Coyote Blog

From Steven Milloy:

The audience -- a sold-out crowd of hundreds who had to apply to be admitted and pay a $3,500 fee -- consisted of representatives of the myriad businesses that seek to make a financial killing from climate alarmism. There were representatives of the solar, wind, and biofuel industries that profit from taxpayer mandates and subsidies, representatives from financial services companies that want to trade permits to emit CO2, and public relations and strategic consultants to all of the above.
    
    We libertarians would call such an event a rent-seekers ball -- the vast majority of the audience was there to plot  how they could lock-in profits from government mandates on taxpayers and consumers.
    
    It was an amazing collection of pseudo-entrepreneurs who were absolutely impervious to the scientific and economic facts that ought to deflate the global warming bubble.

    In the interlude between presentations by the CEOs of Dow Chemical and Duke Energy, for example, the audience was shown a slide -- similar to this one -- of the diverging
    relationship between atmospheric CO2 levels and average global temperature since 1998. That slide should have caused jaws to drop and audience members to ponder why anyone is considering regulating CO2 emissions in hopes of taming global climate.

    Instead, it was as if the audience did a collective blink and missed the slide entirely. When I tried to draw attention to the slide during my presentation, it was as if I was speaking in a foreign dialect.

    The only conclusion I could come to was that the audience is so steeped in anticipation of climate profiteering that there is no fact that will cause them to reconsider whether or not manmade global warming is a reality.

But of course we all know that it is the skeptics that are corrupted by money ;=)

Bravo, Don Boudreaux (responding to the typical anti-libertarian attack that we are just "shills" for large corporations:

If I were a shill for industry...I would oppose free markets. Free markets, after all, are markets open
to competition that invariably keeps the profits of existing firms from
remaining excessive and, often, even bankrupts firms once thought to be
invincible industry leaders. Existing firms almost all deplore
competition in their industries. They seek government regulations that
hamstring rivals and potential rivals. And, of course, firms are
forever pleading for "protection" from foreign competition.

I just wrote a book ("Globalization") in which I make a strong and
principled case for completely free trade - not free trade sometimes,
for some firms, under some circumstances, with some qualifications, but
free trade always, for all firms, under all circumstances, and with no
qualifications.

Whether my book's case for unalloyed free trade is correct or not,
it is surely not the sort of book that causes the heads of many
corporate CEOs to nod in eager agreement. The typical reaction of
business people whenever they hear or read me make my case for
genuinely free trade is to say something like, "Professor Boudreaux,
you don't understand the peculiarities of my industry." And then each executive launches into a laundry list of excuses for why Congress should protect his industry from foreign rivals.

Much has been made of late of the irrational voter, a voter who demands of politicians government economic measures that actually are not in his/her long-term best interest.   For example, a large number of voters want the government to shut down NAFTA, thinking this is in their economic best interest when in fact the evidence is pretty strong that for most of them, it is not.   

What is a gung-ho but thoughtful politician to do?  Do you listen to your experts, who council free trade, or do you pander to the masses?  Do you stick by our trading allies, or do you begin your kindler-gentler foreign policy by unilaterally abrogating treaties with our neighbors. 

Well, if you are the modern presidential candidate, you tell the masses what they want to hear, and then tell our allies you are just kidding.

Update: Cato brings us a great example from North Dakota

Via TJIC, on Hillary:

In 1973 she worked for a non profit.

In 1974 she was a government employee.

In 1975 she failed the D.C bar exam, and married Bubba.

In 1976 she joined the Rose Law Firm, and somehow made partner
three years later in 1979, despite rarely appearing in court "¦a
stunningly quick rise!

Oh, and Bubba became the Governor of Alabama in 1976, but that's unrelated.

In 1976 she was made, through political appointment by Jimmy
Carter, head of a government funded non-profit corporation which did
nothing but launch lawsuits.

In 1978 she laundered $100,000 of bribes through cattle
trading contracts. Despite having never engaged in cattle trading
before, she somehow managed to pick the two best times to trade each
day: she bought cattle contracts at the absolute lowest price each day,
and sell them at the absolute highest price. After laundering the
bribes, she quite cattle trading forever.

From 1993 to 2001, Hillary attempted, from her unelected
position, to socialize American health care, and routinely violated
open meetings laws.

In 2000 Hillary carpet-bagged her way into a senatorship.

Women's groups seem to be supporting Hillary's contention that being married to the President counts as presidential experience.  Wow!  If that is the case, the glass ceiling is exploded!  Melinda Gates has 20 years of experience as Microsoft CEO!

I'd like to say that I would love to see someone who has actually tried to run his/her own business running for the White House, but most of the candidates who claim to have business experience seem to have the politically-connected rent-seeking business experience (e.g. GWB) rather than the real try to make a business work against the general headwind of government bureaucratic opposition type of experience.

Cuba, Castro, Che Guevara, etc all suck.  It is ridiculous to even have to keep making this point against folks who are trying to sanctify them.

That being said, it is way past time to open up Cuba to US trade.  When will we learn that we are doing the Castros work for them?

• If the US did not go out of its way to limit contact with Cuba, the Castros would have to try to do it.  We are just playing into their hands.  Totalitarian governments have a very dicey time in this era of free communications.  China interacts with the west, and is improving.  North Korea blocks all contact and is not.
• The economic boycott gives the Castros a fig leaf to hide behind as their entire population wallows in poverty.  Yes, they are poor, and they are poor because of communism, but the Castros are able to blame the failure of their country on the US embargo.

But they have free health care!  They get all the leeches they want.

Via Hit and Run:

The Palm Beach Town Council on Monday voted unanimously to block "formula restaurants" from opening in the island town.

The ban, which was first proposed in 2006, applies to restaurants with
three or more units and similar trade names, standardized and limited
menus, uniforms, architecture, and decor. The measure will go before
voters this spring.

In other words, if your business has proven itself to be successful with customers and attempts to bring this proven success formula to our town - forget it.

The post digs in further, and finds the real problem to be that the Palm Beach Town Council is afraid of the "riff raff" that might come with certain plebeian chains.  Which reminds me of Lexington's opposition to the Boston Red Line being extended into their town.  Ostensibly, they were opposed to it on fiscal grounds, but that is a joke in a town that has never opposed a government program ever on fiscal grounds.  In fact, they were afraid of the "riff raff" the metro might bring to town, but the more-liberal-than-thou residents could never admit that in public.

I don't believe man-made global warming is substantial enough or catastrophic enough in its effects to warrant expensive public action.  But if we did feel the need to do something, John Tierney echoes a theme I have been sounding for a while (emphasis added):

The CBO report concludes that a tax on carbon emissions "would be
the most efficient incentive-based option for reducing emissions and
could be relatively easy to implement. If it was coordinated among
major emitting countries, it would help minimize the cost of achieving
a global target for emissions by providing consistent incentives for
reducing emissions around the world." But the major presidential
candidates aren't supporting such a tax, and the few proposals on
Capitol Hill to impose a tax are not expected to go anywhere anytime
soon.

Instead, the candidates and most legislators prefer to talk about
cap-and-trade schemes like the Kyoto protocol. These schemes have the
great political advantage of hiding the costs from consumers and
voters, but they cost more and accomplish less. The CBO calculates that
the net benefits of a tax would be five times higher than for a
cap-and-trade with inflexible targets. A more flexible cap-and-trade
system wouldn't be quite as bad a deal economically, but it would
create all sorts of political temptations for doling out exemptions and
subsidies to well-connected industries and companies.

Just the other day, I made the point that just because regulated corporations support a regulation does not mean that said regulation is sensible or good for the economy.  Often, incumbents are beneficiaries of industry regulation, which tends to give them certain advantages over new entrants.  I showed an example with General Electric and the new energy bill regulating light bulbs:

we see that GE has a product sitting on the shelf ready for release
that fits perfectly with the new mandate.  Assuming competitors don't
have such a technology yet, the energy bill is then NOT a regulation of
GE's product that they reluctantly bow to, but a mandate that allows GE
to keep doing business but trashes their competition.  It is a market
share acquisition law for GE.

Marlo Lewis makes a similar point, this time in relation to cap and trade systems:

I can't count how many times I've heard that line of
chatter"”and from people who usually assume anything corporations are
for must be bad!

 

There are many reasons some corporations
support cap-and-trade, or at least say nice things about it in public.
Some companies seek the PR value from looking green....

 

But in the case of energy companies, many who support
cap-and-trade do so in the expectation that they'll get a boatload of
carbon permits from the government"”for free!

 

Permits represent an artificial, government-created
scarcity in the right to produce energy. The right to produce energy is
very valuable, especially where government restricts it. The tighter
the cap, the more valuable each permit traded under the cap.

Get ready, because global warming will soon be an excuse for government micro-management of any number of everyday behaviors.  We have already seen California's attempt to have the government take control of your home thermostat.  In England, the target is patio heaters:

Britain's growing café culture and taste for alfresco drinking and
dining may be under threat from MEPs who want to ban the patio heater.

A
vote in Brussels today is expected to call on the European Commission
to abolish the heaters to help to tackle climate change. Such a move
could cost the pub and catering trade dear.

Pubs spent about £85
million on patio heaters after the smoking ban was introduced last
year. Besides forcing smokers into the cold there is concern that a ban
on patio heaters could bring a significant cash loss to pubs, cafés and
restaurants.

By the way, something not mentioned in the article, perhaps because it takes a knowledge of actual science and stuff, is that these heaters tend to burn LPG and propane, which due to their molecular structure produce far less CO2 per BTU than other fossil fuels.

One is left to wonder what pareto-style ranking of CO2 reduction opportunities put patio heaters at the top of the list.  In fact, there is no possible rational analysis that would make this a legislative priority.  It is a great illustration of two points about such technocratic endeavors:

1. Government cannot correct supposed market irrationalities because governments always act more irrational than private players in the market, no matter who is in charge.
2. Most legislation supposedly to fight global warming is using global warming as a fig leaf to hide the actual reason for the legislation.  My guess in this case is that the sponsors of this legislation have some other reason for wanting the ban, but dress it up as global warming.  This mirrors the larger issues, there socialists, unrepentant Ehrlich admirers,  and anti-globalization loonies have repackaged themselves as fighting global warming and then, surprise, proposed the same government actions they were pushing for pre-global-warming-hysteria.

Typically, wealthy individuals and investors will work hard to delay declaration of income and to push taxes off as far into the future as possible.  The present value of taxes paid a year from now are less than paying the taxes today.

But over the last several weeks, I have had casual conversations with entrepreneurs and individuals from the moderately to very wealthy, and almost to a one they have said they are trying to pull income into 2007 and 2008 in anticipation of potentially large increases in capital gains tax rates and the rates at the top of the bracket.

On a different topic, a friend and I depressed ourselves in a bar last night laying out the case that the next decade may in many ways be a repeat of the 1970s.  Already, we see both parties reverting to the economic prescriptions they promoted in the 1970s.  Further, this week may herald the beginning of an inflationary monetary and fiscal policy combined with government enforced structural limits on growth (e.g. Co2 abatement policy, trade protectionism, price controls, high marginal tax rates and capital gains tax rates, lending restrictions, etc.)  We are seriously discussing nationalizing a major industry (health care) for the first time since the 1970's (when nationalizing oil was seriously considered).  Currently we have a Republican President who is less market-oriented than his Democratic predecessor, and at least as clueless on economic issues as were Nixon and Ford.  All that's left to do is elect a new Jimmy Carter in 2008...

Those of us with long memories, say back to the 1970's, can remember that the Left constantly complained about manufacturing and assembly-line work as "dehumanizing."  Their goal was for workers to transcend this Tayloristic "hell" into clean, white collar office work.  Well, now that we have done so by replacing many assembly-line workers with machinery programmers and service workers, the Left now makes the argument that assembly-line work was the Nirvana of all employment, and the only possible road to the middle class for many Americans.  If I was an academic with time on my hands to do an in-depth research project, I would love to go back to records of leftish complaints about the economy form the 1960s and 1970s.  Because in large part, they have gotten everything they were asking for and more, but now they complain about the change. 

One of the explanations of this paradox is that progressives, despite their name, are extremely conservative (little c) in that they fear change in the economy and in work patterns more than anything else.  Changing trade patterns, changes in economic mix, changes in work relationships -- these all send progressives into a tizzy.  I know that in some sense I am answering a paradox with a greater paradox.  Rather than repeat the argument, here is my argument in depth that capitalism is too dynamic for progressives.  An excerpt from that post:

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

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

Postscript:  I still argue that the "decline" of American manufacturing is a chimera of how statistics are gathered.  As I wrote here:

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

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

For years, protectionists in this country have tried to argue that "oh, I am really for free trade, but to be fair we must impose environmental and labor standards on our trading partners."  Well, now Europe is proposing doing exactly the same to us:

The European Commission is considering proposing a
carbon dioxide tariff on imports from states failing to tackle
greenhouse gas emissions, while also considering a toughening-up of the
EU's own emission trading system....

The plan reflects pressure by French president Nicolas Sarkozy who
argued in October that Europe should "examine the option of taxing
products imported from countries that do not respect the Kyoto
Protocol," referring to the 1997 international agreement on fighting
climate change.

Mr Sarkozy urged Brussels to discuss the implications of "unfair
competition" by firms outside the EU, which do not have to abide by
strict European standards on CO2 emissions.

This letter from Don Boudreaux seems relevant:

Hillary Clinton needs a
language lesson.  She favors only trade that is found by government to
"benefit[] our workers and our economy" and that promotes "rising
standards of living across the world" ("" December 3; my emphasis).  She then asserts that "There is nothing
protectionist about this."

Oh please.

Protectionism
exists whenever, wherever, and whyever government artificially raises
its citizens' costs of buying imports.  Protectionism has forever
rested on the false notion that government officials know best how
consumers should spend their money.  And it attempts today to hide its
ugly face behind the smiling mask of allegedly noble intentions, such
as those mouthed by Sen. Clinton.

The title of his post is "The Moment Somone Must Explain that He or She Isn't a Protectionist, You Can Bank on that Person Being a Protectionist."

Outside of trade policy and climate treaties, I very seldom discuss foreign policy.  First, because it is not my first interest.  Second, because I am not an expert and do not spend the time to keep myself sufficiently informed on the issues to have useful insights.  Third, because of exactly this problem stated so well my Megan McArdle:

I periodically flirt with isolationism, or if you prefer,
"non-intervention". Like most libertarians, I'm attracted to "high
concept" political philosophy: simple rules that can be stated in a
sentence or less. No arguments about causus belli, blowback, or
ultimately unknowable political ramifications; just a simple "yes or
no" test. Did a foreign army invade the United States? For "Yes", press
one; for "No", press two, and go back to arguing about what should
replace child welfare laws in the coming anarcho-capitalist society.

Besides, all the foreigners hate having us there. Why not leave, and
see if absence makes the heart grow fonder? (I suspect that many
nations which have come, over long decades, to regard regional peace as
some sort of natural law, will get a rather nasty surprise. This might
make our influence look, in retrospect, rather appealing.)

But anyone who thinks at all seriously about libertarianism will,
fairly early on, be faced with a very high hurdle. There are a handful
of wars in which American intervention unambiguously halted gross
abuses of human liberty. World War II is one, though many end up going
around, rather than over . . . arguing that the Nazis were the direct
result of American intervention in World War I; or that it was
justified because Japan attacked us¹; or that Russia and Britain would have defeated Hitler anyway².  The American Civil War, however, is by far the highest leap; and the hardest to dodge.

In theory, every state has the right to secede, and the stated
Federal rationale for the Civil War--preserving the union--was the
vilest tyranny. In practice, chattel slavery was a barbarism even
viler.

And so we killed 20-30% of the Confederate Army, not a few of our
own, and uncounted numbers of civilians. That's not counting the
wounded, who probably outnumbered the dead. All we managed to achieve,
at this horrendous cost, was a corrupt and brutal occupation, followed
by the "freedom" of Jim Crow, sharecropping, and "separate but equal". And it was worth it.
The good guys won. We didn't do everything we wanted to, or even
everything we could have, or should have. Jim Crow was putrid. But it
was nonetheless so much better than slavery that it was worth the
horrendous cost--in my opinion, and that of almost everyone in the
world.

For me, a big part of the problem is one of information -- generally, most of the information one might find useful in deciding if X is a good war to pursue is from the government, an institution that demonstrably cannot be trusted based on past history when it makes this case.  Non-interventionism seems the right way to go, except for the
(relatively few) times it is not.  The problems is, to paraphrase the
famous dictum about advertising money, "half (or more) of our wars are
a waste -- we just don't know in advance which half."  Megan uses the
example of the Civil War, saying that that war was worth it because we
got rid of slavery.  But the war by no means began that way.  It wasn't
really until well into the war that both sides were pretty much in
agreement that the war was about ending or retaining slavery. I would argue that in advance, that war looked like an awful, terrible, horrible proposition.  The initial value proposition was "let's go to war so the Feds can have a bigger empire to run."  Only later did it become, "let's go to war to free a large part of our population."  There was a female professor, I forget her name, who made the point that the Emancipation Proclamation changed the war from a bloody waste of time to a moral positive.  But that came years into the fight.

The other problem I have is that the war is fought by, well, the government, the institution for which I have no trust.  One way of thinking about it is that every time we go to war, we put our lives and treasure and very future as a country in the hands of the Post Office.  Eeek.

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

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

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

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

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

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

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

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

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

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

If I had to choose one word that describes why I despair of politics, it is "calibration."  Recently, it has been observed that Ron Paul, for example, cannot possibly win because he sticks to a basic set of beliefs and never calibrates his message to the electorate and recent polls.  On the other end of the scale, Hillary Clinton is famous for endlessly calibrating everything she does in the hopes of maximizing the votes she receives.

Calibration is one of those dangerous words that tend to obfuscate the underlying reality.  Because, there are only two possible definitions of calibration as used in this political context:

• Lying, i.e. telling the electorate what they want to hear with the intention of acting differently once in office
• Total nihilism,, i.e. willingness to shift beliefs based on whatever is effective

Russell Roberts describes the situation pretty well:

But there is little difference between Republican and Democratic
Presidents in what they actually do. In what they say? Sure. Both
Reagan and Bush talk about individual responsibility and the market
blah blah blah. Bill Clinton talked more about feeling people's pain
and the downtrodden blah blah blah. Similarly, in the current
presidential campaign, there are stark rhetorical differences between
say Giuliani and Romney on the one hand and Obama and Clinton on the
other.

But will the actual results be different? Will Hillary double the
minimum wage? Change our health care system to be more socialized?
Eliminate corporate welfare? Will Giuliani make the health care system
less socialized? Eliminate the minimum wage? Get rid of farm subsidies?
Stop spending federal money on education?

Most of it is talk and it's not just because change is hard to
achieve. It's because they really don't want change. Did Bill Clinton
get rid of income inequality? Dent it? The share of income going to the
top 1% rose throughout most of the Clinton administration. Was it his
policies? The steady rise in the share of income going to the top 1%
started rising in 1976. Was it Carter's doing?

Was Bush or Reagan a hard core free trader in practice? Nope. They
used protectionism when it was politically expedient. Just like Bill
Clinton signed welfare reform and NAFTA and then chose not to enforce
the truck provision of NAFTA because the Teamsters didn't like it.

Government gets bigger under both Republicans and Democrats. What
they spend money on is a little different, yes. But to hate George Bush
for being a free market guy is to miss what is really going on. And to
hate Hillary because she doesn't understand the power of markets and to
love, say, Mitt Romney, is to misunderstand both of them. They use
rhetoric to dupe you. Don't be duped.

This all leads to the question of into which category should we place Paul Krugman - lier or nihilist?

Paul Krugman worries that,
although trade between high-wage countries is mutually beneficial,
"trade between countries at very different levels of economic
development tends to create large classes of losers as well as winners"
- and so is suspect because it likely harms ordinary American workers
("Trouble With Trade," December 28).

A famous trade economist
argues that this concern is misplaced.  In a 1996 essay, this economist
- responding to a protectionist who fretted that western trade with
low-wage countries would harm workers in the west - wrote that this
protectionist "offers us no more than the classic 'pauper labor'
fallacy, the fallacy that Ricardo dealt with when he first stated the
idea, and which is a staple of even first-year courses in economics. In
fact, one never teaches the Ricardian model without emphasizing
precisely the way that model refutes the claim that competition from
low-wage countries is necessarily a bad thing, that it shows how trade
can be mutually beneficial regardless of differences in wage rates."

Oh - the economist who wisely warned against the pauper-labor fallacy is none other than Paul Krugman.

I often see folks who are arguing for increased government regulation of some industry observe that "even those greedy corporations in this industry support this new regulation."  For example, if a power company takes a public position to support greenhouse gas emissions, then that is used as evidence that such regulation must really be necessary if even the to-be-regulated are in favor.  Greg Craven makes such an argument in his global warming video that I refuted the other day.

There are two very good reasons a company in such a position might publicly support even a bad regulation.  The first is basic politics and PR:  If the regulation appears inevitable and has public support, then it is sometimes better to get out ahead of it and try to curry favor with politicians and the public to manage the regulation's implementation.   We all know corporations give donations to political candidates, but look at how they give them.  Corporate donations correlate far better with "who is expected to win" rather than "who would create the most favorable regulatory environment for the corporation."  In fact, corporations are highly likely to give donations to both candidates in a closely-fought election, and a lot of their giving is after the election, to the winner of course.

The other good reason that companies support regulation in their industry is because a lot of regulation is either designed to, or effectively, helps incumbent companies against new entrants.   I have talked about this many times with the questioning of licensing.  Global warming regulation and carbon trading systems in particular give us another great example:

BBC News understands the industry will be allowed to increase emissions
as much as it wants by the European environment council. Aviation is
the fastest growing source of greenhouse gases. But Europe's
environment ministers look set to reject a plan for a strict cap on
emissions from planes. Instead, airlines will be given a set number of
permits to pollute.

Instead, airlines will be given a set number of permits to pollute.

If
they overshoot their limit they will be allowed to buy spare permits
from firms who have managed to cut emissions elsewhere - manufacturing
industry, for instance.

So, current airlines in Europe will be given carbon permits that presumable support their current business level.  However, any new entrant, or any current player wishing to take market share from another airline, must spend money on carbon credits to grab this market share, carbon credits the current established incumbents got for free.  This in effect becomes a tax on market share gains.  This European-style protection of large corporations is typical, and is why the 30 largest companies in Europe are nearly the same as they were in 1965, but are completely different in the US.

This is also why, though I don't think expensive action on CO2 is justified, I think that if we do so the approach must be a carbon tax rather than cap and trade.   But cap and trade has so much potential for political hijinx and giving special deals to the politically influential that my guess is that politicians will want cap and trade.

I have frequently quote this Milton Friedman quote about regulation ostensibly being about the consumer, but in reality existing to protect one set of competitors from another:

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

Here is further proof, via Scott Gustafson, right here in Arizona:

Valley tattoo-parlor owners, eager to protect and burnish the reputation of their industry, are calling for state regulation of the tattoo trade. 

Shop owners have teamed up to form the Arizona Tattoo and Piercing Association, and one of the organization's first steps was to meet this week with state legislators who say they now intend to introduce legislation to regulate the tattoo industry... 

"What we heard from the tattoo industry is that they want to be more respected, and unless there is some sort of regulation, shops can exist which will give a bad name to the whole industry," Schapira said. 

He said he intends to introduce legislation to bring regulation to the tattoo industry at the upcoming session of the Legislature. 

Burton-Cahill said she considers the matter "an issue of public health."... 

"This is becoming an increasing trend with the reputable operators," said Will Humble, assistant director of the department. "The majority of the shop owners are doing things in a sanitary way but a handful is not doing everything they can. The bigger members of the industry are trying to make sure those disreputable kinds of places don't give tattooing a bad name."

Here you see it all - ostensibly aimed at the consumer, but in reality aimed at sitting on a few competitors they want out.

I don't know if this has made the blog rounds yet (I have been out of touch and have not gotten through me feed reader today) but this is perhaps one of the most ridiculous things I have ever heard.  It's a 40 second interview with a woman named Geri Punteney in Iowa about Barack Obama on the left of this page  (ironically, NPR makes you listen to a brief commercial before you hear the clip).

You really, really need to take the time to listen.  I will include an excerpt below, but you won't get the full effect of the woman absolutely in tears through the statement, crying because she had gotten to touch someone she had seen on TV.

A few weeks ago, at the home in Oelwein, Iowa, she shares with her mother, Punteney said she'd been inspired to see Obama when he came to the area.                        

"I'd seen the commercials," she said. "And he just seemed sincere, like he's for people like my mom, my brother and me."                        

Many people feel politicians may not be the first place to turn when in dire need of help. But Punteney said she was confident Obama could do something to make her feel better.                     
"I never had anyone pay attention to me and my needs "” and he held my hand," she said.

He can do something to make me feel better?  Barf.  Can it really be that my future freedom and prosperity depend on how this woman votes?  Have we really given this woman so much power over the rest of us?  Have we really throttled back the most productive in society so this woman can feel like she is keeping up?  Have I really become the sacrificial lamb to this woman's need to feel better?

And, oh by the way, in case I have not gone off on this rant in the last five minutes or so, Obama can care because he can promise you whatever you desire, and then he can force me to pay for it.  Unlike people in private life who really do care, politicians don't actually pay for their promises because they can force other people to do it for them.  Worse, politicians like Obama reap the praises of women like this for being caring, while vilifying people like me who are productive and make his caring possible.  It just makes me sick.

Oh, and how much did Obama really care?  Not much, it seems:

I brought a tape recorder to Punteney's house and played her moment
with Obama back for her "” and his suggestion that he'd write her
brother a note. He never did.                        

"He
didn't have time, I guess," she said. "I understand. You know, he was
bombarded by so many people. But just knowing he knows "” that's more
important than a note."

So here it is:  Cares enough to spend Coyote's money:  Yes.  Cares enough to actually expend some effort himself:  No way.

Indeed, Punteney seemed to get just what she wanted from Obama. She got noticed.

How about a trade, Ms. Punteney?  If I promise to get you to an Oprah show, will you promise not to ever vote?

Update: Yeah, I know, her brother has leukemia, which is sad.  The lack of portability of his health insurance is also pain, a result of WWII wage control policy and subsequent tax policy that encouraged the practice.    Sorry, but this need to be touched and noticed by a second or third term Congressman is pathetic. 

I have argued on numerous occasions that government-funded health care is a Trojan Horse for detailed regulation of how we treat our bodies.  The Economist Blog has a great post on this topic:

Why exactly is obesity a public health issue? Well, when,
by force of law, you externalise responsibility for providing a good,
such as health care, then the effects of all individual choices that
affect the cost of providing that good for the individual are thereby
transformed from internal to external effects. If you, like
Mr Dubois, are in the grip of the blithe assumption that reducing
negative externalities by raising the cost of the behaviour that causes
them is simply what government does, then obviously my gluttony and sloth are public problems. Because public policy made them public problems! So, obviously,
it's up to the government to fiddle with prices to manipulate our
behavior in order to minimise its impact on the tax-financed national
budget.

This sort of thing drives me crazy because it's just so
thoughtlessly arbitrary -- intellectual empty calories. Why
specifically a tax on junk food? Yes, one
of the causes of obesity is "the consumption of too many calories."
Another is the failure to burn the calories one consumes. So why not
levy huge fines on people for not showing up at "voluntary"
government-funded yogalates classes? Or if people are consuming too
many calories, then just put a tax on calories. Why tax some calories
but not others? You can get fat eating steak, too. Maybe a national
"cap and trade" system of calorie credits would do the trick. Hey, do
you know who's healthy? Mormons are. Maybe the government should
provide giant tax credits for being Mormon. Or perhaps it would be
easier if the national health care system could just deny services for
ailments it judged to be obesity-related.  You could even decide not to
have a national health care system at all and allow insurance premiums to reflect the actuarial risk of individual behavior! But that would be crazy. 

Hat tip to TJIC, who has more.  I think this would be a great anti-universal-coverage T-shirt:

Ironically, this shirt is produced by the National Organization of Women, who are strong government health care supporters.  Go figure.

From the WSJ:

By a nearly two-to-one margin, Republican voters believe free trade is
bad for the U.S. economy, a shift in opinion that mirrors Democratic
views and suggests trade deals could face high hurdles under a new
president.

Mattel screwed up the design, specification, and their quality control responsibilities which resulted in a series of toy recalls.  Eager to save face and push the blame onto others, management eagerly spun the story as a general failing of Chinese production, rather than their own personal screw-up.

For years I had some kind of corporate health plan.  When I started my own business, I bought a Blue Cross plan that roughly mirrored the corporate health plan I used to have -- very low deductible, lots of coverage.  And it had very high premiums. 

So I finally got serious and went out and did something 99% of Americans never do or never have to do:  I went out and really researched my health care options.  And what I found was that to raise our family's deductible from $500 a year to $2000 a year would save me over $3000 a year in premiums.  In fact, if I switched plans, I would get just as high of a maximum payout and I would get a better gaurantee on future pricing and a commitment never to drop my coverage from a large, well-rated insurance company.

There's an old joke about an economist and another fellow walking down the street.  There was a $10 bill laying on the ground, but the economist just walked right past it.  The other fellow said "what are you doing, you just passed up $10."  And the economist replied "It can't be a real $10 bill, because in an efficient market someone would have already picked it up."

That was my reaction to my health care options.  I asked my broker, "you mean that if I increase my deductible $1500 I can save $3000 a year?  Even in a worst case year I am better off, and in a healthy year I am MUCH better off."  He replied "Yep."  I asked, "But why doesn't everyone do this?"  He just shrugged.  As my Harvard investment management professor used to say, as he wrote up a market situation on the chalkboard to begin each class, either this is an opportunity, of there is something we don't understand.  As I have gained more experience with my new health plan, I have become convinced it is the former.

McQ over at Q&O has a great post on insurance vs. insulation.  I won't quote it all, but it is well worth your read.  Towards the end, he quotes John Stoessel on my particular conundrum:

But people are so conditioned to expect others to pay their medical
bills that they hate high deductibles: They feel ripped off if they
must pay a thousand dollars before the insurance company starts paying.

But high deductibles may be the key to lowering costs and putting you in charge of your health care.

I am absolutely convinced that the best possible step for US health care is to expose more users to the market and price-value trade offs, while providing high-deductible insurance that shelters people from bankrupting unusual events.  More here, here, and here.

For a while, I have been trying to highlight that the real problem with health care is that consumers who receive the service do not have any incentive to shop for the best price or to make trade offs on marginal procedures based on price.  The only people who have any incentive to shop are 1) people without insurance and 2) people with high deductibles (like me).  Politicians are trying to eliminate the former group, even if they don't want insurance, and programs like Romney's in Massachusetts actually ban high deductible insurance.

Now, Obama is worried about anti-trust:

The consequences of lax enforcement for consumers are clear. Take
health care, for example. There have been over 400 health care mergers
in the last 10 years. The American Medical Association reports that 95%
of insurance markets in the United States are now highly concentrated
and the number of insurers has fallen by just under 20% since 2000.
These changes were supposed to make the industry more efficient, but
instead premiums have skyrocketed, increasing over 87 percent over the
past six years. As president, I will direct my administration to
reinvigorate antitrust enforcement. It will step up review of merger
activity and take effective action to stop or restructure those mergers
that are likely to harm consumer welfare, while quickly clearing those
that do not.

How can these mergers harm consumers when consumers don't shop for the service and don't care about price in the first place?  Candidates like Obama and Clinton are threatening to create single payer systems that use monopsony power combined presumably with the coercive power of government to hammer suppliers.  Is it any wonder that they are joining together to try to gain some sort of bargaining position for themselves?  In the context of what Obama wants to do with health care buying, this can be thought of more as unionizing than merging.

By the way, does anyone else note the irony of Obama, who wants to create a single supplier for health care (the US Government) lamenting concentration in the health care field?

I haven't really blogged about the Chinese toy recalls, not knowing much about them.  However, my first thought on hearing the problems described was, "aren't those design defects, not manufacturing issues?"  I had a strong sense that populist distrust of trade with China was being used as a fig leaf to cover Mattel's screw-ups.  Several of the recalls were for parts such as magnets that were small and could be swallowed.  There was no implication that the magnets fell off because they were attached or manufactured poorly, they were just a bad design.

I have worked in a number of large manufacturing companies that have plants and suppliers in China.  It was out responsibility to make sure the product that got to the customer was correct.  There is no way we would source a product from an independent foreign company, and have the product delivered straight to stores without inspection, unless we were absolutely damn certain about the company's processes, up to and including having full-time manufacturing people at their plant.

Well, I might have been on to something (WSJ$)

Toymaker Mattel
issued an extraordinary apology to China on Friday over the recall of
Chinese-made toys, saying most of the items were defective because of
Mattel's design flaws rather than faulty manufacturing. The company
added that it had recalled more lead-tainted Chinese toys than was
justified....

Mattel ordered three high-profile recalls this summer
of millions of Chinese-made toys, including Barbie doll accessories and
toy cars, because of concerns about lead paint and tiny magnets that
could be swallowed. The "vast majority of those products that were
recalled were the result of a design flaw in Mattel's design, not
through a manufacturing flaw in China's manufacturers," Mr. Debrowski
said. Lead-tainted toys accounted for only a small percentage of all
toys recalled, he said. "We understand and appreciate deeply the issues
that this has caused for the reputation of Chinese manufacturers," he
said.

Mattel said in a statement its lead-related recalls
were "overly inclusive, including toys that may not have had lead in
paint in excess of the U.S. standards. The follow-up inspections also
confirmed that part of the recalled toys complied with the U.S.
standards."

The other interesting thing here is just how important Mattel's relationship with China is, to have even issued this apology at all.  For such a massive and high-profile recall, Mattel came off very well through the succesful strategy of blaming China.  I know that parents I have heard talk about the recall blame China and have increased fear of Chinese products.  So it is interesting to see that Mattel feels the need to abandon this so far winning PR strategy.

For those who are new to my blog, I run recreation sites like campgrounds, mostly with retired people as labor.  Retired people love these jobs, because they are looking for a nice place to live for the summer in their RV.  Often they are willing to work just for their site and utilities, though as a private entity I must pay them minimum wage as well (when they work for the government, they don't get paid).  We sometimes get into odd situations -- for example, because of a disability payment or Social Security limits, it is not unusual I have employees that ask me if I could not pay them or pay them below minimum wage, and I have to tell them no (minimum wage is absolutely required, even if the worker begs to be paid less).

This relationship works out well.  The retired persons bring conscientious and low-cost management to the campgrounds.  Our employees, who usually are living comfortably off their retirement savings or pension, get a few extra bucks and a nice place to live for the summer.  These folks may work a bit slow, but I can afford that at $6 an hour.

But what happens when a state like Maryland, because it's got its blood up against Wal-Mart, passes a $11.30 "living" wage?  A number of problems result.  First, a camping night generally consumes, on average, about an hour of labor.  At $6 an hour with 22% burden for payroll taxes and workers comp, this totals to $7.32  per night of camping in labor.  At $11.30 an hour, this totals $13.79 per night of camping.  Most of our campsites are tent camping sites and more primitive natural campgrounds (see here) and a typical price for a night of camping is $16.  This is a very low price for camping when compared to large RV parks, and makes our sites particularly popular with lower income people.  The Marlyland minimum wage would add at least $6.50 to this price, or increase prices by 41% in one swoop.  And this is before considering second order cost increases in other purchased goods and utilities due to the minimum wage increase.

The other problem is one I would have thought so obvious that it is amazing to me that no one seems to talk about it -- not everyone earning minimum wage is trying to live on it.  Certainly people new to the work force are one example, as they are often willing to trade lower initial wages for training and experience and a work record and other valuable but non-quantifiable benefits.  In my case, while I am perfectly happy to tolerate lower productivity from older, retired workers at $6 an hour (the average age of my employees is over 70), when wages are forced arbitrarily to over $11, then I have to think about changing my business model, substituting younger workers for older folks.  As any economist would predict, lower productivity workers get pushed out of the market.

For more on this topic, I discussed four case studies in my business dealing with the minimum wage.

Now, I won't argue that Vista will someday not suck - after all, give an infinite number of monkeys $30 billion a year in cash flow and they'll code Shakespeare.  Or whatever.  But I have to agree with this post by Glenn Reynolds that Vista is still not ready for prime time.  Now, I wrote this same conclusion over a half year ago, but incredibly, no updates of any seriousness have been issued.  It is still the mess it was then, and Moore's Law has yet to catch up to make the average machine run it acceptably  (particularly with laptops).   When I set up the dual boot back to XP on my kid's laptop, I did not make the XP partition large enough because my kids absolutely refuse to install anything on the Vista partition, which they use only because that is where MS Office is installed. 

Am I a lone wolf on this issue?  Oh my God, am I a Vista denier! Well, check out this announcement from Microsoft reported by ZDNet on June 28:

Microsoft is simplifying the processes via which its PC-maker
partners will be able to provide "downgrade" rights from Windows Vista
to Windows XP for their customers.

Microsoft will implement the first of the policy changes for its
Gold Certified (top-tier) OEM partners within the next couple of weeks.
The company will streamline downgrade-rights policies and procedures
for the broader channel somewhat later, said John Ball, general manager
of Microsoft's U.S. Systems Group....

Microsoft is working on ways to allow the rest of the channel to
take advantage of these simplified downgrade procedures, but is still
in the midst of hashing out the details, Ball said. He didn't have a
timetable for when Microsoft will make its more liberal
downgrade-rights policies available to the rest of its PC partners.

I am not sure this is the sign of a healthy product line when your top customers are demanding easier ability to go back to the old version.

As a side note, I have never, ever liked Macs.  First, I never wanted to be one of "the rest of us" and I enjoy tweaking and upgrading too much to be a fan of Macs.  Also, I thought their historic resistance to some obvious improvements, like the two-button mouse, was just stupid.  All that being said, I will admit that I really like the new iMac I bought my wife.  It is perfect for her, and it is gorgeous.  The keyboard is not great for speed-typing but it looks really cool and my wife is fine with that.  The iMac did a great job with the tough stuff - it immediately recognized the PC's on my network and was able to trade files with them (something our Vista laptop still balks at from time to time) and it set up a network printer on the first try.  And, for perhaps the first time ever on a Mac, I didn't feel like the things was wallowing in first gear when compared to my desktop PC.