Coyote Blog

Asymmetrical Information comments on Greg Mankiw by observing:

Harvard scores lowest in student satisfaction *and* enjoys the highest yield (%
of students admitted who attend) of any leading American university. How can the
same institution be so desirable and so disliked at the same time?

The data presented for is for the undergraduate school and my experience is with the graduate school of business, but I think some of my experience can still help answer this question.

At the time I attended, I was sure that the Harvard Business School (HBS) was the best place for me to attend.  I still think that is true.  First, it had (and has) a great reputation with both people hiring for jobs and the general public.  The Harvard diploma has power, power that hasn't lessened even 20 years later.  Second, it had a style that worked well for me personally.  I sat in on classes at other business schools, but HBS classes had an interactive, and often combative, style that I loved and thrived in.  Yes there was work, but the workload never was worse than my undergraduate school.  I would not change my decision.

That being said, while I have showered my undergraduate school with cash, Harvard has not gotten one dime from me.  Because as an institution, it sucked.  It had an incredible arrogance to it, often stating publicly that its customer was NOT the students, but was the businesses who hired its graduates and society at large.  And this was the attitude at the business school, which I was often told was the most student-friendly part of Harvard.  My college roommate Brink Lindsey apparently had a similar experience at Harvard Law, as he was part of a group that founded N.O.P.E., which stood for Not One Penny Ever (to Harvard).

At every turn, one ran into petty, stupid stuff that did nothing to contribute to the educational experience but were frustrating as hell.  The faculty was often arrogant and the administrative and housing staff uncaring. 

At the risk of sounding petty, I will share two examples.  These are small things, but are representative of hundreds of similar experiences over two years. 

• At winter break the first year, we were all given a "gift" of a coffee table book about Harvard.  Then, next spring, we all found a $100 charge on our spring term bill for this "gift"
• My Harvard dorm room had a broken heater in my second year.  It got so cold that ice formed on the inside of the windows.  After weeks of trying, we finally got a maintenance guy to come out.  He set a thermometer down in the center of the room and stared at it for ten minutes.  Then he picked it up and started to leave.  "Why are you leaving?" I asked.  He replied "Because its 53 degrees in here.  State law does not require us to fix the heating until it falls below 50."  I finally had to go to Walmart and buy several space heaters.  Several weeks later I was ticketed by the campus police for having a fire hazard -- too many space heaters.

I do not think it an exaggeration to say that had Harvard scoured every post office in the country for employees, it could not manage to provide worse customer service day-to-day.

And I think this is the answer to the paradox.  If you can tolerate the faculty arrogance, you can get a great education, but Universities are more than just a school.  For most students, Harvard is also their landlord, their only restaurant choice, their local police force, etc. etc.  And for all these other functions, they are terrible.

I missed it when it first came out, but Jack Benway over at Arizona Watch has a nice post in defense of free immigration.  His point, as was mine here, is that the problem is the welfare state, not immigration. 

A prohibition on immigration from any source country violates the basic
principles upon which the US was founded "“ that life, liberty and property are
the inalienable rights of all people unless they sacrifice them by the forceful
denial of another person's pursuit of these same rights. These rights don't stop
at the US border. This does not mean that immigrants should not be screened and
naturalized and subject to the laws of the US. It does mean that the
artificially low quotas that place the current illegals in the position of
criminals by virtue of their presence here are morally wrong. These laws must be
repealed.

And chaos will ensue. What about all the services these illegals use at the
expense of taxpayers? We can't afford this. That's correct, we can't, so stop
offering these entitlements and services "“ to everyone.

Finding this post helps me roughly double my estimate of open immigration supporters here in Arizona (from 1 to 2).

Update:  This issue is really a heated on in Arizona.  It has even divided the writers at Arizona Watch, with Bridgett disagreeing significantly from Jack.

Warning:  This post wanders all over the place, from baseball to gasoline prices to star naming to Internet search engines and back to baseball.

Today I was listening to sports-talk radio for a while, and the topic of conversation was "Should major league baseball nullify (or asterisk) Barry Bond's home run records because he is strongly suspected to have taken steroids."  Now personally, I don't believe anyone has broken Roger Marris's single season home run record who was not taking steroids.  How much that bothers me depends on what day of the week you ask me, but my answer to the record book question never varies:  no, the MLB doesn't have to do a thing.  Here's why, though get ready for a digression.

Perhaps the toughest libertarian-capitalist concept for most people to grasp, even tougher than the idea that wealth is not zero-sum, is that of emergent or bottom-up order.  Capitalism is all about order emerging bottom-up:  Market prices emerge without any one person setting them from above;  supply matches demand without any central body coordinating production.  For many people, this process is some sort of black magic not to be trusted -- just observe Congress and their silly proposals on gasoline prices, reminding us of savages who don't understand how nature works performing elaborate rituals to make the crops grow.

In fact, this whole issue of emergent order vs. grand design is actually a point of incredible inconsistency in American politics.  Observe certain liberals, strong secularists who reject the concepts of God and intelligent design in favor of evolution and bottom-up emergent order in the natural world, but then in turn reject emergent order in human relations and economics in favor of top-down not-so-intelligent design as run by the federal government.  You have only to remember back to Katrina to see the public demand for, followed by the spectacular failure of, top down relief approaches.

The other day I had an argument with a friend about one of those commercial star registries -- you have probably heard the commercial-- pay $X and have a star named after someone you love.  My friend was appalled.  He said - "do you know that they have no authority to name those stars.  Don't people know its not official.  They just put your name in a book somewhere - but its not the official book in Switzerland (or wherever the hell he said it was)."  My reaction was -- so what?  Who had the right to call the other one "official"?  The standard star naming by scientists is accepted because it is useful.  But that doesn't mean I can't come up with my own naming system.  Let's see, I think I am going to rename the Orion constellation as "Warren".  Yes that's much better.  Now, its unlikely anyone else will find a useful reason to adopt this same convention.... The fact is that the star names we use represent a consensus that has emerged over time.  In many cases, constellations and stars had competing names (e.g. Big Bear vs. Big Dipper) that still have not been fully reconciled. 

Or here is an example that might work better for modern Internet users.  The Internet does have an official central body that sets addressing conventions.  They set up the rules by which I can lease the rights to www.coyoteblog.com and the 12-digit IP address that is attached to it.  This is the "official" way to address the web.

But early on, as web sites proliferated, entrepreneurs attempted to impose their own order on the Internet, sort-of the equivalent of suggesting an entirely new set of names for stars.  Yahoo and AOL both developed huge hierarchical directories, effectively imposing a nested-tree addressing system over the Internet's flat addresses.  And for a while, these approaches prospered, as users found these to be a more useful way to organize the Internet.  Then, along came search engines, like Altavista and then Google, and yet a new organizational paradigm was proposed, in effect a third different set of names for the Internet constellations.  Again, users found this keyword and link-popularity approach superior to hierarchical trees, and search engines have prospered while the old directories have languished. 

The point is, no one gave Google a license or top-down authority to reorganize the Internet.  They just did it, like thousands of others tried at the time.  Of these thousands of different approaches, no single smart man picked Google as the approach that everyone should use.  Rather, individuals tried all these different approaches, and over time a consensus emerged that Google was the most useful.

Which -- and I know you thought I forgot -- brings us back to Barry Bond's records.  Individual baseball records don't actually have any meaning to the game of baseball itself -- baseball is played for team wins and losses and ultimately for team championships.  So while individual hits and home runs may have mattered in getting to a champion, the fact that Barry Bonds hit 73 home runs in a year has no real meaning within the context of declaring a team as champion.  It has meaning only in the way that fans react to it. 

One proof of this is the fact that people focus so much on the single-season home run record.  Is this record more inherently valuable than say, the single season triple record?  Triples are actually harder to hit, so you might argue that the triple record is more interesting.  No one from official MLB offices ever declared the single season home run record to be among the most important.  But over time, a fan consensus has emerged that people are far more intrigued by the home run record, so most everyone can name Barry Bonds at 73 home runs but only a geek would know Chief Wilson at 36 triples.

I contend that Barry Bond's 73 home run record  (and his lifetime home run record, if he ever gets that) will take care of themselves without any action from the league office.  Over time, fans will decide for themselves if Bond's 73 is better than Marris's 61.  Today, for example, most discussion of pitching records excludes the period before 1915 or so, which people refer to as the "dead ball" era.  Someday, fan consensus will emerge that they are OK with steroid-driven records (as they have become comfortable with Gaylord Perry's records despite his use of the illegal spitball) or else they are not OK and batting stats from the past decade will be excluded as the "juiced player era".

As a follow-on to yesterday's guess-who quote, guess who recently said this:

So I have been forced to conclude that in all of those great free
market texts by Ludwig von Mises, Friedrich Hayek and all the others
that there is a footnote that says, by the way, none of this applies to
agriculture. Now, it may be written in high German, and that may be why
I have not been able to discern it, but there is no greater contrast in
America today than between the free enterprise rhetoric of so many
conservatives and the statist, subsidized, inflationary, protectionist,
anti-consumer agricultural policies, and this is one of them.

Club for Growth has the answer.

By the way, I agree with this statement completely. 

I don't think you will be able to guess who just wrote this in the LA Times:

The current frenzy over Wal-Mart is instructive. Its size is
unprecedented. Yet for all its billions in profit, it still amounts to
less than four cents on the dollar. Raise the cost of employing people,
and the company will eliminate jobs. Its business model only works on
low prices, which require low labor costs. Whether that is fair or not
is a debate for another time. It is instructive, however, that
consumers continue to enjoy these low prices and that thousands of
applicants continue to apply for those jobs.

Reason's Hit and Run has the answer.  I expressed similar thoughts here.

A while back, I lamented that all three branches of government seemed to be conspiring to weaken Constitutional limits and separation of powers.

The good news is that Congress has finally gotten worked up about protecting separation of powers.  The bad news is that the issue at hand is the justice department's investigation of Congressional bribery.  Unbelievable.  These guys are totally lost.  More on the Jefferson bribery charges.  Glenn Reynolds comments and has a roundup.

Ed Morrissey provides a bit of Constitutional analysis, as well as this excellent point:

This can't be the same Congress that issues subpoenas for all sorts
of probes into the executive branch and the agencies it runs. Does
Congress really want to establish a precedent that neither branch has
to answer subpoenas if issued by the other, even if approved by a judge
-- which this particular subpoena was?

The FBI had a valid subpoena for the information in Jefferson's
office. He refused to provide it. The FBI had little choice but to go
in and take it, and from the description given in the Washington Post,
they took extraordinary care not to confiscate legitimate data relating
to his legislative responsibilities.

A new study on medical malpractice decisions by Alexander Tabarrok and Amanda Agan of George Mason University was released last week.  A lot of the study is dedicated to countering some economically-ignorant canards (e.g. the charge that the recent rise in malpractice insurance is all due to price gouging and not due to malpractice awards).

The most interesting piece is where they compare malpractice awards to results of the independent medical review board rulings.

Our test finds that the tort system and review system do not correlate. Figure Five shows that
adverse actions per doctor in the medical review board system do not correlate with the number of medical malpractice cases per doctor in the tort system, nor do they correlate with the
average award per doctor....                               

In no case is the correlation large; in some
cases, it is actually slightly negative. What these results indicate is that the two systems
we have for determining malpractice, the tort
system and the medical review system, result 
in very different determinations of malpractice.
Surely, one of them is wrong!

The conclusion is one I think many neutral parties have suspected for quite a while:  The tort system is doubly broken:  Bad outcomes that truly are the result of malpractice often do not result in an award, while numerous tort awards go to people who are not the victim of any real malpractice.  Or to put it simply, people who are owed restitution aren't getting it and people who get money often shouldn't be owed anything.

The obvious result is a gross miscarriage of justice.  However, there is a second, less talked about result:  If the tort system is random, having no correlation to real doctor error or doctor quality, then it is impossible to charge doctors with risk-adjusted premiums.  In an efficient market, the worst doctors would pay the highest premiums and would get driven out of the market, just like bad drivers must change their behavior or face lifelong high auto premiums.  However, if tort awards are not correlated with bad behavior, as the study implies, then the system creates a huge moral hazard, with bad doctors underpaying for insurance and good doctors overpaying.  The result is that at best, good doctors will be driven out of the system at least as frequently as bad doctors.  At worst, good doctors, frustrated by the lack of justice in the system, will actually be more likely to leave the system than bad doctors.

Last week, Milberg-Weiss and two of its partners were formally charged with bribery and fraud surround their aggressive pursuit of class-action lawsuits, often against companies with falling share prices.  Walter Olson helps describe in detail what was going on, but the short answer is that the firm, as many of us suspected for years, appears to have been generating class action suits against large companies mainly for the benefit of itself and the legal fees generated.  A few months ago, I questioned shareholder suits and their fundamental logic when I was guestblogging at Overlawyered.

So I am happy that this particular rock is finally being turned over.  However, there are substantial problems on the prosecution side of this as well.  The Justice department is using the abusive Thompson Memo guidelines to go after Milberg-Weiss.  Larry Ribstein is concerned with the firm death penalty approach being taken here that was used to bring down Arthur Anderson.

Milberg is a different story. The case seems to be based on the
alleged misconduct of a couple of partners. If the partners did what
they are accused of, they should go down. Moreover, the firm will have
earned fees under questionable circumstances and should bear civil
consequences for that. But the criminal indictment casts a shadow on
the entire firm that it will have a hard time surviving, given the need
to establish its credibility for courts and institutional investors in
the highly competitive class action industry. Moreover, unlike AA, it's
not clear the indictment reveals a continuing public policy problem,
given the post-PSLRA reliance on unbribable plaintiffs.

We (and I) may not like Milberg's business. But the class action
part of it was one enabled by legal rules. The right way to deal with
the problems of this business is to change the rules, as I've argued
for securities class actions in my Fraud on a Noisy Market.
When we criminally condemn firms like Milberg because we don't like
their business, we set a precedent for other firms in controversial
lines of work -- e.g., Drexel Burnham.

More seriously, the power to criminalize a firm puts a potent tool
in the government's hands to get the firm to cooperate in sacrificing
the rights of criminal defendants. Here the cure seems patently worse
the disease. The questions are no less in Milberg than in KPMG just
because Milberg was in an unpopular line of work.

The government tactic de jour, as outlined in the Thompson memo, is to threaten a large company with extinction, telling them they might get off the hook but only if they agree to throw a number of their employees to the wolves.  These steps include the unbelievable step of forcing companies to waive attorney client privilege, including privilege between any company-paid attorney and any employee.  Does anyone doubt that if the company who employs you was given the choice of having the government prosecute them or you, who they would choose?  In this context, Arthur Anderson should be commended for not sacrificing its employees for its own survival.  KPMG survived, because it chose to roll over on its employees.  I commented on many of the problems with the AA takedown here, and on the dangers of the Thompson Memo here and here.  Tom Kirkendall is all over the story.

Thanks to Reason's Hit and Run.

So we're going to build a wall and send an army to the border.

Maintaining a military to defend a group of people against outsiders who wish to use force against them is one of the core functions of government.  Even crazed libertarian anarcho-capitalists like myself concede it as a function of government.  If libertarians were to have their version of the ten commandments, the only phrase that would have to be on the stone is "Thou shalt not deal with thy neighbor through force or fraud."  The government maintains police and a military to handle the people who wish to violate this one commandment.

Throughout the years, countries have built armies and fortifications to defend against invaders who wanted to loot their lands, or steal their property, or impose their own version of racial or religious uniformity.  The US Army itself has fought for freedom, it has fought to restore democracy and individual rights, it has fought to stop genocides. 

Today, the US Army sallies forth again, to fight for and defend .... what? 

It fights to stop waves of Mexican immigrants that are dangerous because they ... want to freely exchange their labor with US Citizens?

It fights to protect Americans from ... competition for unskilled labor jobs?

It valiantly rides forth to make sure Americans never face the horror of ... interacting with someone with only broken English?

The soldiers racing to the borders are not fighting for me, because I am not in danger.  And neither is anyone around me here in Arizona -- no one from outside the border is threatening me with force or fraud (surprisingly frequent emailers sending me messages about Mexicans all being diseased criminals notwithstanding).  Its not like I live blithely ignorant of the border area in Kansas.  I life in Phoenix, and run businesses  right down on the border.  I don't feel a threat or danger.  In fact, the only danger I see is that the army may come down and drag families who are my friends out of their homes and out of the country (or into concentration camps, as one conservative writer longed for).

Immigration opponents are sometimes a little hazy about what danger they are trying to fix.  I agree there is a problem with the welfare state when it meets immigration, which I discussed here and proposed a solution for it here.  Democratic politicians still are confused on this particular problem, wanting some immigration solution but refusing to consider limiting access to the welfare state.   If the problem is infrastructure (police, prisons, schools, etc.) then it could be possible to provide national funds to border regions for this purpose, rather than for armies and walls (the Feds, after all, are handing out hundreds of billions to New Orleans).  And if the problem is too many people who don't look like us Anglo-Saxons, well, sorry  (If you don't think that this is the real issue for many anti-immigration folks, think about the recent scare headlines that soon a majority in the US may be Hispanic.  Can you imagine similar anxiety over the headline "majority of US may soon be of Canadian descent"?)

Update:  Nick Gillespie comments on the fact that Congress has given its official sanction to my speaking English.

Thank you, Middle Eastern 9/11 hijackers, for finally getting the point
through our thick skulls (forgive our slowness, but all too many of us are
descended from immigrants) that the greatest security threat to the United
States is the influx of Spanish speakers from across the border with Mexico.

Christ, it's bad enough that we have to eat foreign food, live in states
with Spanish-derived names, and answer that extra question about which
language to use at the ATM. (Thought experiment: How much is that extra
second or two of time slowing down the U.S. economy and driving down our
productivity, precisely at the moment when the Chinese are breathing down
our
necks like a bunch of post-industrial railroad coolies? You can be damn sure
that the Chinese government doesn't allow ATM users to pick their own
language.)

As I have written before, I have gotten more bizzaro emails on my pro-immigration stand than anything else I have written about.  Gillespie apparently has had the same experience.

Glenn Reynolds linked to Stanley Bing's book "100 Bullshit Jobs... and How to Get Them."  He points out that "blogger" is number 13.  However, the Amazon description hints that I may have had a second job on the list: "McKinsey Consultant."  I will leave to the outside observer whether both jobs are bullshit.  I will say that they both share in common an ability to consume a lot of hours in the day that would probably be free time without them.  They both also share an hourly pay problem, the blogging job because it pays nothing and the McKinsey job because it turned out to have a staggering number of work hours each week in the denominator.

This week, the US took a step to normalize relations with Libya:

The United States restored
full diplomatic ties with Libya on Monday, rewarding the
longtime pariah nation for scrapping its weapons of mass
destruction programs and signaling incentives for Iran and
North Korea if they do the same

The logic was that Libya still is a sucky dictatorship, but it has taken some important steps forward into the light which we want to reward.  Perhaps more importantly, the administration acknowledges that increasing intercourse with the western democracies tends to have liberalizing effects in countries in this world of open communications (see: China).  Its a difficult trade-off, but I am fine with this.  Certainly we are no virgin in terms of having diplomatic relations with bad governments.

My question is:  Why doesn't this same logic apply to Cuba?  I think it is pretty clear that embargo and shunning over the past 40+ years have had as much effect as they are going to have.  Why not try engagement?  I think this particularly makes sense well before the chaos that may ensue after Castro's death.  If anything, just by reading the behavior of Cuban expats, Cubans remind be of the Chinese in terms of their entrepreneurship, and I certainly think engagement has worked better than shunning in China. 

Of course I already know the answer to my question:  Because Cuban expats make up a large voting block in the most critical presidential election swing state and no candidate wants to be soft on Castro.  But this seems to make it even more of an opportunity for a second-term president who doesn't have to contest Florida again.

Update:  Yes, I did indeed spell it "Lybia" at first.  Seems vaguely Feudian.  Excuse 1:  Blogging is a real time function.  Excuse 2:  Its just a hobby.  Excuse 3:  I was a mechanical engineer in school

I have never been satisfied with the delays caused by having to approve comments, but I didn't like giving bots a free pass either.  Now that TypePad has added a Capcha step in the comment process (that is the little nonsense word you have to retype from the image) I am going to let comments go straight up, relying on technology to catch bots.  In reality, trackbacks are actually the bigger problem -- I sometimes get waves of 300-400 bot-spam trackbacks in a day, until TypePad takes steps to block that source.

Please use the comments to this post to, uh, comment on any problems you are having with the new comment process.

Via Overlawyered, one of my absolute favorite blogs, comes my favorite headline of the week, courtesy of KCRA in California:

Paraplegic Activist Leaps From Wheelchair, Runs From Police

That's classic.  Apparently, the person involved had defrauded numerous organizations with spurious ADA complaints under California's ridiculous sue-anyone-with-higher-net-worth-than-yours laws.

Police said Laura Lee Medley, who repeatedly filed claims and lawsuits
for noncompliance with the Americans with Disabilities Act, was a con
artist.

A San Bernardino County spokesman, David Wert, said
Medley had complained to police earlier that she was having medical
problems so she was taken to a hospital for treatment.

Wert said, "That's where the great miracle occurred."

Officers
said Medley, 35, leaped from her wheelchair and ran for freedom after
being placed under arrest by Las Vegas police. The barefoot woman was
caught after a brief pursuit.

According to authorities in
Southern California, Medley was never disabled but used her supposed
condition to file many medical claims and lawsuits. Her questionable
claims led to the arrest in Las Vegas.

The vast majority of my employees and many of my customers are over 60, so we try extra-hard to accommodate people with all kinds of disabilities.  That is why this type of fraud really burns me up.  Not once but twice we have killed incipient lawsuits when we have had customers who were claiming severe physical disabilities observed playing football or unloading a truck.  I have had one person I was interviewing for a job tell me that I had to hire him since he was disabled, because if I didn't choose him I would be discriminating against the handicapped (we chose a different candidate).

Update: More Unruh act silliness:

A Los Angeles psychologist who was denied a tote bag during a Mother's
Day giveaway at an Angel game is suing the baseball team, alleging sex
and age discrimination.

Michael Cohn's class-action claim in Orange County Superior Court
alleges that thousands of males and fans under 18 were "treated
unequally" at a "Family Sunday" promotion last May and are entitled to
$4,000 each in damages.

In the next few weeks, Enron leaders Lay and Skilling will or will not be found guilty of various fraud-related charges (betting is that they will be).  You, in turn, may or may not agree with the verdict. (Disclosure:  I used to work with Skilling at McKinsey.  From my knowledge of his brilliant mind and his attention to detail, I thought that his Congressional testimony that he was unaware of the shenanigans in the SPE's was unconvincing, and so thought at the beginning of the trial he would be found guilty.  However, the prosecution's case has had surprisingly little to do with the SPE's and was weaker than I expected, so I am less sure now).

Wherever you are on guilt or innocence, you should be concerned about the increasingly aggressive tactics that prosecutors are getting away with in this and related cases.  Tom Kirkendall is all over this story, and reports:

the Enron Task Force refused Ken Lay and Jeff Skilling's request to
have the prosecution recommend to U.S. District Judge Sim Lake that
half-a-dozen former high-level Enron executives who have declined to
testify during the trial on Fifth Amendment grounds be granted immunity
from having their testimony used against them in a subsequent
prosecution.

Those witnesses -- several of whom have been mentioned prominently
in testimony during the trial -- would likely provide exculpatory
testimony for Lay and Skilling if they were to testify. The
Lay-Skilling defense team limited their immunity request to those six
witnesses even though the Task Force fingered the unprecedented number
of the Task Force identified over 100 former Enron executives
as unindicted co-conspirators in the case for the transparent purpose
of preventing the jury from hearing the full story of what happened at
Enron.

Another potential outcome may be the weakening of attorney-client privilege.

Just before my body decided to purge itself for a few days, USA Today ran a story that the NSA was doing more than just listening in on overseas calls to suspected terrorists.  It claimed that the NSA was also compiling a database of domestic call records.

The National Security Agency has been secretly collecting the phone
call records of tens of millions of Americans, using data provided by
AT&T, Verizon and BellSouth, people with direct knowledge of the
arrangement told USA TODAY.

This bothers me, as much for separation of powers issues that I will describe below as for any  worry about the data being collected.  Conservatives, however, immediately criticized the article, as summarized well here, making a number of points:

1.  Its old news
Shame on conservatives.  This is the same tired line that Clinton used to drive them crazy with.  The theory here is that once a story has run a full news-cycle, it is then too late to report on it or show any further outrage about it.  Once the political boil is lanced, its time to "move on".  Sorry, I don't buy it.

2.  USA Today is exaggerating
The USA Today and those who picked up on the story  are indeed sloppy, perhaps purposefully to make a better story, in blurring the line between collecting phone numbers and eavesdropping.  To date, the evidence is only that phone numbers were collected, which is in fact less intrusive than eavesdropping.  It still pisses me off, for reasons below.

 3.  The IRS already has more data
Yes, and that bothers me too.  Does anyone really doubt that IRS data has been peeked at and used for political purposes?  And I am flabbergasted at how far conservatives have wandered over the last several decades that they hold up the IRS as a model to be emulated.  But here is the key difference that I will get into in a minute:  The IRS is allowed to collect this data by legislative statute passed by Congress.  This statute includes rules for data management and access, with steps for judicial review and criminal penalties for its violation.  The NSA data base has ... none of this.  No legislative authorization.  No process and privacy protections.  No penalties for misuse of data.  No judicial review steps.

4.  Its no big deal, and its good for you
Maybe.  Or maybe not.  The trouble is that we are only getting tiny leaked glimpses into whatever the administration is doing.  The President has created the theory that he can declare war against a vague and in fact impossible to define target, and then take on absolute dictatorial non-reviewable powers to prosecute this war in any way he likes, and that any steps taken in this war can be considered legitimate steps (rather than overstepping his bounds) based on his say-so alone. 

The problem is not the database per se, but the fact that the NSA and this administration feels it can do anything it wants outside the bounds of traditional separation of powers.  If the NSA needs a phone call database, then the President can go to Congress and solicit such an authorization.  A well-crafted piece of legislation would put strict limits on how the data is used, would provide some sort of outside review of its use, and would provide for stiff penalties for its misuse.  This is what I wrote previously:

Here is how we have generally interpreted the 4th amendment:  The
legislative branch sets the ground rules, as followed by the
Administration.  The administrations selection of targets is reviewed
by the Judiciary (warrants) and is also subject to later review at
trial (via the admissibility of evidence).  What we try to avoid is
allowing the same person to set the rules, choose the target, and
perform the surveillance, all in secret and without outside review.
The problems with the NSA wiretapping program is not that it is wrong
per se, but that it may violate this process.  The administration is
claiming the right to choose the target and perform the surveillance
under the own rules and in secret with no possibility of review.   

What really irks me about this is the crass politics going on.  Does anyone doubt that if a Clinton White House had been revealed doing this that Conservatives would have been screaming in outrage?  And liberals are, if anything, even funnier.  These are the folks that trust the government but distrust corporate America.  So why is it that they are upset about a transfer of phone records from evil old AT&T to benevolent old Uncle Sam?  Except, of course, because it is being done by a Republican.

More on eroding separation of powers here and here.

Update: This database may be being used to see who reporters are talking to in order to root out leaks.  Anyone uncomfortable now?  And this is priceless:

Under Bush Administration guidelines, it is not considered illegal for
the government to keep track of numbers dialed by phone customers.

Duh.  Under Bush Administration guidelines, nothing the administration wants to do is considered illegal.

More: Several sources have used the Supreme Court decision to make the case that collection of the phone records is legal without a warrant.  Here is a key passage:

Petitioner in all probability entertained no actual expectation of
privacy in the phone numbers he dialed, and even if he did, his
expectation was not "legitimate." First, it is doubtful that telephone
users in general have any expectation of privacy regarding the numbers
they dial, since they typically know that they must convey phone
numbers to the telephone company and that the company has facilities
for recording this information and does in fact record it for various
legitimate business purposes. And petitioner did not demonstrate an
expectation of privacy merely by using his home phone rather than some
other phone, since his conduct, although perhaps calculated to keep the
contents of his conversation private, was not calculated to preserve
the privacy of the number he dialed. Second, even if petitioner did
harbor some subjective expectation of privacy, this expectation was not
one that society is prepared to recognize as "reasonable." When
petitioner voluntarily conveyed numerical information to the phone
company and "exposed" that information to its equipment in the normal
course of business, he assumed the risk that the company would reveal
the information  to the police,

First, it would be interesting to see if the SCOTUS would agree that this ruling extends to sharing such information with non-law-enforcement branches of the government (NSA is not a law enforcement arm).  Second, it would be interesting to see if the Court came to the same conclusion if the target for the the data sweep was "every citizen in the US" and not just targets of law enforcement investigations.

Third and most importantly, this decision seems to suck.  This exact same logic seemingly applies to any piece of data submitted to any private third party unless the data is specifically protected (e.g. medical records).  Sorry, but this is wrong.  I should be able to have commercial transactions with third parties without the expectation that the government can take the records for its own use without any kind of a warrant. 

Also, the premise that this ruling is based on is provably false, though only by technology instituted after the decision.  There is an entire industry of phone company services and 3rd party technologies aimed right at this area of phone call (and email; and Internet surfing) anonymity and privacy.  With the Internet for example, there is a very, very clear expectation that sharing information with a company for one purpose (e.g. to complete a transaction) does NOT authorize the company to use or share the data for any other purpose.  This use of transaction data and its limits is a CRITICAL and front-of-mind issue for modern communicators.  It is absurd to say, as the justices did, that:

When
petitioner voluntarily conveyed numerical information to the phone
company and "exposed" that information to its equipment in the normal
course of business, he assumed the risk that the company would reveal
the information  to the police

The implication is that by giving a company data for use in a transaction, we are giving them an unwritten license to do whatever they want with the data.  Do you believe you are granting this?  Is it true that you "entertain no expectation of privacy" in such transactions?  If you agree with this ability, then I assume you also agree that the government should be able to see all your:

• Credit card bills
• Records of who you have emailed
• Records of which Internet sites you have visited
• Records of what searches you made in search engines

These are all 100% amenable to the logic the Justices used in this decision.

I don't mean that law enforcement shouldn't be able to subpoena these records ever.  But they need to at least go to a judge and say "we want to see Warren's phone records from X to Y date because we suspect him of Z for the following reasons."

For the last two days I have had some sort of food poisoning or gastro-intestinal something that has made me as sick as I every remember being.  Sopranos fans, think Tony Soprano in the episode he kills Big Pussy.  Starting to recover, I hope.

Update: Little did I know that when I posted this, it was only halftime.  I am finally better, but I can certainly do without getting that again for a while.

Per the WSJ($):

Last week the House of Representatives expressed its
collective outrage over high gas prices by voting as a herd, 389-34, to
make gasoline "price gouging" a federal felony.

Really. This command and control legislation reads
like the kind of law passed by the old Soviet Politburo. If an oil
company is found guilty of charging a "grossly excessive" price for
gasoline, it could face a $250 million fine and its executives face
imprisonment. Even neighborhood service station owners could be
sentenced to two years in jail and a $2 million fine for the high crime
of charging too much at the pump.

So what is price gouging?  What is the objective standard that we can all apply to our behavior to know clearly, before the fact, if our actions are legal or illegal?

One small problem is that no one in Washington can seem to define what
constitutes price gouging. Under the House legislation, the bureaucrats
at the Federal Trade Commission would define a "grossly excessive"
price and then, once prosecutors charge some politically vulnerable
target, juries across the country would decide who's guilty and who's
not. A Senate version, sponsored by Maria Cantwell of Washington,
contains terms like "excessively unconscionable price increases" and "a
gross disparity" between the normal price and the price during a
shortage or an emergency.

If this passes, there are two, and only two, ways this can be enforced:

1. The standards remain incredibly vague, such that there is no objective way to know if you are guilty of a felony until you are in front of a jury listening to the verdict.  Some juries will may decide 6 cents over cost is gouging, others may decide its 50 cents.  But you won't know until you hear the jury's verdict.
2. In an effort to deal with the problem of having no objective standard in advance, a federal bureaucracy is created to set detailed lists of allowable prices, essentially subjecting retail gasoline sales to price controls.  The prices set by regulators will either be above the price the market would have set, meaning that the price-setting is a meaningless waste of money, or it will be less than that set by the market, such that gas shortages and lines will ensue. 

These are the only two choices.  You only have to look at past history with oil price controls, airline regulation, railroad regulation, wage and price controls, etc. to know just how bad this will end.

As Jeff Flake of Arizona, one of the brave 33 no votes, tells us: "None
of my colleagues actually believes this will reduce prices, and many
realize it will ultimately make shortages worse." Yet this is what
happens when petrified politicians allow mob rule to trump economic
common sense.

My company operates several retail gasoline outlets.  We at best break even and probably lose money on the gas, but we continue to sell it to bring people into our stores and because there are so few other local retailers (we are in very rural areas).  If this law passes, I am just not going to risk going to jail because some economically ignorant jury in the future can't figure out that gas is more expensive in rural areas or because some tragic and sympathetic figure decides to sue me.  I'm out.  And if someone observes that in the rural areas in which we operate, consumers will probably be worse off if we exit, then Congress should have thought of that before they passed this Marxist-populist legislation.

Up to now, it was for this and only this reason that I tended to vote Republican more than Democrat.  I held my nose and looked past family-values-based censorship and stupid drug law enforcement and regulation of sexual choices and xenophobic immigration policies and all the rest of the conservative baggage solely because Republicans tended to pass less stupid dumbshit socialist destructive economic regulation than the Democrats. 

I've always told people that as a libertarian for whom neither party is internally consistent, you just have to pick the issues you vote on.  If I was gay or needed frequent abortions or was Howard Stern, I would vote Democrat.  Trying to run a small business against a growing tidal wave of government taxes and regulations, I often vote Republican.   If every Republican was (were?  I always get that subjunctive thing mixed up) like Jeff Flake, I would continue to vote for them.  Right now, though, I may go back to sitting on my hands or vote for whatever goofy person the Libertarian Party has put forward.

I just can't figure out who is making all these imagined profits.  I don't know any retailers of gasoline who make any real money on gasoline sales.   For god sakes, typical gasoline margins are 5-12 cents a gallon, and the credit card processing fee alone at $3 a gallon uses up 9 cents of that!  And even the great Satan ExxonMobil, in their greatest most profitable quarter ever, made a profit of 9.7% of sales, barely above the US industrial average and well below that of most well-known consumer products companies.  If anyone is making profits they don't deserve, it is Hugo Chavez and the Saudi princes, but I don't think there is much we are going to do about that.  And, if one is concerned with pricing in emergencies, I have actually pleaded for gouging when the alternative was not being able to find gas at all.

If Congress really wants to do something about gas prices, it could consider:

• Reducing gas taxes, which take more our of a gallon of gas than any private entity makes in profit
• Opening up exploration in the ANWR and on the US east coast
• Making it easier to build new refining capacity in the US
• Restructuring rules to reduce the number of EPA-mandated unique local gasoline blends are required
• Remove the 40+ cent tariff on important ethanol, which federal rules effectively require in gasoline and which is in short supply domestically

By the way, in the past several weeks, Congress has rejected legislation on every one of these items in favor of this silly gouging legislation.  The WSJ offers this final thought:

If service stations are guilty of extortion because their prices are
rising more than their costs, then are we to have pricing police
preventing homeowners from selling their houses for two or three times
what they bought them for, or movie theaters from charging $6 for
popcorn that costs 25 cents to produce, or Barbra Streisand from
commanding a $1 million fee for a single performance? Now that
Republicans have surrendered to the political expediency of price
controls on big oil, they won't have much standing to stop Democrats
from imposing price ceilings on pharmaceutical drugs, school supplies,
medical equipment, and the like.

Incredibly, there are still depths to be plumbed in bringing TV shows to the big screen, as apparently Knight Rider may soon be made into a movie.  Shows I would have expected to be made into movies before Knight Rider include:

• 6-million dollar man
• A-team
• Hawaii 5-0

And by the way, what kind of world do we live in where I can't buy old Hawaii 5-0 reruns on DVD?

Hat Tip:  Reason's Hit and Run, with a nostalgic look at past efforts to discern KITT's sexual orientation.

Most any reader of this site will know that I am a strong supporter of free and open immigration.  However, I am sad to see Cingular pull this particular ringtone off the market.  The ringtone went as follows:

The ringtone started with a siren, followed by a male voice saying in a
Southern drawl, "This is la Migra," a slang term for the Border Patrol.

"Por favor, put the oranges down and step away from the cell phone.
I repeat-o, put the oranges down and step away from the telephone-o.
I'm deporting you back home-o," the voice continued.

For years I have been a strong supporter of the complete freedom to engage in what is often called "hate speech."  Beyond the usual slippery-slope threat-to-free-speech argument, I have always thought it was important to let idiots publicly identify themselves.  I mean, what could be better than a cell phone ringtone that just shouts out "I'm a racist moron" to the world?  This is an even better idea than the comedian Gallagher's (he of the cuisinarted vegetables) idea for shoot-able stupid flags.  It is the same reason I allow free commenting on this site and love to get opposing email.

I am a bit late on this one, but a California judge has determined that giving kids tests that have consequences is unconstitutional:

A judge in Oakland struck down California's
controversial high school exit exam Monday, issuing a tentative ruling
suggesting the test is unfair to some students who are shortchanged by
substandard schools.

If finalized, the unexpected ruling
would block the state from carrying out its plan to deny diplomas for
the first time to tens of thousands of seniors who have been unable to
pass the exit exam.

Note that this standard essentially means that no tests with real consequences (e.g. denial of grade advancement or diploma) can ever be given, because with 1129 high schools in California, some schools will always be below par.  So his argument will always apply -- there will always be kids who can claim their school is on the low end of the normal distribution.  And even if every school were exactly the same, kids within these schools could, I presume, similarly argue to this judge that they had sub-par teachers or sub-par parents or a sub-par reading light or a sub-par dog that ate their homework.

By the way, doesn't this also imply that California can no longer name state champions among high schools in various sports?  After all, isn't that unfair to schools with lesser sports programs?  And couldn't I extend this ruling to say that California state run colleges shouldn't be using high school grades or SAT scores or any other test-based metric in selecting entrants since some of these folks came from low-performing schools?

This confusion of equal protection with equal outcomes is so absurd its not really even worth commenting on further.  I won't even bother, then, asking how the judge expects sub-par schools to be made to improve without testing-with-teeth, or even what objective standards the judge used to determine that any schools were "substandard" in the first place.

For those who support this ruling, and agree with the plaintiff attorney's language that sounds like students have a right to a diploma that can't be denied without due process, here is a question:  What is a diploma?  Obviously, you don't want it to mean that a student has demonstrated basic knowledge and abilities against an agreed upon standard.  Are we reduced to a diploma being a certificate of attendance, indicating that a student grimly sat through 4 years of classes and nothing else?

This same week, the Florida Senate was unable to rescue the very successful state voucher program in the face of last year's insane Florida Supreme Court ruling that vouchers were unconstitutional because the Florida Constitution's uniformity clause:

the Florida Supreme Court ruled 5-2 that the voucher program violated
the "uniformity clause" of the state constitution guaranteeing a
high-quality system of public schools. Because the performance of the
voucher kids was superior to those in public schools, the court ruled that education was not uniform -- or in this case not uniformly miserable.

The program in question that was struck down by the court awarded vouchers to students of schools that failed to pass state standards. 

The program at issue is Governor Jeb Bush's
seven-year-old "Florida A+ School Accountability and Choice Program."
For the first time, schools have been graded on the reading, writing
and math progress made by the children they are supposed to be
teaching. (Imagine that.) Any school that received an F in two of four
years is deemed a failure, and the kids then get a voucher to attend
another school, public or private.

One immediate impact -- according to researchers at
Harvard, Florida State, and the James Madison Institute -- has been
that the mere threat of competition caused many inner-city school
districts to improve. The percentage of African Americans who are now
performing at or above grade level surged to 66% last year, from 23% in
1999.

What is amazing about the court's decision is that every kid who got a voucher, 90% of whom are minorities, came from a school demonstrated by objective standards to be far below average.  But, according to the court, it is constitutional for these kids to be in schools that are far below average, but becomes unconstitutional when kids are moved to above average schools?  Does this make any sense?  I'ts sort of a reverse Lake Wobegone effect -- the system is constitutional as long as all the schools are below average but once any are above average then its unconstitutional.  LOL.

Here is the reason that the court's logic doesn't make sense:  The real thing they are concerned about with the uniformity clause is not uniform quality, but whether the schools are uniformly controlled by the government and uniformly populated with union rather than non-union teachers.

Note that both these decisions use the existence of flaws within the two states' educational systems (e.g. low-performing schools) combined with a "uniformity" or "equal protection" standard to strike down reforms aimed at fixing these very flaws.  Both are saying that you can't reform the schools until all the schools are equally good,  but of course the schools will never improve without reform. 

Update:  But good news in Newark.  It's depressing but not surprising to see my alma mater's own Cornell West out there fighting against school choice for African-Americans.

Update #2:  Walter Olson comments:

It would appear that from now on a high school diploma is meant to
signify not a student's actual mastery of a certain body of material,
but rather the mastery he or she would have attained had the breaks of
life been fairer. Employers, and all others who rely on California high
school diplomas in evaluating talent, would be well advised to adjust
their expectations accordingly.

About ten years ago, I remember Microsoft started to get pounded by observers for "missing out" on the Internet.  One of their responses was the development of Internet Explorer, which, thanks to a good design and the fact it was bundled with the OS, quickly beat out Netscape and other incumbents.

Recently, PC-Pundit John Dvorak has argued that Microsoft's foray into Explorer has been its biggest blunder.  I'm not usually a Dvorak fan (I find him to be too much of a technocrat, tending to favor top-down standard setting over messy bottom-up innovation) but I thought his take was pretty interesting:

I think it can now be safely said, in hindsight, that Microsoft's entry
into the browser business and its subsequent linking of the browser
into the Windows operating system looks to be the worst decision"”and
perhaps the biggest, most costly gaffe"”the company ever made. I call it
the Great Microsoft Blunder....

If the problem is not weird legal cases against the company, then
it's the incredible losses in productivity at the company from the
never-ending battle against spyware, viruses, and other security
problems. All the work that has to go into keeping the browser afloat
is time that could have been better spent on making Vista work as first
advertised.

All of Microsoft's Internet-era public-relations and legal problems
(in some way or another) stem from Internet Explorer. If you were to
put together a comprehensive profit-and-loss statement for IE, there
would be a zero in the profits column and billions in the losses
column"”billions.

Yeah, I know, the Internet was supposed to be the next platform for applications taking over from the PC.  This has always been a slow phenomena to emerge (I LIKE having my applications on my own PC and available even if Cox cable is having another hiccup) and its not at all clear you need a browser to play well anyway.  While Microsoft has screwed around with Explorer and dot-net, Google has become the gold standard of web-based applications, and they don't have a browser at all.

By the way, if you are waiting for the new version of Explorer, just get Firefox instead.  It is everything Microsoft is trying to make Explorer and it is there already.  And you don't even have to think in Russian to use it.  (OK, did anyone get my movie reference there or am I a total loser?)

Hat tip to the Mises Blog.

Want to get worked up about price collusion in the oil industry?  Don't waste your time.  No study has ever found collusion effects that raised US gasoline prices more than a few percent, and only for a very short period of time.  The reason is that in a free market, there is too much incentive for new entrants undercutting a price collusion attempt.  Railroads and airlines have probably the most severe economic incentives to collude, and they have never pulled it off for any period of time EXCEPT when the government stepped in to enforce the arrangement (e.g, airline controls pre-deregulation).

If you want to see a real cartel at work raising prices at the expense of consumers, check out this from the Mises Blog:

The raisin agricultural marketing order (AMO), with roots in the
Depression-era Agricultural Marketing Agreement Act, is rationalized as
a way to "stabilize" prices. However, it allows the Raisin
Administration Committee (RAC), controlled by producers, to determine
how much of each crop can be sold, with the rest forced into storage.
That power to jointly restrict output to raise price makes it a cartel.
A cartel with so many members would not usually succeed, and the mere
attempt would be prosecuted if antitrust laws were applied, but AMOs
are enforced by the government, through the USDA...

The RAC "stabilization" is accomplished by restricting sales, often
substantially. "Free tonnage" has been as low as 53% of the crop in
2001, and less than 80% in most years. That helps producers by harming
consumers, turning price "stabilization" into price enhancement....

The raisin cartel's effects on American consumers can also be seen
in the gap between the "free tonnage" prices and "reserve pool" prices
for raisins destined for low value markets. In 2001, those prices were
$877.50 per ton versus $250 per ton; in 1998, it was $1250 versus $357;
in 1984 and 1994, the differential approached 10 to 1.

Per the WSJ($):

The Internal Revenue Service dealt a serious blow to
organizations that provide down-payment assistance to home buyers in a
ruling that could curtail the ability of lower-income U.S. citizens to
purchase homes.

In the past eight years or so, a number of large
nonprofit organizations -- including Nehemiah Corp. of America, of
Sacramento, Calif., and AmeriDream Inc., of Gaithersburg, Md. -- have
doled out hundreds of millions of dollars of cash down-payment
assistance to mostly low- and moderate-income home buyers. According to
industry estimates, as many as 625,000 people were assisted by such
groups with their down payments between 2000-05. The programs have been
widely viewed as helping to increase the nation's homeownership rates,
which rose to 69% last year from 67% in 1999.

Why?  A lot of the tax code is skewed to promote home ownership.  So why is the IRS penalizing a program that seems to make a lot of sense?

In its ruling yesterday, the IRS said these aid groups funded largely
by home builders and other sellers no longer qualify for tax-exempt
status because the benefits of the programs are going to sellers and
profit-making entities. In its statement, the IRS said it has found
"that organizations claiming to be charities are being used to funnel
down-payment assistance from sellers to buyers through self-serving,
circular-financing arrangements."

Uh-oh.  Its those nasty profit making ventures again.  What's going on here?  Basically a home-builder gives the down payment for a home to a charity which in turn gives it to a buyer who in turn gives it back to the home-builder.  Let's say the down payment is 10%.  This arrangement acts as if the home-builder is giving the buyer a 10% discount, just circuitously.

So why is it so circuitous?  Why don't they just give the discount directly?  Is it some kind of tax dodge?  The answer to the latter is probably not.  From a corporate tax standpoint, the current circuitous charity method produces a 10% charitable donation on a 100% price sale.  The discount approach just produces a 90% price sale.  Tax wise, these are equivalent.  So why doesn't the home-builder, if it wants to be generous to low-income buyers, just give them the discount?

The answer is, because the government does not allow it! 

The majority of home buyers affected by this ruling are those who
qualify for mortgages insured by the Federal Housing Administration, a
federal agency responsible for aiding first-time and lower-income home
buyers. Under FHA guidelines, home buyers seeking mortgages must have
their own funds to use for a down payment or they can get assistance
from a relative, employer or a charity. They can't get assistance
directly from the seller.

The only argument against this practice made by the IRS is that the price of the house is increase by a fee added in the process by the charity that facilitates the transaction.  But this is one of those classic government regulatory jobs where the result that instead of getting a home with a bit of extra fee in the transaction, people will instead not be able to get a home at all.  No one points to anyone being hurt, and in fact the article points out that 35% of FHA loans depend on these charities for down payments.  (There is also some hint that this process may increase default rates, but the only evidence is that default rates for this type of transaction are up --  but default rates on mortgages are up across the board right now.)

And, by the way, what is wrong with charity by a business that, in addition to helping out a charitable cause, also helps out its business?  For example, my company gives coupons for free one-day jetski rentals at Lake Havasu all the time to charity auctions in our area.  We do it to support charity, but also because it provides us some free advertising and often people who win the certificate also show up with friends who become paying customers.  So what?  Is my charity tainted because I have created a win-win? 

Does it bother anyone else that the only complaint voiced in this article about government requirements for building in surveillance backdoors into the Internet is about the cost?

Oh, and by the way, note the date on the act in question.  1994 makes it a Clinton-era law crafted after the first attempt to bomb the WTC.  All of you Democrats who feel smugly certain that civil liberties will be safe if only your party was in charge should note how closely the Patriot Act resembles Clinton's proposed anti-terrorism bill.  Just as Republicans have found that politicians shed their small government talk once they are in charge, our country's leadership tends to abandon any past queasiness about trampling on civil liberties once in a position of power, no matter what party they represent.