed juries the arbiter of what risk trade-offs we as individuals can take with our medications here and here and here.  I questioned multiple punitive damage awards for the same offense in the context of double jeopardy here.

A pair of news stories has me spooked tonight.  This first is via Instapundit, and is a story of human pettiness that would be funny if the stakes were not so high:

President Chirac and three of his ministers walked out of the room
when Ernest-Antoine Seillière, the leader of the European business
lobby UNICE, punctured Gallic pride by insisting on speaking the
language of Shakespeare rather than that of Molière.

When M Seillière, who is an English-educated steel baron,
started a presentation to all 25 EU leaders, President Chirac
interrupted to ask why he was speaking in English. M Seillière
explained: "I'm going to speak in English because that is the language
of business."

Without saying another word, President Chirac, who lived in
the US as a student and speaks fluent English, walked out, followed by
his Foreign, Finance and Europe ministers, leaving the 24 other
European leaders stunned. They returned only after M Seilière had
finished speaking.

That's the silly part, but the underlying issue that was being discussed is not so silly:

In the absence of his President, M Seillière gave warning about the
dangers of the "economic nationalism" being pursued by the French
Government. The summit, aimed at restoring confidence in the future of
the EU, has been overshadowed by a row over the tide of protectionism
sweeping the continent, with Tony Blair and Angela Merkel, the German
Chancellor, cautioning about the danger of raising barriers to foreign
competition.

What has me really worried is that the US, the only vaguely consistent defender of free trade in the world for the last 60 years, is having the same discussion, initiated not so much by the economic problems in Europe but by security issues.  As I warned earlier, Congress seems ready to use the events of the Dubai ports mess and the fear of 9/11 to clamp down on foreign investment (sorry, $ required I think):

Building on their win in the Dubai ports deal, U.S.
lawmakers are moving to gain leverage over a swath of foreign
investments in the U.S., an effort that business leaders and President
Bush's aides warn could harm the U.S. economy.

In the first serious legislative move, Senate Banking
Chairman Richard Shelby (R., Ala.) released the summary of a bill
Friday that would greatly expand the array of foreign acquisitions
subject to automatic scrutiny and would require the administration to
notify lawmakers as soon as it begins to review any foreign
transaction. The bill also would require the administration to rank all
countries according to their relations with the U.S. and their support
for weapons-control deals. Approvals would then depend in part on the
ranking of a company's home country.

The administration would have to report to Congress on
why it approved or rejected any transaction, but the bill wouldn't give
lawmakers the power to veto a deal, as many critics feared.

Business groups and Bush administration officials
expressed immediate alarm over several provisions in the bill, which
Shelby aides claim has the support of other members of the Banking
Committee. In a letter to Sen. Shelby this week, seven groups
representing the nation's top banks and finance companies warned that
legislative proposals making the rounds of Congress "would threaten
job-creation prospects for the U.S. economy" and "reduce U.S. economic
growth."

Building on their win in the Dubai ports deal, U.S.
lawmakers are moving to gain leverage over a swath of foreign
investments in the U.S., an effort that business leaders and President
Bush's aides warn could harm the U.S. economy.

In the first serious legislative move, Senate Banking
Chairman Richard Shelby (R., Ala.) released the summary of a bill
Friday that would greatly expand the array of foreign acquisitions
subject to automatic scrutiny and would require the administration to
notify lawmakers as soon as it begins to review any foreign
transaction. The bill also would require the administration to rank all
countries according to their relations with the U.S. and their support
for weapons-control deals. Approvals would then depend in part on the
ranking of a company's home country....

The administration would have to report to Congress on
why it approved or rejected any transaction, but the bill wouldn't give
lawmakers the power to veto a deal, as many critics feared.

Business groups and Bush administration officials
expressed immediate alarm over several provisions in the bill, which
Shelby aides claim has the support of other members of the Banking
Committee. In a letter to Sen. Shelby this week, seven groups
representing the nation's top banks and finance companies warned that
legislative proposals making the rounds of Congress "would threaten
job-creation prospects for the U.S. economy" and "reduce U.S. economic
growth."

This sucks, particularly in the light of a president who has at best been only a luke-warm defender of free trade and who seems to have entirely misplaced his veto pen.  It is an interesting statement on how far this president has wandered from his party's traditional roots that I would greatly prefer to have his predecessor Bill Clinton in office for this fight.  Clinton was certainly a mixed blessing for us anarcho-capitalists, but he was always a strong and articulate defender of free trade, even to the extent of opposing the strong protectionist wing of his party.

In addition to the security issues involved, I have also tackled the overblown fears about trade deficits here, among other places.  For those of you in Arizona concerned about free trade, I know that Congressman Jeff Flake, one of the few remaining folks in Congress who understands free markets and small governments, shares some of these same concerns about rising protectionism.  I hope those of you in his district will continue to send him to Washington to serve us, and I would like to see where our other AZ Congresspersons stand on free trade.  I don't want to pre-judge, but this is one of those issues where I have no trust that McCain (for example) will land on the correct side of the issue.  I fear that conservatives are going to feel the need to flog the security horse right through the November elections, no matter what other principles get trampled in the process.

As a final note, I could add the current backlash against immigrants as
the third leg of this story on rising economic nationalism.  One of the
things that has surprised me the most in getting comments to this blog
is how many people who accept global free trade as right and beneficial
in turn support strong restrictions on immigration (Cafe Hayek comments on economist Robert Samuelson as one such person).
I see free trade and free immigration as having exactly the same
philosophic roots, based in the fact that our rights to trade,
associate, etc. stem from our humanity, not our citizenship.  I won't repeat my argument but you can read it here;
if you are pro-free-trade but anti-immigration, I ask that you give me
five minutes to make the case that no one else seems to want to make
today.  And even if you don't accept the philosophic similarities,
economicly open immigration and free trade are nearly identical issues,
each involving the free flow of labor, capital, and goods across
borders.  If you still can't see the similarity, here is a quick
example:  If I decide that my best sourcing decision is to subcontract
my tech support to Claude in France, I can do this equally well by
either straight outsourcing to Claude where he lives today (global
trade) or by encouraging Claude to move to the US to do the work for me
here (immigration).

As a followup to this post on security as a Trojan horse for protectionism, I wanted to link this article in the WSJ($) called The Perils of Protectionism:

Fifty-six percent of the economists polled in the latest WSJ.com
forecasting survey -- conducted in the aftermath of a flap over foreign
management of U.S. ports -- say protectionism will lead to some
slowdown in U.S. growth over the next several years, and 8% predict
that the slowdown will be significant....

The ports controversy came at a time of growing concern about
protectionism around the world. It followed the blocked bid by China's
Cnooc Ltd. to acquire Unocal Corp. last year and emerged as European
governments angle to prevent high-profile utility deals within their
borders. The fear is that if governments take steps to shield their
countries' businesses, international trade and investment flows could
be reduced. Corporations will find it more difficult to reach new
markets.

Protectionism is unambiguously bad," said David Berson, chief economist
at Fannie Mae. Indeed, the free flow of capital across national borders
is conventionally looked upon by economists as a long-term good, and
69% of those surveyed say foreign ownership of U.S. assets is positive
for the economy in the long run.

One example of why the protectionist arguments are short-sighted is demonstrated by this passage from the same WSJ article:

While the ports row has receded, the U.S.'s large bilateral trade
deficit with China, which was $17.91 billion in January, remains a
flashpoint. Some lawmakers complain the imbalance has been inflamed by
an artifically low exchange rate for China's yuan against the dollar.
Though Beijing modestly revalued the yuan last summer, allowing it to
float in a narrow range against a basket of foreign currencies, critics
have continued to lash China's currency policy and call for further
revaluation.

So the Chinese government is artificially subsidizing the US economy through reduced prices of Chinese goods via a low valuation for the yuan vs. the dollar.  And that's a bad thing?  If the Chinese government is holding down the exchange rate, then they are in fact taking their money and the money of their citizens and pumping it into lower prices for US consumers and lower interest rates on US government debt.  Ooooh, color me really concerned.

As far as the "well, we're going into debt to pay for our consumerism" argument, I and others have tried and tried to educate the world that the trade deficit is not a debt, and running a trade deficit is not bad.

I just bought, or rather built, a new home computer.  My last computer, a Dell, was about 18 months old.  I really enjoyed building my own this time, and Newegg.com makes it pretty easy, and there are lots of articles out there to help.  As with my old Dell, I bought a processor that was one notch or two below the fastest currently available, which tends to be a sweet spot in price-value.  This time, though, I switched from Intel to the AMD dual core ("toledo") at 2.2 Ghz.  Basically both my computers are/were fast machines for their times, though since I built this new one myself, I did a few extras, like going with parallel SLI graphics cards and I overclocked the whole rig about 10-15%. 

The result?  My 18-month-old machine gets a 3dwinmark score of 250.  My new machine gets a score of over 13,000, or over 70 times better!  Granted, this is on a synthetic benchmark mainly aimed at measuring 3d graphics performance, but this is still a huge leap in performance in 1.5 years.  I have also played around with my hard drive selection and configuration to get a jump in performance there as well.

I spent a lot of time researching and picking out my components -- that is the real joy of a self-build, that you know the quality and trade-offs of every single subsystem in the box.  If anyone out there is interested, email me and I will tell you the exact components I chose and why, or maybe I will do a post on it sometime.

UPDATE:  Components posted here.

The other day, I saw Coyote Blog grouped into a category of "conservative blogs".  I know a lot of folks tend to immediately shorthand free market economics to "conservative", but I bristle at the tag, particularly given the knife sticking out of the free economy's back right now with Republican finger prints all over it.  Therefore, I have decided that it is time to take one of those wildly unpopular libertarian stands that will help ensure that I don't get lumped in with Pat Robertson any more, while simultaneously guaranteeing I will never be able to hold elective office or survive a Senate confirmation.

For some reason, perhaps because of the recent Hollywood movie on the topic, there seems to be a lot of talk and concern in the press about white slavery and forced prostitution.  To which the general legislative response is "Let's crack down on prostitution".

The reason women get used and abused in the prostitution trade is because the trade is illegal, not because we aren't tough enough on it.  If a woman working at Wal-mart has part of her pay stolen by her boss, or is required to pay sexual favors to hold her job, she has legal recourse, both to the police and to civil court.  In fact, walking into an attorney's office and declaring "I work at Wal-mart and my boss forced me to have sex and stole my pay" would likely result in her becoming a millionaire some day.  On the other hand, a prostitute today who walked into a police station and declared "I work as a prostitute and my boss stole my pay" would likely result in her arrest.  Women get abused precisely because their trade is illegal, giving them no real recourse to the legal system.  Making prostitution legal would give thousands of abused women their first chance ever at freedom from their tormentors.

I think the time is right to revisit the subject of legalized prostitution.  America, for all the talk of a Republican-led theocratic state, has continued to relax itself on enforcing moral norms between consenting adults.  Forty years ago, the majority of Americans opposed legal homosexuality, legalized gambling, and even interracial marriage.  In many states, even tattooing was illegal.  Today, though we still suffer through some tortured ethical logic (e.g. gambling is moral as long as it is on a boat but not on land) these practices are legal in many parts of the country.  Its time to recognize that consensual sex between adults should be legal in all its forms, including those forms where money is exchanged.  By the way, speaking of bizarre ethical logic, today, in most states, exchanging money for sex is illegal EXCEPT if the act is filmed and the film is distributed widely.  Then the sex act for money is no longer prostitution but is pornography, which while frowned upon by many is generally legal.

Interestingly, feminists tend to be split on this issue, in part because feminists tend to split into at least two camps.  The first camp is the libertarian-feminist, who honestly want to empower women, and who try to be consistent to the "women should be able to make decisions for her own body" argument used in abortion and which leads them to support legalized prostitution as well. I can imagine these feminists saying "Hey women out there, if men could
make $500 an hour having sex, does anyone doubt that it would be legal?"

The second camp is the sort of uber-gender feminists, whose agenda is more about molding all women into their idealized female.  These feminists, who seem to control many women's organizations today, have created a whole new kind of morality that women must follow, a morality that seeks to ban breast implants since they are a trivial pandering to male aesthetic norms and to keep prostitution illegal because they see it as degrading to women.   These women use the language of choice in their abortion politics, but they are more about a new form of master-gender (rather than master-race) fascism.

By the way, when I say "free the hookers", I really mean free them.  Several countries in Europe have partially liberalized prostitution, but have reported there is still a lot of sex industry underground.  The reasons is that these countries have applied typical European economic policy to the fledgling industry, meaning they regulated the crap out of it.  Specifically, they tend to put extreme licensing requirements that artificially limit the number of people who can perform the trade legally, much like New York artificially limits the number of cab medallions.  And they get the same result as with cabs in New York - a large gray market is created, and the benefits of bringing the industry out in the open are thwarted.  More on the problems with licensing here and here and here.

After you finish this post, I have an updated post on the same topic here.

Well, the US trade deficit is up again, and you can be sure the news was accompanied by a lot of moaning and groaning and soul-searching.  The main reason that all the media and the majority of Americans freak out over large trade deficit numbers is that they look at the American economy as a large bank vault with a fixed supply of money on the shelves.  They reason that if more money is going out of the vault to buy things than is going back in from sales, then eventually the vault will go empty and we will be bankrupt.  Either implicitly or explicitly, those who fear trade deficits perceive the trade imbalance to be red ink, something bleeding out of a fixed supply.

This view of the trade deficit as a being a growing and unsustainable debt is wrong.  I will try to explain in a couple of ways.

The micro view

Lets first look at it from the perspective on one individual.  Lets say Fred made $50,000 this year, and lives in a US where, before he makes his spending decisions, trade is exactly in balance with China.  Fred spends some of his income on rent, and invests some in some nice US equities.  And he takes $1000 of what he just made that he might have saved and buys himself a nice Chinese-made plasma TV so he can really enjoy the Superbowl next year.

So, where's the debt?  One can argue that net savings is lower (perhaps - we haven't gotten yet to where the Chinese are spending their extra US dollars), but Fred seems to have increased the trade deficit without incurring any debt.  In fact, Fred is actually better off, since in a free society no one engages in a transaction that doesn't return more value than one spends.  In this case, the plasma TV provides more than $1000 of value back to Fred, or else he would not have engaged in the transaction. 

Yes, many people are buying Chinese TV's with consumer debt, but these same people are buying much more American stuff with consumer debt as well.  To the extent that there is or is not a "problem" with people taking on too much consumer debt, this problem is absolutely unrelated to the country of origin of the goods they are buying.  You can max out your Visa card on American stuff just as easily as on Chinese stuff.

But wait, you say.  The reason the debt is not obvious is from the way I structured the problem.  I assumed the rest of the economy was static while Fred was making his decision.  But if Fred had bought American, somewhere in the US economy there must have been less debt.  So we will tackle this next.

The Economy is Not Zero Sum

Repeat please:  The economy is not zero-sum.  Never has it been so hard to convince people of a concept that should be so obvious.  I used up bushels of electrons explaining why the economy is not zero sum here, but the short proof is easy:  Look at the world in 1900.  Look at it today.  The world as a whole and most every individual is far richer.  The fact is that economies create wealth every day, and free economies create a LOT of wealth.

At the heart of every argument that the trade deficit is bad is the mercantilist notion that the US economy is a bank vault leaking funds.  But this analogy that seems to be in everyone's head is flawed.  The supply of money or wealth in the US, in the vault, is constantly growing.  If you really have to think of it as a vault, then think of what's inside as rabbits rather than gold bars.  Does anyone doubt that if you start with a hundred rabbits and every year sent a few to China that you might still have more rabbits than you started with in the vault?  A free economy is like a group of rabbits on Viagra.  Even if the Chinese took billions of dollars they got from selling goods to the US each year and burned the money in a big bonfire, the US still would be growing in wealth.

Of course, the vault analogy sucks for a larger reason, that the US economy is deeply integrated with that of the rest of the world.  In fact, much of the wealth creation comes from this very integration, providing a more robust division of labor and a deeper well of creativity and entrepreneurship than any one country could achieve on its own.  And the dollars we send overseas don't stay there, they come back.  But we will address this next.

So What do the Chinese do with Those Dollars?

OK, so we are all short-sitedly (at least according the the "progressive" intelligentsia) sending dollars to China to satisfy our consumerism.  So what do those Chinese do with those dollars?  They can't spend them domestically, because stores and vendors in China don't accept dollars any more than the Wal-mart down the street from me accepts Yuan.

Most all the dollars have to come back to the US, or the person in China holding them gets no value.  You could say, well that person can take them to the bank and exchange them for Yuan, and that is true.  But that bank would not accept the dollars for exchange unless it knew it could get them back to the US, or had another client that needed them to make a purchase in the US.  So, the dollars will have to come back to the US to purchase something.

Some of the dollars come back to purchase US goods and raw materials, but of course this is less than the total dollars the Chinese have to spend, or else there would be no trade deficit.  In fact, this all that the words "trade deficit" really means.  It means that of the dollars the Chinese receive from sales to the US, only a portion is used to buy American goods that are shipped back to China.  The rest goes to buy American .. something else.

What?

Well, some of it goes to purchase American goods that stay in the US.  Lets shamelessly steal an analogy from Don Beadreaux and Jack Wenders.  If Chinese companies buy American steel and lumber and ship it to China, it shows up in the trade balance.  If they buy the same products and build a factory in the US, it does not.  The Chinese use a lot of their dollars to invest in buildings, real estate, capital assets, factories, production facilities, etc. in the US.  And this is bad, how?  I know that since the Japanese investment boom of the eighties, there are lots of folks who call themselves "liberal" who suddenly got very upset about foreigners owning US-based assets.  It is impossible for me to see this concern as anything but xenophobia and racism, since hundreds of years of Dutch, Canadian, and British investment never worried a soul but Japanese and Chinese investment has everyone in a lather. 

By the way, if you worry about China as a security threat, wouldn't you rather see them invested in the US economy, and therefore have a strong interest in our continued prosperity?  One could easily wonder why Saudi Arabia does not use their power over oil reserves to screw with the US like they tried to do in the early 70's.  The reason is that all of their wealth is invested in dollar and euro-denomitated assets.   People worry about the power the Saudis may have to mess with our economy, but their reinvestment of dollars back in our economy has made this a game of mutual assured destruction.  The same thing is occuring with China.

The other thing the Chinese do with the money is invest in dollar-denominated financial assets, which in many ways is just an indirect way of investing in the same capital assets listed above.  They will invest dollars in equities and, yes, debt securities.  But the fact that the Chinese choose to spend their dollars on debt securities does not mean that the trade deficit is causing the debt.  If the Chinese had a predilection for debt securities, more so than say an American holder of dollars, one might argue that this predilection drives down interest rates a bit and therefore might increase total debt, but this is a fairly tenuous chain of causation and not, I think, what seems to be bothering folks who panic over the trade deficit.  In fact, one can argue that the causation runs more strongly the other direction, that the large US budget deficit keeps the dollar higher than it might otherwise be, increasing the trade deficit.

So when people lament that "we now consume much more than we produce", they are making a meaningless statement because the we in the first part are not the same as the we in the second part.  The US and the Chinese are sending equal amounts of money back and forth - its has to be, over the medium to long term, or exchange rates would crash.  All the trade deficit means is that there is a difference in WHERE Chinese and Americans consume the goods.  Americans consume Chinese goods in the US.  The Chinese consume some of the US goods it buys in China, and then consumes the rest in the US.  The trade deficit represents the net amount of American goods and services the Chinese buy in the US and choose not to haul back to China.  Instead, they take ownership of the American goods here, in the form of capital assets or financial securities that represent ownership or calls on the cash flow of these capital assets. 

Anyway, you can find more here at Cafe Hayek.

Postscript:  By the way, the US has run a trade deficit of a magnitude that panics people for over two decades.  If this is bad, surely we would be able to find the damage somewhere.  But the US over the last two decades has had the strongest economy in the world.  I suspect that a lot of people would answer "we have run up a huge debt".  But any increase in total debt in the US is not relevant to the trade deficit, or only tangentially related as discussed above.  The Federal debt is run up because the politicians are all spending whores who support their reelection with "good works" paid for with our money.  Consumer debt, which may or may not be "too high", is based on individual spending and saving choices, and is unaffected by whether a person buys an American or Chinese TV.

I won't repeat all that I wrote in my defense of open immigration, but I will summarize by saying that the right to associate with whom you want, to own and live on the property you choose, to negotiate with whomever you please to sell your labor, are all rights that we have as humans, not via the state.  These rights in effect pre-date, rather than flow from, the state, and as such should not be subject to citizenship test.

Anyway, Prawflawblog has a nice defense of immigration up as well:

Apparently both parties, with Republicans in the
lead, have embarked on an anti-immigrant frenzy. The hysteria has been
fueled for some time now by daily broadcasts in all major networks and
gravely sounding members of Congress discussing the "crisis on our
borders", "our bankrupt immigration system", etc. The virulence of this
sentiment makes Le Pen in France seem like a cosmopolitan liberal.

Yet liberal principles require a drastic reduction
of immigration controls. Foreigners flock to our shores because there
is demand for their labor. The same principle that supports free trade
of goods and services -- the law of comparative advantages -- applies
with equal force to freedom of movement. Freer immigration would
alleviate world poverty and allow people in our country to redirect
resources toward more efficient activities. Every single argument for
strict immigration controls is flawed

By the way, I know that "Social Security Reform" has been dropped from the media radar screen, even if the demographic problem hasn't gone away.  If one is not willing to privatize it (as it should be) the next best alternative to the Social Security's demographic bomb is... allow free immigration.  Nothing would do more to help the long-term Social Security picture like a few million new young immigrants hungry to work and perhaps to share in the American entrepreneurial spirit, paying their taxes to support the rest of us in our old age.

Over the past fifty years, a powerful driving force for statism in this country has come from technocrats, mainly on the left, who felt that the country would be better off if a few smart people (ie them) made the important decisions and imposed them on the public at large, who were too dumb to make quality decision for themselves.  People aren't smart enough,they felt, to make medication risk trade-off decision for themselves, so the FDA was created to tell them what procedures and compounds they could and could not have access to.  People couldn't be trusted to teach their kids the right things, so technocrats in the left defended government-run schools and fought school choice at every juncture.  People can't be trusted to save for their own retirement, so  the government takes control with Social Security and the left fights giving any control back to individuals.  The technocrats told us what safety equipment our car had to have, what gas mileage it should get, when we needed to where a helmet, what foods to eat, when we could smoke, what wages we could and could not accept, what was and was not acceptable speech on public college campuses, etc. etc.

Throughout these years, libertarians like myself argued that there were at least three problems with all of this technocratic statism:

• You don't have the right to make decisions for other people. Period.  No matter how high-minded and idealistic you want to portray
  it, at the end of the day you are proposing to use force to coerce another man into doing your will.  You may stop them from using force or fraud against others, but an adult may make decisions for themselves, even if they are bad.  I am reminded of a great line from the HBO show Deadwood, "Can you let me go to hell the way I want to?"

• You can't make better decisions for other people, even if you are smarter, because every person has different wants, needs, values, etc., and thus make trade-offs differently.  Tedy Bruschi of the Patriots is willing to take post-stroke risks by playing pro football again I would never take, but that doesn't mean its a incorrect decision for him.

• Technocratic idealists ALWAYS lose control of the game.  It may feel good at first when the trains start running on time, but the technocrats are soon swept away by the thugs, and the patina of idealism is swept away, and only fascism is left.  Interestingly, the technocrats always cry "our only mistake was letting those other guys take control".  No, the mistake was accepting the right to use force on another man.  Everything after that was inevitable.

I am reminded of all this because the technocrats that built our regulatory state are starting to see the danger of what they created.  A public school system was great as long as it was teaching the right things and its indoctrinational excesses were in a leftish direction.  Now, however, we can see the panic.  The left is freaked that some red state school districts may start teaching creationism or intelligent design.  And you can hear the lament - how did we let Bush and these conservative idiots take control of the beautiful machine we built?  My answer is that you shouldn't have built the machine in the first place - it always falls into the wrong hands.  Maybe its time for me to again invite the left to reconsider school choice.

Today, via Instapundit, comes this story about the GAO audit of the decision by the FDA to not allow the plan B morning after pill to be sold over the counter.  And, knock me over with a feather, it appears that the decision was political, based on a conservative administration's opposition to abortion.  And again the technocrats on the left are freaked.  Well, what did you expect?  You applauded the Clinton FDA's politically motivated ban on breast implants as a sop to NOW and the trial lawyers.  In establishing the FDA, it was you on the left that established the principal, contradictory to the left's own stand on abortion, that the government does indeed trump the individual on decision making for their own body  (other thoughts here).  Again we hear the lament that the game was great until these conservative yahoos took over.  No, it wasn't.  It was unjust to scheme to control other people's lives, and just plain stupid to expect that the machinery of control you created would never fall into your political enemy's hands.

OK, rant over.  No one wants to hear "you asked for it", but that is indeed my answer to many of the left's laments today about conservatives taking over their treasured instruments of state control.  I hate to be a geek here, but even Star Trek figured out this whole technocrat losing control of the fascist state thing 40 years ago.

Update:  Wow, I am not that skilled with reading academix-speak, but I am pretty sure that Ed Glaeser via Margina Revolution is saying the same thing:

Soft paternalism requires a government bureaucracy that is skilled in
manipulating beliefs.  A persuasive government bureaucracy is inherently
dangerous because that apparatus can be used in contexts far away from the
initial paternalistic domain.  Political leaders have a number of goals, only
some of which relate to improving individual well-being.  Investing in the tools
of persuasion enables the government to change perceptions of many things, not
only the behavior in question.  There is great potential for abuse.

Update:  Cafe Hayek discusses how the FDA is failing even technocratic objectives and this is an amazing data-rich in-depth analysis of the FDA vs. markets in managing drug risk/reward choices:

The debate over off-label prescribing is not about perfect safety; it is about
whether unavoidable trade-offs are best made for everyone by a centralized authority
such as the FDA or whether those decisions are best made by patients and doctors
acting independently. Whoever makes a decision to try (patient), prescribe (doctor),
or approve (FDA) a drug must face the trade-off between the costs of prescribing a
potentially unsafe medicine (a type II cost) and the costs of not prescribing a drug
that could have saved a life (a type I cost)....

The FDA tends to overemphasize the cost of using a potentially unsafe medicine,
because type II costs are highly visible and result in punishment of the FDA, whereas
type I costs are invisible and do not result in punishment.

If the FDA approved a drug that killed thousands of people, that story would make
the front page of every newspaper in the nation. Congressional hearings would certainly he held, the head of the FDA would probably lose his or her job, and the agency would be reorganized. But if the FDA rejected a drug that could save thousands of people, who would complain? When a drug kills a patient, that person is identifiable, and family and friends may learn the cause of the death. In contrast, the patient who would have lived, had new drugs been available, is identifiable only in a statistical sense. Family and friends will never know whether their loved one could have survived had the FDA not delayed the introduction of a new drug. In some cases the drug that could have saved the patient's life is never created, because the costs of the FDA's testing procedures make the necessary research and development appear unprofitable...

Patients and doctors do not face the same biased incentives as the FDA and thus
tend to pay more attention to the costs of not using a drug that could save a life.

Until recently, I have never really been a passionate participant in the immigration debate;  however, living here in Arizona, it is virtually impossible to avoid this discussion.  One observation I can make with some confidence is that, like most political debates, few of the participants seem to have opinions that are grounded in a consistent philosophy (rather than just a pragmatic collection of political points of view, as discussed here).  As a result, rather than quoting stats on illegal border crossings or the number of Al Qaeda operatives supposedly running around the Arizona desert, I thought I would try to lay out the philosophical argument for immigration.

Individual Rights Don't Come From the Government
Like the founders of this country, I believe that our individual rights exist by the very fact of our existance as thinking human beings, and that these rights are not the gift of kings or congressmen.  Rights do not flow to us from government, but in fact governments are formed by men as an artificial construct to help us protect those rights, and well-constructed governments, like ours, are carefully limited in their powers to avoid stifling the rights we have inherently as human beings.

Do you see where this is going?  The individual rights we hold dear are our rights as human beings, NOT as citizens.  They flow from our very existence, not from our government. As human beings, we have the right to assemble with whomever we want and to speak our minds.  We have the right to live free of force or physical coercion from other men.  We have the right to make mutually beneficial arrangements with other men, arrangements that might involve exchanging goods, purchasing shelter, or paying another man an agreed upon rate for his work.  We have these rights and more in nature, and have therefore chosen to form governments not to be the source of these rights (for they already existed in advance of governments) but to provide protection of these rights against other men who might try to violate these rights through force or fraud.

So Citizenship Shouldn't Determine What Rights You Have
These rights of speech and assembly and commerce and property shouldn't, therefore, be contingent on "citizenship".  I should be able, equally, to contract for service from David in New Jersey or Lars in Sweden.  David or Lars, who are equally human beings,  have the equal right to buy my property, if we can agree to terms.  If he wants to get away from cold winters in Sweden, Lars can contract with a private airline to fly here, contract with another person to rent an apartment or buy housing, contract with a third person to provide his services in exchange for wages.  But Lars can't do all these things today, and is excluded from these transactions just because he was born over some geographic line?  To say that Lars or any other "foreign" resident has less of a right to engage in these decisions, behaviors, and transactions than a person born in the US is to imply that the US government is somehow the source of the right to pursue these activities, WHICH IT IS NOT.

In fact, when the US government was first formed, there was no differentiation between a "citizen" and "someone who dwells within our borders" - they were basically one in the same.  It is only since then that we have made a distinction.  I can accept that there can be some minimum residence requirements to vote in elections and perform certain government duties, but again these are functions associated with this artificial construct called "government".  There should not be, nor is there any particular philosophical basis for, limiting the rights of association, speech, or commerce based on residency or citizenship, since these rights pre-date the government and the formation of border.

New "Non-Right Rights" Are Killing Immigration
In fact, until the 1930's, the US was generally (though not perfectly) open to immigration, because we accepted the premise that someone who was born beyond our borders had no less right to find their fortune in this country than someone born in Boston or New York.  I won't rehash the history of immigration nor its importance to the building of this country, because I don't want to slip from the philosophical to the pragmatic in my arguments for immigration.

In the 1930's, and continuing to this day, something changed radically in the theory of government in this country that would cause immigration to be severely limited and that would lead to much of the current immigration debate.  With the New Deal, and later with the Great Society and many other intervening pieces of legislation, we began creating what I call non-right rights.  These newly described "rights" were different from the ones I enumerated above.  Rather than existing prior to government, and requiring at most the protection of government, these new rights sprang forth from the government itself and could only exist in the context of having a government.  These non-right rights have multiplied throughout the years, and include things like the "right" to a minimum wage, to health care, to a pension, to education, to leisure time, to paid family leave, to affordable housing, to public transportation, to cheap gasoline, etc. etc. ad infinitum.

Here is a great test to see if something is really a right, vs. one of these fake rights.  Ask yourself, "can I have this right on a desert island".  Speech?  Have at it.  Assembly?  Sure, if there is anyone or things to assemble with?  Property?  Absolutely -- if you convert some palm trees with your mind and labor into a shelter, that's your home.  Health care?  Uh, how?  Who is going to provide it?  And if someone could provide it, who is going to force them to provide it if they don't want to.  Ditto education.  Ditto a pension.

These non-right rights all share one thing in common:  They require the coercive power of the government to work.  They require that the government take the product of one person's labor and give it to someone else.  They require that the government force individuals to make decisions in certain ways that they might not have of their own free will. 

And since these non-right rights spring form and depend on government, suddenly citizenship matters in the provision of these rights.  The government already bankrupts itself trying to provide all these non-right rights to its citizens  -- just as a practical matter, it can't afford to provide them to an unlimited number of new entrants.  It was as if for 150 years we had been running a very successful party, attracting more and more guests each year.  The party had a cash bar, so everyone had to pay their own way, and some people had to go home thirsty but most had a good time.  Then, suddenly, for whatever reasons, the long-time party guests decided they didn't like the cash bar and banned it, making all drinks free.  But they quickly learned that they had to lock the front doors, because they couldn't afford to give free drinks to everyone who showed up.  After a while, with the door locked and all the same people at the party, the whole thing suddenly got kind of dull.

Today, we find ourselves in political gridlock over immigration.  The left, which generally supports immigration, has a lot at stake in not admitting that the new non-right rights are somehow subordinate to fundamental individual rights, and so insist new immigrants receive the full range of government services, thus making immigration prohibitively expensive.  The right, whether through xenophobia or just poor civics, tends to assume that non-citizens have no rights whatsoever, whether it be the "right" to health care or the more fundamental right, say, to habeas corpus.

A Not-so-Modest Proposal
So what would I do?  Well, this is blogging, so I am not really obligated to come up with a plan, I can just complain.  After all, Howard Dean said "Right now it's not our job to give out specifics", so why should I have to?  But, I will take a shot at it anyway:

1. Anyone may enter or reside in the US. The government may prevent entry of a very short list of terrorists and criminals at the border, but everyone else is welcome to come and stay as long as they want for whatever reason.  Anyone may buy property in the US, regardless or citizenship or residency.  Anyone in the US may trade with anyone in the world on the same terms they trade with their next door neighbor.
2. The US government is obligated to protect the individual rights, particularly those in the Bill of Rights, of all people physically present in our borders, citizen or not.  The government may also define a certain number of core emergency services (e.g. fire, police, trauma care) to which all residents, citizens or not, have equal access.
3. Certain government functions, including voting and holding office, may require formal "citizenship".  Citizenship should be easier to achieve, based mainly on some minimum residency period, and can be denied after this residency only for a few limited reasons (e.g. convicted of a felony).  The government may set no quotas or numerical limits on new citizenships.
4. All people present in the US pay the same taxes in the same way.  A non-citizen or even a short term visitor pays sales taxes on purchases and income taxes on income earned while present in the US just like anyone else.  Note that this is not radical - I am a citizen and resident of Arizona but other states like California tax me on income earned in that state and purchases made in that state.
5. While I would like to eliminate much of the welfare state altogether, I won't address that today (Don't underestimate, though, how damaging the welfare state and the
   highly regulated economy can be to immigrants, and the problem that can
   cause, as demonstrated today in France)  For purposes of this plan I will merely state that the non-right right type government services should be divided into two pools:  Services only available to citizens and services available to those who are paying into the system. 
   • The first category might include pure handouts, like Welfare, farm subsidies, and public housing.  This category can even include public policy decision like "allowing squatters or vagrancy on public lands", since this is an effective subsidy as well in the form of public housing. 
   • The second include services like public transportation or unemployment insurance -- if the individual is paying the fair (for example, the employer is paying her unemployment premiums) then they should have access to the service.  Social Security is a tough beast to classify - I would put it in the "Citizen" category as currently structured, but would gladly put it in the "available to everyone" category if SS could be restructured to better match contributions with benefits, as in a private account system.

That's enough for now.  I wrote more on immigration here.

Postscript-  And please don't tell me that a government's job is to "defend its borders".  Its not.  A government's job is to defend its citizens and residents.  There are times that this job may literally require defending the borders (e.g. France in 1940) but that clever misrepresentation of the role of government is the linguistic trick immigration opponents use to justify all sorts of semi-fascist actions, like building this happy little wall in Nogales:

Which seems awfully reminiscent of this wall in Berlin:

Compare Berlin and Nogales.  What is the fundamental principle that makes preventing the movement of people one-way across a border one of the worst human rights violations in the last century, but preventing them from moving the other way across a border is a fine policy with bi-partisan support here in Arizona?

Technorati Tags:  Immigration, Economics,
Philosophy,
International

I think maybe its time for me to stop reading the news.  What else can a good libertarian do when Republicans oppose free trade, support government intervention in the economy, and spend tax money like drunken sailors while Democrats vote for new restrictions on free speech?

The latter occurred yesterday, as the House failed to get the 2/3 majority necessary to pass the Online Freedom of Speech Act, mostly on the strength on opposition from Democrats (you know, those principled supporters of civil liberties).  Politicians have again shown themselves ready to trash the Constitution in order to limit the speech of those potentially critical to themselves.  Apparently, there is reason to hope, since bill sponsors are trying to bring the bill to the floor in a more routine process that would require only a majority vote for passage (which the bill appears to be able to garner).

My only problem with this initiative is that it falls far short of the mark of protecting all Americans.  Right now, only the major media outlets have full free-speech rights in an election.  This bill would extend free speech to the Internet.  Here's an idea:  Why don't we give everyone back their first amendment rights, as I wrote here:

These past few weeks, we have been debating whether this media
exemption from speech restrictions should be extended to bloggers.  At
first, I was in favor.  Then I was torn.
Now, I am pissed.  The more I think of it, it is insane that we are
creating a 2-tiered system of first amendment rights at all, and I
really don't care any more who is in which tier.  Given the wording of
the Constitution, how do I decide who gets speech and who doesn't - it
sounds like everyone is supposed to:

Congress shall make no law respecting an establishment of religion, or
prohibiting the free exercise thereof; or abridging the freedom of
speech, or of the press; or the right of the people peaceably to
assemble, and to petition the government for a redress of grievances.

I
have come to the conclusion that arguing over who gets the media
exemption is like arguing about whether a Native American in 1960's
Alabama should use the white or the colored-only bathroom:  It is an
obscene discussion and is missing the whole point, that the facilities
shouldn't be segregated in the first place.

By the way, I don't want to ever hear from the NY Times again about some company that is being monopolistic.  The NY Times has opposed the Online Free Speech Initiative from the very beginning in a transparent attempt to quash a competitive media that is stealing readers from it at a very fast clip.  I'm sure they hate having this type stuff on the Internet.  And this is the same NY Times that was one of the very few supporters of the Kelo decision because they were in the midst of getting a new HQ via an eminent domain landgrab.  Reason number 635 I don't agree with giving the press more rights than the rest of us have.

It may surprise some readers to know that I am a conflict avoider when it comes to arguing politics in social gatherings.  There are a variety of reasons for this, not the least of which is often a desire to escape substantive issues in the off-hours of my life. 

However, one important reason I don't like discussing current events or other weighty issues with people (particularly in groups) is that many of the people I meet don't really have an underlying philosophy, but rather a hodge-podge of political positions stitched together from a variety of sources.  This makes it almost impossible to have a substantive conversation with them.

When I have a disagreement with someone on matters of politics or economics or whatever, there are really only two satisfying outcomes:

1. To discover that we share the same basic premises and philosophy, but have reached different conclusions from these premises.  Trying to figure out where we diverge is an interesting and generally informative exercise
2. To discover that we have very different fundamental premises or assumptions about the nature of existence.  While perhaps not satisfying, this can at least save a lot of useless discussion.  For example, if you believe that we are all born with an obligation or requirement, kind of like original sin, to provide our fellow man with material comforts, while I do not, there is not a lot of point in the two of us arguing about redistributive taxation.

Unfortunately, it is impossible to reach either of these conclusions with people who have no underlying philosophy that drives their ethics and political positions.  I remember one discussion with a woman who was taking all all comers over abortion, defending a woman's right to choose for her body.  So I asked her if she was therefore opposed to the government ban on breast implants.  "No, that's different, those are totally frivolous.  Women shouldn't have breast implants, its demeaning".  But, I asked,  isn't the FDA telling women what they can and can't put in their bodies.  "But its necessary, she says, because people don't always know enough to make the right decisions".  So, I follow-ed up, its part of the FDA's job to hold up drugs like the morning-after pill?  "No, that's just christian-right bullshit".

How can you argue with this, when there is no consistent underlying philosophy?  Essentially her position boils down to "I support government intervention except when I oppose it".  And this is not unusual.  In fact, the positions she took are entirely consistent with the positions on these same issues taken at the NOW web site.  Hell, the entire Republican and Democratic platform each boil down to "we support government intervention except where our major donors oppose it".

The reason for this brief, really tangential rant was this morning when I was reading through some recent emails from a trade group I belong to called the NACS, or the National Association of Convenience Stores.  Because of changes in the market, the NACS represents a large percentage of the gasoline retailers in this country.  In the last two weeks, the NACS has:

1. Opposed government "price gouging" regulations aimed at how gas stations price their product.
2. Advocated government intervention in the pricing of credit card processing services, arguing that gas stations are getting gouged by banks today

Could anything be more stark?  There are no values here, no philosophy, no core assumptions about the nature of man and man's existence.  Just a bald desire to be left alone yourself, but have the government intervene in your favor with everyone you do business with.

PS:  Credit card processing rates piss me off as well, but you don't see me asking for the government to intervene.

Truck and Barter is not very impressed with Bush's call for us all to drive less. 

I'd like to know just why I should conserve. We supposedly live in a
capitalist society based on property-rights and free-trade; why, all of a
sudden, do you ask that I not trust that the price of fuel incorporates all the
scarcities at every level of production? What economic lever broke in the past
month? Why do you think the price system is failing so bad that we need to
"conserve" more than the price signal warrants?

I won't pretend that market prices don't exist, or that markets have suddenly
stopped working; I won't pretend that prices are inefficient allocators of
resources; I won't pretend that I cannot buy as much gasoline as I can afford at
current prices.

Furthermore, Mr. President, I will not pretend that you have legal or moral
authority to tell me how much gasoline I may purchase. I will not pretend that
your feeble call to use less has any impact whatsoever on my psyche. I will not
pretend that the Federal Government knows better than me how much gasoline I
should purchase.

Awesome, well said.  Maybe if Bush had worn a cardigan, like Jimmy Carter did when he asked the same thing, he might have been more successful.  Or then again, maybe Bush should have thought twice about channeling Jimmy Carter on any energy or economics related issue.

By the way, there is much more to the post - make sure to read it all.

Update: This one attracted a number of comments fast.  Here are some additional thoughts

Doesn't it make sense to conserve gas?  Isn't what Bush said correct?

Sure it makes sense, but I didn't need Bush to tell me.  Seeing my average 15 gallon fillup go from $30 to $45 nearly overnight told me everything I needed to know.   I adjusted my driving behavior based on how I value various types of trips.  And so, apparently, did everyone else, as gas consumption in this country dropped almost 10%.  Bush doesn't have to tell you to refinance your home when mortgage rates drop, or to buy less OJ when the orange crop failed -- prices signal these things quite nicely.

By the way, I limited my driving years ago (e.g. I live 1 mile from my office) but not because of gas prices.  Lets say 1 hour of driving gets me 30 miles in the city, and requires 1.5 gallons of gas.  The recent increase in gas prices has increased the cost of that 1 hour of driving by about $1.50.  That is NOTHING compared to how I have increased how I value my free time as I have grown older.  That hour may use up five bucks of gas but hundreds of dollars of my leisure time.  I have often told people that the biggest change you go through getting older is how much your internal valuation of your own free time goes up.  In college, I would wait for 8 hours in a line to get concert tickets at face value.  Today, I buy them market up at eBay, because that 8 hours is now worth far, far more to me than the markup.

Wouldn't voluntary conservation beyond what you have already cut back help reduce gas prices in the US?

Sure, if everyone cut back some percentage more than what they would have already done due to the price increase, then yes that might help push prices down.  Of course every person who did this would lose from doing so.  When the price increases, everyone eliminates their marginal use of gasoline, ie every use or trip that is worth less to them than the cost in fuel.  That means that the trips that remain are worth more to them than the gas (and other)  costs.  Therefore, remaining trips are a net increase to their well-being.  If a remaining trip is then eliminated voluntarily, or the cost of that trip is increased due to the increased hassle of carpooling or using public transit, then their well-being is reduced. 

However, this is the great thing about America:  If you personally value voluntarily reducing your gas consumption to help reduce prices for others, in a free society, no one is going to stop you.

By the way, here is the reason I don't worry about it:  I am old enough to have been driving in the late 1970's.  And I know from experience that allowing prices to shoot up for a period of time, without government price caps or windfall profit confiscation silliness, is going to lead to more supply and lower prices in the future.

Don't you think its unethical not to conserve in times like this?

No.  I don't associate consumption and ethics.  If it is sold legally at a certain price, and I can afford and wish to pay that price, then I don't see that morality or ethics come into play.  While there certainly can be ethical problems spending money unwisely (e.g. blowing money on coke or gambling that was needed to feed your kids), that is a different situation.  I don't feel guilty about consuming gas.

Isn't it a security issue?  Shouldn't we be asked or forced to conserve more to make the US independent of foreign oil?

There is only one time this argument makes any sense - if the world is in a full scale shooting war and all foreign trade and international markets are halted, and then we would have much bigger problems.

Short of the breakdown of world trade and markets, being "independent of foreign oil" is a mirage, an impossible non-goal.  Lets say that the world energy supply and demand was exactly the same as it was today, except that the US produced domestically exactly enough oil to satisfy domestic demand.  But in this case there is still a world market for oil.  The price of oil and gas in this country would not be more or less than it is today, except maybe for a few cents of transportation cost differences.  And if there is an oil supply shock, the pricing in the US will be virtually the same in this hypothetical situation as it would be in today's structure.

Shouldn't the President be doing something?

Sure.  Get the hell out of the way of the people who can fix the problem.  Rethink the regulatory regime that is preventing refinery construction.  Revamp the licensing approach for nuclear power.  Open up oil drilling in proscribed areas.  And find his lost veto pen and ax any dumbshit regulation out of Congress managing energy prices, taxing windfall profits, or attempting to pick winners via subsidies.

Technorati Tags:  Energy, Economics

Apparently, this is one of the top new features MS is touting to get people to pay hundreds of dollars a screen for MS Office upgrades:

The new version of Microsoft Corp.'s Office
software will let users save documents in the popular PDF format, as
part of efforts to broaden the appeal of the new Office product and get
people to upgrade.

 Office 12, which is due out by the end of
2006, faces some of its stiffest competition from existing users who do
not see the need to upgrade from previous versions. Microsoft is
aggressively touting new functions, such as the PDF support, to try to
spur upgrades and appeal to people who might otherwise not buy Office
at all. The Office suite retails for between $149 and $499, depending
on which edition a user chooses.

Oooo, that's really going to do the trick.  Kind of like urging you to trade-in your car because the new one has more cupholders.  Of course, Open Office is free, is working great for us, and already has a built-in export to pdf.

I fear that this administration has effectively reenacted the much-hated Alien and Sedition Acts of the early 19th century.  Using the "war" on terror as its excuse, the Bush administration is rapidly expanding its ability to grab and hold people indefinitely without charge or trial.  This is not a huge surprise -- many presidents have tried to do similar things in time of war or in reaction to internal security threats.  Much of the Patriot Act was originally proposed by Bill Clinton, after all.

What is new is that the courts and the opposition party are letting him get away with it.

The Sept. 9 court ruling concerning Jose Padilla, an
American citizen locked up in a military prison in South Carolina for
three years, is a case in point. The ruling should send shockwaves
through the American public since the decision seriously undermines
constitutional rights.

A federal appellate court ruled that constitutional rules
that apply to the police do not apply to military personnel.... The federal
government has been given a green light to deprive Americans of their
rights to due process. No arrest warrants. No trial. No access to the
civilian court system. You may not be able to see it on television, but
this court decision is the equivalent of a legal hurricane-and it is no
exaggeration to say that this is a level 5 storm with respect to its
potential havoc for civil liberties.

Federal agents arrested Padilla at O'Hare International
Airport in Chicago just after he arrived on a flight from Pakistan. The
feds claim that Padilla fought against U.S. troops in Afghanistan,
escaped to Pakistan and returned to the United States to perpetrate
acts of terrorism for al-Queda. Instead of prosecuting Padilla for
treason and other crimes, President Bush declared Padilla an "enemy
combatant" and ordered that he be held incommunicado and interrogated
by military and intelligence personnel.
Padilla has not yet had an opportunity to tell his side of
the story. For two years the government would not even permit Padilla
to meet with his court-appointed attorney, Donna Newman. Newman has
nevertheless defended Padilla's rights, arguing that the president does
not have the power to imprison Americans without trials.

Bush has not made any dramatic televised address to the
country to explain his administration's attempt to suspend habeas
corpus and the Bill of Rights, but his lawyers have been quietly
pushing a sweeping theory of executive branch power in legal briefs
before our courts.

I actually am fairly radical on this - I don't think the fact that he is a citizen or not should even make a difference.  Citizenship does not confer rights, and governments don't hand them out -- rights are ours based on the fact of our existence.   While some of the rules of due process may change for non-citizens, just the fact that they are from a different country doesn't give us the right to lock them in a room indefinitely.  This is why I support free and open immigration - there is no reason why a person born in Mexico should have fewer rights to contract with me for a job or a home than an American citizen.  The right to associate, to contract, to agree on wages, to buy a particular home, all flow from being human, not from the US government.

So I wouldn't support Padilla's treatment if he was a Iranian citizen and I certainly don't support it for an American.  Yeah, I know, he may be a bad person.  But we let bad, dangerous people out of jail every day.  Our legal system is structured based on the premise that it is worse to lock an innocent person away than let a guilty person go free.  Its a trade-off that we have made for hundreds of years and I for one am pretty comfortable with.

I also get the argument that we are at war -- in Iraq.  If someone is captured in Iraq, that may be another story.  But Chicago is not in the war zone, by any historic definition of that term (unless you want to use WWII Japanese internment as a precedent, which I doubt).  Just calling it a "war on terror" does not make Chicago a war zone any more than declaring a "war on drugs" makes Miami a war zone where suspected drug users can be put in jail without trial.  Perhaps if Bush could get Congress to officially declare war, he might have firmer legal footing, but I don't think that's going to happen.  As I wrote here:

Yes, I know that there is a real risk, in fact a certainty, that
dangerous people will be let out on the street.  But that is the bias
of our entire legal system - the "beyond a reasonable doubt" standard
and other protections of the accused routinely put bad people back on
the street.  We live with that, because we would rather err in putting
bad people back on the street than in putting good people behind bars
for life.  Give them a trial, deport them, or let them go.  Heck,
airdrop them into Paris for all I care, but you have to let them get
due process or go free.

Sure, terrorists are using our free and open society against us, and its frustrating.  But what's the alternative?  I just don't think there is a viable alternative which says that we should destroy our open society in order to save it.  We've got to learn to be smart enough to work within the rules, and it may be that we have to expect that in the future our freedom comes at some statistical increase in the danger to ourselves (by the way, isn't that exactly the trade-off we have enforced on Iraq, without even asking them -- citizens are much freer that under Saddam but at  an increased risk of terrorism?).

By the way - where the hell is Congress?  Stop grandstanding in confirmation hearings and get to work reigning this stuff in.

The FEC is suing the Club for Growth for campaign finance violations, basically arguing that they are controlled by the Republican Party and therefore not an independent political group (or whatever, I can't really be bothered to understand just what argument the FEC is using to trash the First Ammendment).

So I have Exhibit #1 for the trial.  Yesterday I published a blog piece blasting the Republican Party, concluding:

The Republicans are lost.  Combine this kind of spending with their
Patriot Act and Sarbabes-Oxley driven Big-Borther-Is-Watching
intrusiveness, luke-warm committment to free-trade, and bizarre , and I find nothing at all attractive about the party.  Only the economic insanity of the opposition party continues to keep Republicans in power.

If the Club for Growth is a subsidiary of the Republican Party, then why are they linking my post today from their home page? 

I will pat myself on the back and say that I called it, way back in week 4 of the preseason and again after week 1:  The Cards, as usual, suck.  The only reason that this is news is that some national sportscasters were drinking the kool-aid and had predicted that this will be a turnaround year for the Cards.  One quarter of watching the Cards get manhandled by Denver's second team in pre-season convinced me that while the Cards had some interesting skill position players, they had no Offensive or Defensive line.  And now, their top player on each line has gone down with an injury. 

This is a team that has never given a crap about its lines, as illustrated by the brilliant trade a couple of years ago of the draft rights to Terrell Suggs (despite his being a hometown ASU hero), perhaps the best young DL in the game, for two mediocre receivers.  Here is Coyote's draft rule number one:  Teams like the Cards that draft receivers in the first round several years in a row are going to suck (hear that, Detroit?)

I said previously this is maybe a 5 win team.  Did I overestimate?  It looks like the Cards have a shot at the Matt Leinert sweepstakes, otherwise known as the first draft choice.  Of course, the Cards being the Cards, they will probably pull out some last second win in the last second of the game to drop out of the first pick, like they did two years ago against the Vikings.  If they do get the first pick, they should trade the pick for linemen or more picks to draft lineman.  Here's why:

• There is no point in having a good QB and a bad O-line (see Houston Texans in their first year)
• You can get more value by trading the top 3 picks for lower picks
• Matt Leinert is going to be uniquely valuable.  Some team will see him as a once in a generation type player and will give up many goodies for him (see Mike Ditka and Ricky Williams)
• Like Eli Manning and San Diego, Leinert will probably refuse to come play in Arizona anyway

I get email and comments from time to time that my language deriding government's intervention into every aspect of our lives is overblown and exaggerated.  My answer:  Oh yeah, well how about this:

Mike Huckabee, the Governor of Arkansas, now
requires annual fat reports. These are sent to the parents of every
single child aged between 5 and 17; a response, he says, to "an
absolutely epidemic issue that we could not ignore" in the 1,139
schools for which he is responsible.

I just cannot craft any reasonable theory of government where this is the state's job.   The "obesity" crisis in this country just amazes me.  "Experts" every few years broaden the definition of who is overweight or obese, and suddenly (surprise!) there are more people defined as overweight.  Even presuming it is the state's job to optimize our body weights, is it really the right approach to tell everyone they are too fat?  Having known several people who were anorexic, including at least one young woman who died of its complications, is it really a net benefit to get young people more obsessed with looks and body style?  And what about the kids that are genetically programmed to be overweight?  Does this mean that years of taunting and bullying by their peers is not enough, that the state's governor wants to pile on now?

It is interesting to note that governor Huckabee apparently started this initiative after his own personal battle with weight loss:

[Huckabee] lost 110lb after being warned that his
weight, more than 280lb after a life of southern fried food, was a
death sentence. A chair even collapsed under him as he was about to
preside over a meeting of state officials in Little Rock.

We all have friends who have lost weight or gotten into homeopathy or became a vegan and simply cannot stop trying to convert their friends now that they see the light.  Now we have the spectacle of elected officials doing the same thing, but on a broader scale and with the force of law, rather than  just mere irritation, on their side.  One can only imagine what report cards kids would be carrying home if Huckabee had instead had a successful experience with penis enlargement.  What's next, negative reports for kids with bad acne?  For women whose breasts are too small?  For kids who are unattractive?

As I have argued many times in the past, a large part of the blame for these initiatives is public funding of health care.  Beyond the efficiency and choice arguments, I have tried to point out that publicly funded health care is a Trojan horse for a number of truly intrusive nanny-state government controls of our lives.

It isn't such a stretch to imagine the effect
when people realise "” as residents of Arizona have been told already "”
that about 40 per cent of their healthcare charges are spent treating
the consequences of avoidable obesity.

When health care is paid for by public funds, politicians only need to argue that some behavior affects health, and therefore increases the state's health care costs, to justify regulating the crap out of that behavior.  Already, states have essentially nationalized the cigarette industry based on this argument.

By the way, I am willing to make a bet with anyone that no where near 40% of our healthcare charges in Arizona are due to obesity.  I am positive some advocate made up this number, or created it using some ridiculously broad assumptions, and it has now been swallowed by the credulous and scientifically-illiterate press.

Update: Wow, the solution to obesity!  Government funded shrubbery:

City dwellers living in areas with little greenery and high levels of
graffiti and litter are more likely to be obese than those living in
pleasant areas with lots of greenery, say researchers in a study
published on bmj.com today.

Reason number 6,345 not to ever take "facts" from a "study" reported in the media at face value.

Update #2: More about the health care as a trojan horse for statism  (emphasis added)

BangkokThe World Health
Organization (WHO) has always had a rather expansive notion of what it
means to be healthy. If one looks at the official definition it defines
health as a "state of complete physical, mental and social well-being
and not merely the absence of disease or infirmity." According to that
understanding there isn't much that is not in some way connected with
health.  And for the health promoters at WHO's recently completed Bangkok conference that means that health is the supremely important value that trumps everything else.

After
all, the health promoters argue, it is surely obvious that health is a
necessary condition for any sort of life, so it must follow that for
any truly rational person health must outweigh any other value that
might conflict with it. But the "obvious" -- especially the obvious of
the health promoter -- is often likely to be untrue. While it may be
true that being alive is in some not very interesting sense necessary
for having a life, it is not at all true that being "healthy,"
especially as defined by WHO, is a necessary condition for having a
good life.

 

All
of us make trade-offs between optimal health and other values all of
the time. We travel by car for instance, for reasons of economy or
convenience, even though we might recognize that statistically planes
are safer. We smile at Alan Dershowitz's cardiac calculus where a
patient chooses between ten years of inactive life and the risk of
sudden death:

 

"My
doctor has made a prognosis/That intercourse fosters thrombosis/But I'd
rather expire/Fulfilling desire/Then abstain, and develop neurosis."

When I read this article on waste disposal, via Instapundit, all I could think of was Julian Simon.  For those who may be too young to remember, back in the 80's, after the panic that we were running out of oil was over, but before the current panic that we are producing too much carbon dioxide, there was a panic that we were running out of garbage dump space.  Uh, never mind:

Simply put, operators of garbage dumps are stuffing more waste than
anyone expected into the giant plastic-lined holes, keeping disposal
prices down and making the construction of new landfills largely
unnecessary....

The
productivity leap is the second major economic surprise from the trash
business in the last 20 years. First, it became clear in the early
1990's that there was a glut of disposal space, not the widely believed
shortage that had drawn headlines in the 1980's. Although many town
dumps had closed, they were replaced by fewer, but huge, regional ones.
That sent dumping prices plunging in many areas in the early 1990's and
led to a long slump in the waste industry.

Since then, the
industry and its followers have been relying on time - about 330
million tons of trash went into landfills in the United States last
year alone, according to Solid Waste Digest, a trade publication - to
fill up some of those holes, erase the glut and send disposal prices
skyward again. Instead, dump capacity has kept growing, and rapidly,
even as only a few new dumps were built.

Shortages seldom persist where the human mind is left free to attack the problem, and economic incentives are allowed to operate freely.  I wrote my own post attacking the zero-sum mentality that causes certain people to jump from one shortage-panic to the next. 

My prediction:  Five years from now, we will be seeing the same article on oil and natural gas.  "This oil field in west Texas is over 80 years old, and was thought to be depleted, until $60 oil prices and some new technology...."   You get the idea.

Nicholas Kristof reported in the NY Times (via Reason)that Portland had found the secret to eternal motion, cutting CO2 emisions while paying no price and growing the economy:

Officials in Portland insist that the campaign to cut emissions has entailed no
significant economic price, and on the contrary has brought the city huge
benefits: less tax money spent on energy, more convenient transportation, a
greener city and expertise in energy efficiency that is helping local businesses
win contracts worldwide.... Portland's experience is so crucial. It confirms the
suggestions of some economists that we can take initial steps against global
warming without economic disruptions. Then in a decade or two, we can decide
whether to proceed with other, costlier steps....

Here's his big conclusion:

Perhaps eventually we will face hard trade-offs. But for now Portland shows we
can help our planet without "wrecking" our economy--indeed, at no significant
cost at all.

No one, particularly the science-challenged press who oh-so-wanted this to be true, asked themselves if this made any freaking sense at all.  Apparently, it doesn't:

In response to data requests from the Cascade Policy Institute, a Portland-based
think tank, the [Office of Sustainable Development] admitted that a math error
resulted in a 2004 carbon dioxide calculation that was 74,561 tons too low. The
re-stated total puts Multnomah County above the 1990 levels by more than 68,000
tons.

The implication?

What's more, Cascade's prez, John Charles, argues that, beyond bad math, there
are more basic methodological flaws that lead to an undercounting of
transportation-related emissions. "Portland's claim of painlessly reducing
carbon dioxide has been repeated over and over by journalists, bloggers, and
even some scientists for the past month, without any attempt to verify the
accuracy of the OSD's report," he writes. "In fact, actual carbon emissions have
been well above the level claimed by Portland, and any regulatory program
imposed by the government to lower emissions to pre-1990 levels is going to be
costly to consumers, something elected officials apparently don't understand."

A few days ago, I spilled a lot of electrons discussing the sources of wealth and poverty. This week, Arnold Kling has a great article applying many of the same concepts to give advice to Live8 and others who want to eliminate poverty.  While I droned on for about 30 inches of computer monitor space, Robert Lucas's quote in Kling's article gets to the heart of the issue in just a few lines:

"of the vast increase in the well-being of hundreds
of millions of people that has occurred in the 200-year course of the industrial
revolution to date, virtually none of it can be attributed to the direct
redistribution of resources from rich to poor. The potential for improving the
lives of poor people by finding different ways of distributing current
production is nothing compared to the apparently limitless potential of
increasing production."

He concludes with some advice for protestors:

1. The world is a complex place. The farther you are
removed from a situation, the less likely that your intervention there will do
good and the greater risk that it will cause harm. No matter how thoughtfully it
is administered, long-distance aid will tend to be
ineffective.

2. The easiest poverty to prevent is poverty that is
close by. By developing useful skills and remaining employed, you can help keep
yourself and your family out of poverty. That makes you less of a burden on the
world than if you fly half way around the world to stage
confrontations.

3. Learn to distinguish motives from consequences. A
well-meaning policy can backfire. The seemingly cold-hearted impersonal market
is enormously beneficial.

4. Poverty is not a simple problem. See What Causes
Prosperity?

5. Remember that unlike the Folk Song Army of Tom
Lehrer's song, you have no monopoly on good intentions. A morality play in which
those who care crusade against those who are square makes for great theater.
However, it is not a realistic basis for economic policy.

As a parting shot, I noted previously the odd contradiction that is inherent in many G8 and similar protestors who purport to want to eliminate poverty:

In a nutshell, they want to fix poverty in the third world by
disavowing everything -- private property rights, individual
enterprise, free commerce, entrepreneurship, individual freedoms, etc.
-- that made the G8 not impoverished.  Rich nations, you have to help
the poor nations, but whatever you do, don't allow they to emulate what
you did to get rich. 

This is so nutty its unbelievable.  If they were camping outside of
the G8's door and saying that we want you to drop trade barriers on our
goods and help us foster entrepreneurship and we want your help
promoting private investment in our economy and infrastructure, I could
understand perfectly.  This is like activists camping outside of Jack
Welch's door looking for him to help the poor by funding programs to
teach children to drop out of school and avoid getting a jobs.

Living for many years in Dallas, including the three-Superbowl period in the mid-eighties, it was nearly impossible not to jump on the Dallas Cowboy bandwagon.  And, part and parcel (Parcell?) of being a Cowboys fan was hating those NFL east franchises the Giants, Redskins, and the Eagles (the Cardinals were also in the division, but were such a joke that they were not even worth hating, which is ironic since they are now my team here in Phoenix).

When we were driving up to Princeton reunions from Washington DC, my old roommate Brink Lindsey pointed out to me, as we passed the new Philadelphia stadium, that the Eagles were named in the 1930's after the blue eagle of the National Recovery Administration, or NRA.

I found this hard to believe, that anyone would name a sports franchise after one of the worst pieces of legislation in American history, but it seems to be true.  Apparently, naming the team the eagles was part of a larger soviet-style propaganda program:

For a while, there was no escaping the bird. Towns all over the country got on the Blue Eagle bandwagon. A hundred thousand schoolchildren clustered on Boston Common and were led in an oath administered by Mayor James Michael Curley: "I promise as a good American citizen to do my part for the NRA. I will buy only where the Blue Eagle flies." In San Francisco, 8,000 schoolchildren were dragooned into showing their
allegiance by forming themselves into a human Blue Eagle on the outfield in Seals Stadium. In Cleveland, 35,000 enthusiasts gathered in the public square to cheer the unveiling of the Blue Eagle flag while city officials proclaimed the "end of the depression." In Memphis, 125,000 people watched another 50,000 march in the city's traditional Christmas parade; on the final float Santa Claus sat resplendent upon a big Blue Eagle, from which perch he threw candy to children. In a New
Orleans park, NRA celebrants erected an enormous pyramid on which were inscribed the names of more than 7,000 people and businesses who had taken the pledge; on top of the pyramid was a nine-foot eagle made of blue lights, while red and white bulbs spelled out "We Do Our Part." In Philadelphia, citizens were soon cheering for a new professional football team whose name was inspired by the general's icon: the Philadelphia Eagles. In Roanoke, North Carolina, "Shanghai Mickey" offered Blue Eagle tattoos for a mere 50 cents. In Atlantic City, beauty contestants had the Blue Eagle stamped on their thighs.

What's next?  Should we rename the Red Sox the Boston Alien and Sedition Acts?  How about having the Chicago Smoot-Hawley Tariffs?

By the way, for those who are not familiar, the National Industrial Recovery Act of 1933 that formed the NRA was the centerpiece of Roosevelt's New Deal, and was modeled on Mussolini's fascism in Italy (via Sheldon Richman of the Concise Encyclopedia of Economics):

The image of a strong leader taking direct charge of an economy during hard times fascinated observers abroad. Italy was one of the places that Franklin Roosevelt looked to for ideas in 1933. Roosevelt's National Recovery Act (NRA) attempted to cartelize the American economy just as Mussolini had cartelized Italy's. Under the NRA Roosevelt established industry-wide boards with the power to set and enforce prices, wages, and other terms of employment, production, and distribution for all companies in an industry. Through the Agricultural Adjustment Act the government exercised similar control over farmers. Interestingly, Mussolini viewed Roosevelt's New Deal as "boldly... interventionist in the field of economics." Hitler's nazism also shared many features with Italian fascism, including the syndicalist front. Nazism, too, featured complete government control of industry, agriculture, finance, and investment.

And further, from John Flynn's The Roosevelt Myth via Anthony Gregory:

[Mussolini] organized each trade or industrial group or professional group into a state-supervised trade association. He called it a corporative. These corporatives operated under state supervision and could plan production, quality, prices, distribution, labor standards, etc. The NRA provided that in America each industry should be organized into a federally supervised trade association. It was not called a corporative. It was called a Code Authority. But it was essentially the same thing. These code authorities could regulate production, quantities, qualities, prices, distribution methods, etc., under the supervision of the NRA. This was fascism. The anti-trust laws forbade such organizations. Roosevelt had denounced Hoover for not enforcing these laws sufficiently. Now he suspended them and compelled men to combine.

If you are not familiar with the NRA, you need to be if you are going to come to a conclusion about the New Deal and just how statist FDR's aspirations were.  Henry Hazlitt has a long evaluation here. In the end, the NRA was struck down by the Supreme Court, and never revived in large part because it was a disaster for the economy.  Many blame the NRA for strangling the recovery that began in 1933-34 and thus extending the depression. Parts of the law (collective bargaining, minimum wage) were incorporated in other later legislation, but the core concept of organizing industrial cartels with government backing to run industries and set prices, wages, and production levels died, fortunately.

By the way, the countries today that I know of that most closely adhere to the assumptions of the NRA are France and Germany, who expelled the fascists in the forties only to eventually adopt most of their corporatist economics.

Reason has a good article on helping Africa.  To some extent, their arguments echo the ones I made in my previous post:

Despite political pressures, increasing the U.S. foreign aid budget would be a
mistake. The true cause of Africa's poverty is the continent's long history of
crippling misgovernance"”a problem that is exacerbated by rich countries' trade
protectionism, particularly with respect to agriculture....

The aid is ineffective because of the appalling way in which Africa is
governed. In recent decades, of each dollar given to Africa in aid, 80 cents
were stolen by corrupt leaders and transferred back into Western bank accounts.
In total, Nigerian President Olusegun Obasanjo estimated, "corrupt African
leaders have stolen at least $140 billion from their people in the [four]
decades since independence." All that is left when these regimes eventually
collapse is a massive public debt.

The article discusses how US and European agricultural subsidies really hurt the poorest nations:

While advocates of current market-distorting agricultural policies do not
intend to harm developing nations, the collective effect of U.S. farm policies
is devastating for producers of agricultural goods worldwide. American farm
policies might provide short-term benefits for agricultural producers in the
U.S., but those benefits are more than offset by the cost to American consumers
who pay higher taxes to support the U.S. farmers and higher prices for
agricultural products. Meanwhile, U.S. tariffs, quotas, and export subsidies
exacerbate poverty in regions like sub-Saharan Africa where people are heavily
dependent upon agriculture....

U.S. agriculture policy undermines U.S. efforts to alleviate poverty because
it drives down global agricultural prices, which in turn cost developing
countries hundreds of millions of dollars in lost export earnings. The losses
associated with cotton subsidies alone exceed the value of U.S. aid programs to
the countries concerned. The British aid organization Oxfam charges that U.S.
subsidies directly led to losses of more than $300 million in potential revenue
in sub-Saharan Africa during the 2001/02 season. More than 12 million people in
this region depend directly on the crop, with a typical small-scale producer
making less than $400 on an annual cotton harvest. By damaging the livelihoods
of people already on the edge of subsistence, U.S. agricultural policies take
away with the right hand what the left hand gives in aid and development
assistance.

I tend to be a pragmatic, rather than a dogmatic, federalist.  What I mean by that is that I support federalism for the pragmatic reason that it tends to slow statism, rather than a dogmatic belief that federalism is somehow morally superior.  Generally, federalism has been good for this country, as it has provided a check to states that go nuts on taxation and over-regulation.  The exodus of businesses from the Northeast in the 60's and 70's and from California more recently are examples of this effect at work, as citizens vote with their feet for the regulatory regime they prefer.

The recent decision on medial marijuana, where the Supreme Court ruled 6-3 that federal marijuana laws trump state medical-marijuana statutes seems to be another nail in the federalism coffin.  One can tell immediately that the ruling is all about federalism (rather than drugs) when you have the spectacle of the three most conservative judges supporting state legalization laws and the most liberal judges ruling for continued marijuana illegality under federal law.  Again reading my handy pocket Constitution (courtesy of Cato), it is hard for me to find where the feds have purview over regulating California home-grown pot smoked in California.  By accepting the argument below, the Supreme Court has basically ruled that the feds can pretty much regulate intra-state commerce, since you can probably make a similar argument in any case:

lawyers for the U.S. Justice Department argued to the Supreme Court
that homegrown marijuana represented interstate commerce, because the
garden patch weed would affect "overall production" of the weed, much
of it imported across American borders by well-financed, often violent
drug gangs

By the way, think about that for a minute.  They are arguing that home-grown weed would "affect" the inter-state commerce of "violent drug gangs".  How would it affect it?  It would reduce their commerce!  So the feds are claiming purview over home-grown pot because it would, what?  Unfairly reduce the inter-state trade of violent drug gangs?

Clarence Thomas makes the point succinctly that accepting this argument is the end of the distinction between inter- and intra-state commerce:

Respondents Diane Monson and Angel Raich use marijuana that has never
been bought or sold, that has never crossed state lines, and that has
had no demonstrable effect on the national market for marijuana. If
Congress can regulate this under the Commerce Clause, then it can
regulate virtually anything and the Federal Government is no longer
one of limited and enumerated powers.

Is it just me, or does this Supreme Court seem all over the place in its rulings?  Maybe you constitutional scholars out there can figure it out.

Update:  More from Reason

More thoughts:  The left complains that the right is trying to create a theocracy via the Supreme Court.  The right argues that it just wants to protect constitutional limits on government, which the left wants to exceed.  I have been and still am suspicious of some conservative judges on the court, but I must say that the way the votes fell in this case certainly hurts the "theocracy" argument.  I would start to believe if it wasn't for the fact that in the next case, if recent history is any guide, everyone will likely reverse their positions again.

I have not really had the time to do the research to form an opinion about Bush's judicial nominees, and the MSM is not very helpful in its coverage on the issue.  I wrote here that the judiciary has started to overreach of late, legislating from the bench to advance an agenda generally supported by the Democrats.  I don't know the candidates well enough to decide if these proposed judges are conservative activists who want to legislate from the bench but for conservative ends, or if they represent a first shot at reversing extra-constitutional judicial activism (which I would support).

However, I may have started to develop an favorable opinion on a couple of judges, based on what I have learned from their detractors.

Take this example, from a NY Times editorial, March 6, 2005.  In disparaging how extremist Bush judge nominees are, they use the example of:

Janice
Rogers Brown, who has disparaged the New Deal as ''our socialist
revolution.''

Woe is me, I must be an extremist.  First, the New Deal was clearly a "revolution", in that it was one of two events (the other being the Civil War) in the last 200 years that fundamentally changed the role of the federal government in what was a massive reinterpretation of the Constitution.  But was it socialist?  We can argue about whether the New Deal legacy that reaches us today is socialist or not- many quite normal non-extremist folks would argue yes and many similarly rational folks would argue no.

However, arguing the nature of the New Deal from what programs reach us today leaves out a lot of the picture.  Much of the New Deal was voided by the Supreme Court.  While some was re-passed later once FDR had a chance to remold the court with his own (for the time) extremist ideologues, some of the most socialist-statist-fascist legislation never was reinstituted.

The most dramatic of these institutions that fortunately were left on the cutting room floor was the National Industrial Recovery Act, or NRA.  Roosevelt actually modeled the NRA on Mussolini's fascism in Italy, so I guess it might be more correct to call it fascist rather than socialist but in practice, I can't ever tell those two apart.*

The image of a strong
leader taking direct charge of an economy during hard times fascinated
observers abroad. Italy was one of the places that Franklin Roosevelt
looked to for ideas in 1933. Roosevelt's National Recovery Act (NRA)
attempted to cartelize the American economy just as Mussolini had
cartelized Italy's. Under the NRA Roosevelt established industry-wide
boards with the power to set and enforce prices, wages, and other terms
of employment, production, and distribution for all companies in an
industry. Through the Agricultural Adjustment Act the government
exercised similar control over farmers. Interestingly, Mussolini viewed
Roosevelt's New Deal as "boldly... interventionist in the field of
economics." Hitler's nazism also shared many features with Italian
fascism, including the syndicalist front. Nazism, too, featured
complete government control of industry, agriculture, finance, and
investment.

If you are not familiar with the NRA, you need to be if you are going to come to a conclusion about the New Deal and just how statist FDR's aspirations were.  The actual text of the act is here.  Henry Hazlitt has a long evaluation here.  In the end, the NRA was scrapped in large part because it was a disaster for the economy.  Many blame the NRA for strangling the recovery that began in 1933-34 and thus extending the depression.  Parts of the law (collective bargaining, minimum wage) were incorporated in other later legislation, but the core concept of organizing industrial cartels with government backing to run industries and set prices, wages, and production levels died, fortunately.

Update:  More here.  Mr. Gregory quotes John Flynn's The Roosevelt Myth:

[Mussolini] organized each trade or industrial group or professional group into a state-supervised trade association. He called it a corporative. These corporatives operated under state supervision and
could plan production, quality, prices, distribution, labor standards,
etc. The NRA provided that in America each industry should be organized
into a federally supervised trade association. It was not called a
corporative. It was called a Code Authority. But it was essentially the
same thing. These code authorities could regulate production,
quantities, qualities, prices, distribution methods, etc., under the
supervision of the NRA. This was fascism. The anti-trust laws forbade
such organizations. Roosevelt had denounced Hoover for not enforcing
these laws sufficiently. Now he suspended them and compelled men to
combine.

*  I disagree with people who want to argue that socialism is freedom but without property rights while fascism is property rights without other freedoms.  Neither of these conditions are stable, and both converge to the same destination of suffocating statism, just with different starting points and different people in charge.  One of the things that drive libertarians nuts is being presented with a grade school civics book that has a linear political spectrum with fascism on one end and communism on the other.  Are those really my only two choices?