Coyote Blog

I missed it last week, but apparently the CEO's of a number of major US airlines took the PR offensive last week to beg for more government subsidies and pension bailouts.  Reason's Hit and Run has the roundup.  They observe that the Senate was open to their pleas:

But luckily for the money-squandering dullards, there are enough members of
the Senate Commerce Committee who apparently believe certain businesses are too
colossally incompetent to fail:

The Commerce Committee's ranking Democrat, Sen. Daniel Inouye of
Hawaii, agreed: "If we do not begin to solve the problems plaguing the air
carriers, we will see more failures in coming months and certainly more jobs
cut."

Because what is the federal government if not a
guarantor of full employment at lousy companies?... If Inouye and his fellow
hacks were serious, they could start by privatizing airports, allowing vigorous foreign
competitors to own more than 50 percent of U.S.-based airlines, and letting
the failures actually fail, for starters. But that would take a belief in free
airline markets we haven't really seen since the Carter Administration.

It has always been hard to get airlines to just go away.  Pan Am hung around forever, as did TWA, through bankruptcy after bankruptcy.  My guess is that politician's unwillingness to let airlines fail has only increased with the advent of frequent flyer miles - no congressman wants all of his well-healed constituents calling the office and complaining about the 300,000 United miles they just lost.  By the way, have you ever noticed that frequent flyer mile holders are the only creditor of airlines who consistently come out of bankruptcies whole?  Even the worker's defined benefit pension plans get a haircut before frequent flyer mile holders.

Legacy airlines are really backwards in their practices - for example, many of their supply chain processes are reminiscent of the auto industry in the 60's and 70's, in part because airlines are sheltered from foreign competition while auto makers for the most part aren't.  I used to work in the aviation industry, and the opportunities there are tremendous, but no one in the industry will even listen.  The "not invented here" attitude was invented in the airline industry.

And while the management of these firms is backwards, you also have to deal unions a share of the blame.  Union supporters often accuse companies of "union-busting".  I have never heard the term, but in the case of airlines, one might be able to accuse the unions of "company-busting".  Unions hold out and strike for outrageous salaries and benefits and work rules that far outstrip what similarly skilled people make in other industries.  By the way, unlike conservatives, I don't have some deep seated hatred of unions.  In a free society, workers can try to organize to increase their bargaining power.  I do have problems with the way the US government, through legislation, tilted the bargaining table in the unions' favor, but that is a different story. 

For some of these reasons, and others, I was flabbergasted that local company America West would purchase USAir.  When there are so many planes and gates for sale on the market, and cities are begging for new competitors to enter their airline market, why would you buy yourself a load of trouble in the form of legacy union contracts and frequent flyer obligations?  It is noteworthy that Southwest has never bought another airline, and prefers instead just to buy assets out of bankruptcy.

I am weeks late finding this article, but Todd Zywicki at Volokh posts what may be the definitive economic analysis of Kelo.  He talks about not only the issue of subjective value that leaves homeowners undercompensated for the taking, but about the deceitful game local governments are playing:

Second, focusing on the holdout problem in the Kelo context is to focus on
the wrong issue. The scenario here is different from when a government wants to
build a school or post office, traditional public use purposes. Schools and post
offices have to go in a particular geographic area (that's why they are being
built), and thus strategic bargaining may be plausible because it is similar to
a bilateral monopoly situation. The small group of landowners in the relevant
area can act strategically and try to extract a high price for its sale.

In Kelo, however, there is no obvious holdout power because Pfizer could put
its building in any city in America. So its not like a neighborhood school,
road, or post office. In Kelo, the holdout power is created artificially
by the city's desire to give Pfizer a sweetheart deal to bring it to town.

So ex ante, there is no viable holdout power in this situation because
there are an infinite number of close substitute sites for the building. The
building is going to be built somewhere, the only question is what city--New
London, Hartford, Bridgeport, Boston, New York, Chicago, etc. The artificial
scarcity that says the building has to be built in New London was created by the
city's other subsidies to attract Pfizer to town (the obscenely low rent,
etc.).

So if one is truly concerned about the holdout power problem, then the
correct solution is to require the city to eliminate the artificial scarcity
that "requires" the building to be built in New London rather than some other
city, the same way that a new school would have to be built in New London. If we
allow both the subsidies and the Taking for the benefit of the private party, we
are allowing the distribution tail of what city the Pfizer headquarters will be
built to wag the efficiency dog of whether the homeowner is holding out versus
having subjective value. Instead, we want to have the parties bargain ex ante
before they finally select the city--i.e., choose the city and the plot of
land at the same time--not bargain ex post after the city is selected.
Forcing an ex ante bargain when there are still many substitutes for the
proposed site would eliminate the holdout problem and allow us to determine the
extent of parties' subjective value, because the negotiations would be conducted
against the backdrop of a competitive market, rather than a bilateral monopoly.
The bilateral monopoly is thrust upon the city in the road or post office
scenario; it is freely-chosen in the Kelo situation.

Instead, the ruling in Kelo enables the worst possible economic
outcome--it permits cities to create artificial scarcity just to get a larger
piece of a stable-sized pie (getting Pfizer to New London rather than Hartford),
while then permitting cities on the back end to take land from private
landowners who may or may not be losing subjective value and being
undercompensated in the process.

And the incentive effect of Kelo is obvious--it now enables corporations to
extract both subsidies and takings as the price for locating in city A rather
than city B.

I have written about my frustrations with local governments subsidizing business relocations here and here.

I just finished Harry Potter and the Half-Blood Prince.

The first question my wife asked me was "how did it rank with the other books?"  This is very hard to answer, because it is very different from the first five.  Each of the first five was fairly self-contained.  There was a dominant story cycle that came to closure at the end.  Yes, there was still Valdemort running around out there, but that was kind of just like knowing that Blofeld and SPECTRE would still be a villain in the next Bond movie.  The best comparison I can make, for people of my generation who saw the original Star Wars movies as they came out, was that the first 5 Potter books were like the New Hope, while this book is Empire Strikes Back.  The only problem was that Empire Strikes Back stands out as perhaps the best Star Wars movie, and this definitely is not the best Harry Potter book.  In a real sense, book six is really part 1 of a two-part finale that presumably ends with book 7.  I was left with the same thought as at the end of the LOTR Two Towers movie:  OK, so when does the last one come out?

I found a couple of things about the book unsatisfying.  The mystery of who is the half-blood prince does not really drive the story as well as other mysteries, like say how the Sirius Black mystery or Chamber of Secrets mystery or the Tri-Wizard tournament drove other books.  This book is driven more by revelations about Harry and Valdemort, and by the time these play out the identity of the Half Blood Prince is kind of a letdown, or more precisely, irrelevant.  More unsatisfying to me was that this book is mostly about Harry.  While stuff is happening to all the traditional suspects, the mysteries are being solved by Harry alone, not by the traditional Harry-Ron-Hermione team.  Harry has always had to stand alone at the end of each book, but Ron and Hermione contributed to his getting there in the middle, and there is less of that here (Ron and Hermione, as well as everyone in the book seem distracted by their hormones). 

I guess I would say that a number of the traditional Harry Potter story elements were kind of half-hearted, even the Quiddich.  Rowling is obviously trapped by the need to get a lot of exposition done to bring the 7 book series to a close, and as a result the book never really gets moving until the final few chapters, and then all-too-much occurs in a few pages. 

This will never be considered the best book of the series, but the best spin I can put on it is that it was probably essential to start driving the series to a conclusion.

Update: Several folks have argued that I am missing the point, that quiddich and friends and school stuff are fading in the background as part of the wizarding world going to war and Harry coming of age to face his destiny.  This hypothesis about the ending is very interesting but only if you have read the book, it is FULL of spoilers.  If he is right, then it may be possible to look back and find this book more interesting in light of what we learn in book 7.  We'll see.  I still stand by my statement that the first 3/4 of the book is much less satisfying than the previous books.

2nd Update:  I guess predictably, various groups on opposite sides of the political spectrum and the Iraq war are claiming that Rowling is supporting them with this book.  Jeez, can we politicize everything?  Here is what are two clear tenants of the book:

1. There are times you have to actually fight evil, rather than just hope it goes away or is not really there
2. Governments can't really be trusted to do #1 responsibly

If my reading is correct, you can see why there is a bit in it for everyone.

Several people emailed me this morning.  Yes, that is me on Instapundit this morning.

You will have to forgive this post if it gets a little long or theoretical.  Yesterday I made the mistake of going jogging when it was still 114 degrees outside, and I guess I discovered why biblical prophets seem to always get their visions out in the desert.

One of the worst ideas that affect public policy around the world is that wealth is somehow zero sum - that it can be stolen or taken or moved or looted but not created.  G8 protesters who claim that poor nations are poor because wealthy nations have made them that way;  the NY Times, which for a number of weeks actively flogged the idea that the fact of the rich getting richer in this country somehow is a threat to the rest of us; Paul Krugman, who fears that economic advances in China will make the US poorer:  All of these positions rest on the notion that wealth is fixed, so that increases in one area must be accompanied by decreases in others.  Mercantilism, Marxism, protectionism, and many other destructive -isms have all rested on zero sum economic thinking.

My guess is that this zero-sum thinking comes from our training and intuition about the physical world.  As we all learned back in high school, nature generally works in zero sums.  For example, in any bounded environment, no matter what goes on inside (short of nuclear fission) mass and energy are both conserved, as outlined by the first law of thermodynamics.  Energy may change form, like the potential energy from chemical bonds in gasoline being converted to heat and work via combustion, but its all still there somewhere. 

In fact, given the second law of thermodynamics, the only change that will occur is that elements will end in a more disorganized, less useful form than when they started.  This notion of entropic decay also has a strong effect on economic thinking, as you will hear many of the same zero sum economics folks using the language of decay on human society.  Take folks like Paul Ehrlich (please).  All of there work is about decay:  Pollution getting worse, raw materials getting scarce, prices going up, economies crashing.  They see human society driven by entropic decline.

So are they wrong?  Are economics and society driven by something similar to the first and second laws of thermodynamics?  I will answer this in a couple of ways.

First, lets ask the related question:  Is wealth zero sum and is society, or at least the material portions of society, always in decline?  The answer is so obviously no to both that it is hard to believe that these concepts are still believed by anyone, much less a large number of people.  However, since so many people do cling to it, we will spend a moment or two with it.

The following analysis relies on data gathered by Julian Simon and Stephen Moore in Its Getting Better all the Time:  100 Greatest Trends of the Last 100 Years.  In fact, there is probably little in this post that Julian Simon has not said more articulately, but if all we bloggers waited for a new and fresh idea before we blogged, well, there would not be much blogging going on. 

Lets compare the life of an average American in 1900 and today.  On every dimension you can think of, we all are orders of magnitude wealthier today (by wealth, I mean the term broadly.  I mean not just cash, like Scrooge McDuck's big vault, but also lifespan, healthiness, leisure time, quality of life, etc).

• Life expectancy has increase from 47 to 77 years
• Infant mortality rates have fallen from one in ten to one in 150.
• Average income - in real dollars - has risen from $4,748 to $32,444

In 1900, the average person started their working life at 13, worked 10 hours a day, six days a week with no real vacation right up to the day they died in their mid-forties.  Today, the average person works 8 hours a day for five days a week and gets 2-3 weeks of vacation.  They work from the age of 18, and sometimes start work as late as 25, and typically take at least 10 years of retirement before they die. 

But what about the poor?  Well, the poor are certainly wealthier today than the poor were in 1900.  But in many ways, the poor are wealthier even than the "robber barons" of the 19th century.  Today, even people below the poverty line have a good chance to live past 70.  99% of those below the poverty line in the US have electricity, running water, flush toilets, and a refrigerator.  95% have a TV, 88% have a phone, 71% have a car, and 70% have air conditioning.  Cornelius Vanderbilt had none of these, and his children only got running water and electricity later in life.

To anticipate the zero-summer's response, I presume they would argue that the US somehow did this by "exploiting" other countries.  Its hard to imagine the mechanism for this, especially since the US did not have a colonial empire like France or Britain, and in fact the US net gave away more wealth to other nations in the last century (in the form of outright grants as well as money and lives spent in their defense) than every other nation on earth combined.  I won't go into the detailed proof here, but you can do the same analysis we did for the US for every country in the world:  Virtually no one has gotten worse, and 99.9% of the people of the world are at least as wealthy (again in the broad sense) or wealthier than in 1900.  Yes, some have slipped in relative terms vs. the richest nations, but everyone is up on an absolute basis.

Which leads to the obvious conclusion, that I shouldn't have had to take so much time to prove:  The world, as a whole and in most of its individual parts, is wealthier than in was in 1900.  Vastly more wealthy.  Which I recognize can be disturbing to our intuition honed on the physical world.  I mean, where did the wealth come from?  Out of thin air?  How can that be?

Interestingly, in the 19th century, scientists faced a similar problem in the physical world in dating the age of the Earth.  There was evidence all around them (from fossils, rocks, etc) that the earth had to be hundreds of millions, perhaps billions of years old.  The processes of evolution Darwin described had to occur over untold millions of years.  Yet no one could accept an age over a few million for the solar system, because they couldn't figure out what could fuel the Sun for longer than that.  Every calculation they made showed that by any form of combustion they understood, the sun would burn out in, at most, a few tens of millions of years.  If the sun and earth was so old, where was all that energy coming from?  Out of thin air?

It was Einstein that solved the problem.  E=mc2 meant that there were new processes (e.g. fusion) where very tiny amounts of mass were converted to unreasonably large amounts of energy.  Amounts of energy so large that it tends to defy human intuition.  Here was an enormous, really huge source of potential energy that no one before even suspected.

Which gets me back to wealth.  To balance the wealth equation, there must be a huge reservoir out there of potential energy, or I guess you would call it potential wealth.  This source is the human mind.  All wealth flows from the human mind, and that source of energy is also unreasonably large, much larger than most people imagine.

But you might say - that can't be right.  What about gold, that's wealth isn't it, and it just comes out of the ground.  Yes, it comes out of the ground, but how?  And where?   If you have ever traveled around the western US, say in Colorado, you will have seen certain hills covered in old mines.  It always fascinated me, how those hills riddled with shafts looked, to me, exactly the same as the 20 other hills around it that were untouched.  How did they know to look in that one hill?  Don Boudroux at Cafe Hayek expounded on this theme:

I seldom use the term "natural resource." With the possible
exception of water, no resource is natural. Usefulness is not an
objective and timeless feature ordained by nature for those scarce
things that we regard as resources. That is, all things that are
resources become resources only after individual human beings
creatively figure out how these things can be used in worthwhile ways
for human betterment.

Consider, for example, crude oil. A natural resource? Not at all. I
suspect that to the pre-Columbian peoples who lived in what is now
Pennsylvania, the inky, smelly, black matter that oozed into creeks and
streams was a nuisance. To them, oil certainly was no resource.

Petroleum's usefulness to humans "“ hence, its value to humans "“ is
built upon a series of countless creative human insights about how oil
can be used and how it can be cost-effectively extracted from the
earth. Without this human creativity, oil would objectively exist but
it would be either useless or a nuisance.

A while back, I published this anecdote which I think applies here:

Hanging out at
the beach one day with a distant family member, we got into a
discussion about capitalism and socialism.  In particular, we were
arguing about whether brute labor, as socialism teaches, is the source
of all wealth (which, socialism further argues, is in turn stolen by
the capitalist masters).  The young woman, as were most people her age,
was taught mainly by the socialists who dominate college academia
nowadays.  I was trying to find a way to connect with her, to get her
to question her assumptions, but was struggling because she really had
not been taught many of the fundamental building blocks of either
philosophy or economics, but rather a mish-mash of politically correct
points of view that seem to substitute nowadays for both.

I
picked up a handful of sand, and said "this is almost pure silicon,
virtually identical to what powers a computer.  Take as much labor as
you want, and build me a computer with it -- the only limitation is you
can only have true manual laborers - no engineers or managers or other
capitalist lackeys".

She
replied that my request was BS, that it took a lot of money to build an
electronics plant, and her group of laborers didn't have any and
bankers would never lend them any.

I
told her - assume for our discussion that I have tons of money, and I
will give you and your laborers as much as you need.  The only
restriction I put on it is that you may only buy raw materials - steel,
land, silicon - in their crudest forms.  It is up to you to assemble
these raw materials, with your laborers, to build the factory and make
me my computer.

She thought for a few seconds, and responded "but I can't - I don't know how.  I need someone to tell me how to do it"

The only real difference between beach sand, worth $0, and a microchip, worth thousands of dollars a gram, is what the human mind has added.

The economist Julian Simon is famous for his rebuttals of the zero summers and the pessimists and doom sayers, arguing that the human mind has unlimited ability to bring plenty our of scarcity.

"The ultimate resource is people - especially skilled, spirited, and hopeful young people endowed with liberty- who will exert their wills and imaginations for their own benefit, and so inevitably benefit not only themselves but

the rest of us as well."

As a final note, it is worth mentioning that the world still has only harnessed a fraction of this potential.  To understand this, it is useful to look back at history.

From the year 1000 to the year 1700, the world's wealth, measured as GDP per capita, was virtually unchanged.
Since 1700, the GDP per capita in places like the US has risen, in real
terms, over 40 fold.  This is a real increase in total wealth, created by the human mind.  And it was unleashed because the world began to change in some fundamental ways around 1700 that allowed the human mind to truly flourish.  Among these changes, I will focus on two:

1. There was a philosophical and intellectual
   change where questioning established beliefs and social patterns went
   from being heresy and unthinkable to being acceptable, and even in
   vogue.  In other words, men, at first just the elite but soon everyone,
   were urged to use their mind rather than just relying on established
   beliefs
2. There were social and political changes that greatly increased
   the number of people capable of entrepreneurship.  Before this time,
   the vast vast majority of people were locked into social positions that
   allowed them no flexibility to act on a good idea, even if they had
   one.  By starting to create a large and free middle class, first in the
   Netherlands and England and then in the US, more people had the ability
   to use their mind to create new wealth.  Whereas before, perhaps 1% or
   less of any population really had the freedom to truly act on their
   ideas, after 1700 many more people began to have this freedom. 

So today's wealth, and everything that goes with it (from shorter
work hours to longer life spans) is the result of more people using
their minds more freely.

The problem (and the ultimate potential) comes from the fact that in many, many nations of the world, these two changes have not yet been allowed to occur.  Look around the world - for any country, ask yourself if the average
person in that country has the open intellectual climate that
encourages people to think for themselves, and the open political and
economic climate that allows people to act on the insights their minds
provide and to keep the fruits of their effort.  Where you can answer
yes to both, you will find wealth and growth.  Where you answer no to
both, you will find poverty and misery.

Even in the US, regulation and the inherent conservatism of the bureaucracy slow our potential improvement.  Republicans block stem cell research, Democrats block genetically modified foods, protectionists block free trade, the FDA slows drug innovation, regulatory bodies of all stripes try to block new business models.

All over the world, governments shackle the human mind and limit the potnetial of humanity.

Yesterday I read in Reason that apparently the new Pope has in the past shown support for the anti-Harry Potter crowd, which is gearing itself up in anticipation of the new Harry Potter book release tomorrow.  He apparently wrote:

It is good, that you enlighten people about Harry Potter, because those are
subtle seductions, which act unnoticed and by this deeply distort Christianity
in the soul, before it can grow properly.

Here is my whole take on the anti-Harry crowd:  Get a life.  From a values point of view, what is it about Harry that you wouldn't want your child to emulate?  And as for the magic stuff - OK, get ready for this - its...made up.  Yes, it is a fantasy, it is not real.  There is no danger of your child suddenly running off and casting spells.

And here is my take on the Potter books as a whole:  Awesome.  Forget that I personally have enjoyed reading every one of them.  Consider that my 11-year-old boy has been waiting for weeks, not for a computer game or movie to come out, but for a book.  Likely a loooonnnggg book.  And this weekend, no matter what the weather or what is on TV, he will be glued to a couch from dawn to dusk reading.  Do you remember being so excited about reading anything at 11, other than the new issue of Spiderman?

By the way, its your last chance to place a bet on which major character buys it in this book, though Dumbledore is the runaway favorite (the logic being that in the story archetype that Rowling seems to be following, the young hero must face the final battle without his mentor - so Dumbledore needs to go before the 7th and last book).

Update:  At noon, Boston time my son crossed over page 310.  I am not sure I read that fast.

Update #2:  OK, its about 4:00 Eastern on Saturday and he is done.  You can tell that we struggle to keep this kid in books (this week he has read Harry Potter, the DaVinci Code, and a Clive Cussler book).  I will try to get him to write a review for the blog.  I threatened that I would tie him up naked in the middle of his school's cafeteria if he gave me any spoilers, but I will say that he was very, very depressed at the end.

An email from a friend recently got me thinking about why, despite rising prices and tight worldwide demand, we aren't seeing gas station lines this year, like we did during oil shocks of the early and late 70's.  I remember both well, but the later shocks resonate with me more because as a newly minted 16-year-old driver, I was given the family job of driving around town hunting for gas for the family cars.

My first thought was that it was related to the speed and sharpness of the supply discontinuity.  Certainly the 1972 embargo represented a sharp supply change which took the world market a while to absorb, and what we have seen of late has been more gradual.  This is certainly part of the explanation, but incomplete, as the gas lines of the late 1970's were not accompanied by a similar discontinuity.  I might add that many economists at the time might have said that the speed should not matter that much, since it was accepted at the time that energy demand was inelastic, that it did not change much with price.  Therefore, the speed would not matter, since the market's corrective mechanism of price would not work well anyway.  Since then, we have learned that energy demand is very elastic, and that usage will adjust itself based on price.

My second thought was that regulation has a role in the explanantion.  Usually, when you see people queing up for a product or service, it means that prices or supply or both have been artificially limited.  Certainly last year's gas lines we got in Phoenix were almost entirely due to regulation.  Here in Phoenix, the government requires a blend of gas used no where else in the country.  The gas comes in from another state via a single pipeline.  Mobil tried for years to build a small refinery here to produce this blend closer to the market, but were never allowed by state regulators.  So, last year when the pipeline broke, we had shortages.  Our intrepid governor, as most politicians love to do in an oil shortage, blamed greedy gas station operators and oil companies for the problem.  However, when it came time to issuing her plan for dealing with the crisis, here were the first three steps:

• Temporarily repeal regulations setting the unique gas blend for Phoenix
• Temporarily repeal regulations on truckers to allow them to better take up the transportation slack
• Reevaluate regulations that have restricted the construction of a refinery in Arizona

LOL, so it is all the oil companies' faults but the solution was to repeal three sets of government regulations.  Much the same situation occured in the early 70's.  Richard Nixon was probably one of the worst presidents from an economics standpoint that we have had in the last half century.  Few people remember just how close we got to a government program of gas rationing and how loud the calls were for nationalisatoin of oil companies.  Fortunately this never happened, but other bad stuff did.  For example, the markets ability to close the supply-demand gap were limited by a number of pricing controls on oil and other energy subsitutes, regulations that were not repealed until nearly a decade later.  Even weirder, the US government put in place distribution rules that said that oil companies had to send each market (I think it was done county by county) the same proportion of supply as in the year before the embargo.  I am not sure what fear drove this rule, but the result was chaotic.  For example, the previous summer lots of people drove cross-country for vacation, filling up out on the interstate in the countryside.  With shortages, no one wanted to drive long distance.  As a result, rural areas typically had plenty of gas, and cities were running out.  Demand patterns shifted (duh) but the government would not allow supply distribution to shift to match.

The final, and perhaps most important reason, though, that we have not had long gas lines is because people are not expecting them.  Fear of gas lines is a self-fulfilling prophacy, for the following reason:

Take the example of 1972, and we will use typical numbers of that era.  Lets say there were 100 million cars each with an average 20 gallon tank.  Lets
say normally, people refill their tank when it is ¼ full, so on
average their tank is 5/8 full.  Doing the math, there are 5/8 times 20 times 100
million gallons actually in cars or about 1,250 million gallons.  That's right - one of the largest single inventories of gas in this country is in people's tanks.

Now, lets say
due to supply panic, everyone suddenly refills at ¾ full. No one wants to be caught short (I remember in the 1970's, people would wait in line to put a gallon or two in their tanks -- it was nuts).  In this case, on average they
are 7/8 full or there are a total of 1750 Million gallons in cars' tanks.  So, in the space of
what might be two or three days, people suddenly demand 500 million gallons above and
beyond their normal usage to increase their tank's inventory.  Boom, stations are
out of gas, which causes people to feel even less secure without a full tank, so
they inventory more (many in spare gas cans) and the problem gets
worse.

One of the conspiracy theories of the 1970's was that we had gas lines because oil companies were holding tankers offshore waiting for prices to rise (the early 1970's were the point in time where the leadership banner for conspiracy theory nuts was handed off from the right wing to the left).  The irony is that the answer to the "mystery" of where all the gasoline inventory went was right under people's noses.  If an average tanker of the time carried 500,000 barrels of oil, and each barrel of crude oil produces about 20 gallons of gasoline (in addition to all of the other fuels) then then the act of gassing up cars faster caused 50 tanker loads of oil to disapear into people's gas tanks.  The "missing oil" was right in their garage!

A while back, I lamented all the work it takes in some states to get a liquor license.  Most liquor license laws stem back to the emergence from prohibition, when states wanted to purge organized crime from the liquor business.  What the heck, then, are they trying to do today, other than limit competition for incumbents, which is the typical role of licensing?  Before I go on, I can't help quoting Milton Friedman again about liscencing of all sorts:

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.

Anyway, here in Arizona, it takes a load of paperwork even to change the manager of a licensed facility (even regulation-happy California does not require this).  For each manager, a multi-page application, personal history, proof of training, and fingerprint cards (yes, really) have to be submitted, and an FBI background check has to be completed (to make sure they never worked for Al Capone, I guess).

Today, I got my new managers application back from the license bureaucracy a second time for corrections.  This time, here are the two errors they found:

• For the year when the manager was full time RVing (that means living the nomadic life with no permanent home, roaming the country in his RV) he didn't show a permanent address.  Yes, we explained his lifestyle then, but the form requires a permanent address for the last five years and can't be processed without it
• For a period of time when the manager was unemployed, he did not fill in his own home address where it asked for his employer's address

That's it - after sitting in their hands for weeks. After already returning the application to me before with another flaw, and never mentioning these flaws.  No phone call to get the information, just rejected out of hand, requiring the whole process start over again. 

After dealing with these folks for years, it is absolutely clear to me that they have totally lost sight of what the original mission of their organization might have been, and have substituted the mission "uncompromisingly ensure the rigorous compliance with all forms and processes adopted by this organization in the past".

Groups like the NAACP are actively pursuing claims for compensation from both corporations and governments for slavery in the United States 140 or more years ago (that's 7+ generations in the past).  The particular article linked is on seeking reparations from corporations, but many efforts exist to extract compensation from taxpayers, e.g. you and I.

Lets forget for a minute why I owe money for what my great-great-great-great-great grandfather did to your great-great-great-great-great grandfather.  Lets even forget that my great-great grandparents and all preceding generations of my family did not even live in this country.  Forget even about whether a statute of limitations has been exceeded by waiting 140+ years and seven or more generations to file a claim.

Lets however ask the question of what damages are incurred by the current generation of African-Americans who are decedents of American slaves.  Clearly the slaves themselves were irreparably harmed by slavery, but lets talk about the people who are actually bringing the suit.

If it were not for slavery, then many African-Americans today would be ... in Africa.  And in Africa, they would very, very likely be in horrible mind-numbing poverty (see Live8).  Its hard to pin down a number, but estimates of average incomes in Sub-Saharan Africa are between $600 per year and $1,770 per year.  By comparison, the average income of an African American was $14,397 in 1999 and is certainly higher today, since black incomes are growing rapidly in this country and actually falling in Africa.  And African American life expectancies, which still have some catching up to do with whites in the US, are nevertheless 10-25 years longer than their counterparts in the old country.  Everything from AIDS survival rates to education levels to VCR ownership and Internet access are far superior for American blacks than blacks in Africa.  So in this context, how does one demonstrate economic damages from slavery?

If I were an African American, I would give thanks every day that my ancestors endured the torture and humiliation and horror of slavery so that today my family could live, despite frustrations that sill exist for blacks, in relative wealth and prosperity and good health instead of some sub-Saharan shit-hole.

One Note:  I have certainly gotten some interesting emails on this one, including at least one "you will roast in hell" offering.  One comment I have gotten several times is "But there is no statute of limitations on murder, so how can there be on slavery?"   To which I answer - yes, there is not statute of limitations on murder, BUT, if we fail to catch a murderer in his lifetime, we don't throw his kids or grandkids in jail in his stead, nor do we ask his grandkids to pay reparations for his murders.  If we suddenly could absolutely prove the identity of Jack the Ripper, would we track down all his descendants and sue them for his actions? 

The second comment I get, presumably from African-Americans by the pronouns "I" and "we" used in the emails, is "we had our heritage ripped away".  I will confess that I may have a blind spot on this loss-of-heritage issue.  My great-grandparents were forcibly exiled from Germany about a century ago, and I don't shed any tears for my lost heritage, particularly given Germany's atrocious actions during the twentieth century.  I am thrilled to be an American and reject or at least ignore my German heritage.  I am not at all saddened my disconnectedness from the Kaiser or Hitler, and am not sure in turn that if I was black I would feel a loss from not being closer to Robert Mugabe or any of a zillion other repressive African regimes. 

By the way, in terms of being disconnected from one's heritage,  I have no way to prove it or get the numbers, but I would be willing to be that there are more college students right now studying black and/or African history in the US than in the whole of Africa.

I have argued several times in the past that banning "hate speech" has been an entry point for limitations on free speech on college campuses all over the country.  Now, it appears that the British Parliament may use it as an excuse to put restrictions on speech of all all their countrymen:

MPs gave the Racial and Religious Hatred Bill a third reading by 301 votes to 229, a majority of 72.

Shadow minister Dominic Grieve said the bill would not improve race relations.

But Minister Paul Goggins said: "I believe we need to
take on the hate mongers, whether they are terrorists or whether they
are extremists."

The bill would create a new offence of incitement to
religious hatred and would apply to comments made in public or in the
media, as well as through written material.
The plans, which have failed to make it through
Parliament twice before, cover words or behaviour intended or likely to
stir up religious hatred. Jews and Sikhs are already covered by
race-hate laws.

I can't think of anything more dangerous than placing any such restrictions on speech, especially when the standards against which speech will be judged are so ambiguous and open to interpretation.  As someone who often utters statements and supports concepts that many consider "extreme" (and here), it is very worrisome to see politicians attempting to ban "extreme" speech.

There are so many ironies in this I can hardly count them, but here is one:  The left typically are primary supporters of these prohibitions on hate speech.  Under the British law, half the management of organizations such as Planned Parenthood who often criticize the religious right and religious organizations could probably be heaved in jail.

Update:  Can't happen in the US? Check out this article on allowing native Hawaiians to secede.

Previously, I asked "why won't ethanol just go away", lamenting what a stupid program ethanol is and how much subsidy money is poured down that drain, not to mention the effect it seems to have on the Iowa primary every 4 years.  Yet another study has shown that ethanol consumes more energy to make than it actually produces. 

Turning plants such as corn, soybeans and sunflowers into fuel uses much more
energy than the resulting ethanol or biodiesel generates, according to a new
Cornell University and University of California-Berkeley study.

"There is just no energy benefit to using plant biomass for liquid fuel,"
says David Pimentel, professor of ecology and agriculture at Cornell. "These
strategies are not sustainable."

Pimentel and Tad W. Patzek, professor of civil and environmental engineering
at Berkeley, conducted a detailed analysis of the energy input-yield ratios of
producing ethanol from corn, switch grass and wood biomass as well as for
producing biodiesel from soybean and sunflower plants. Their report is published
in Natural Resources Research (Vol. 14:1, 65-76).

In terms of energy output compared with energy input for ethanol production,
the study found that:

• corn requires 29 percent more fossil energy than the fuel produced;
• switch grass requires 45 percent more fossil energy than the fuel produced;
  and
• wood biomass requires 57 percent more fossil energy than the fuel produced.

In terms of energy output compared with the energy input for biodiesel
production, the study found that:

• soybean plants requires 27 percent more fossil energy than the fuel
  produced, and
• sunflower plants requires 118 percent more fossil energy than the fuel
  produced.

In assessing inputs, the researchers considered such factors as the energy
used in producing the crop (including production of pesticides and fertilizer,
running farm machinery and irrigating, grinding and transporting the crop) and
in fermenting/distilling the ethanol from the water mix. Although additional
costs are incurred, such as federal and state subsidies that are passed on to
consumers and the costs associated with environmental pollution or degradation,
these figures were not included in the analysis.

Its good to be back in the USA, though my wife and I had a great time in Paris.  In the extended post, I have some pictures from our trip.  However, don't expect any tourist sites.  My business-related travelogue includes pictures of a gas station, a few cool new cars, my restaurant bill from hell, and other stuff...

Continue reading ‘Some Final Observations from Paris (with Pictures!)’ »

As a note, I had this post ready last Thursday, but with the terrorist attacks in London, the regular G-8 protesters sort of dropped off the radar screen.

For years now, I have struggled trying to categorize what philosophy motivates the brick-throwing protesters that seem a regular part of G-8 summits ever since they ripped up Seattle several years ago.   To say they are against Globalization does not answer the question, since what exactly does that mean, given that the protest movement itself is global and multinational in nature. 

To some extent, the protests of course just Marxism returning under a different guise.  However, even when compared to socialist reality avoidance, the arguments of the protesters seemed really hard to follow.  Part of the problem is that many of the protesters are violent anarchists and out-and-out criminals who want nothing more than violence and destruction.  However, there are people and groups who seem to be trying to accomplish something, and who resent being associated with these criminals.  After reading a number of different web sites of the protesters (many are really, really hard to parse logically), I have come up with the following basic argument shared by the core of the protesters.

1. They want to help the poor and outright poverty-stricken nations of the world
2. Many want the wealthiest nations (G8) to help these poverty-stricken nations, both because they blame the wealthy nations for this poverty, and because the wealthy nations are seen as the ones with the means to do something
3. They want to help these nations by encouraging the poorer nations to avoid any of the techniques or economic models the G8 used to get wealthy and successful in the first place

There is nothing particularly new about arguments 1 and 2; however, it was recognizing part 3 of the argument that helped me realize why I could never understand what they wanted.  In a nutshell, they want to fix poverty in the third world by disavowing everything -- private property rights, individual enterprise, free commerce, entrepreneurship, individual freedoms, etc. -- that made the G8 not impoverished.  Rich nations, you have to help the poor nations, but whatever you do, don't allow they to emulate what you did to get rich. 

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

I discussed suggestion on providing aid to Africa here and here.  A good companion article to this piece is this one on why progressives are too conservative to like capitalism.  Here is the part that is relevant to development:

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

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

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

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

Progressives do not like American factories appearing in third world
countries, paying locals wages progressives feel are too low, and
disrupting agrarian economies with which progressives were more
comfortable.  But these changes are all the sum of actions by
individuals, so it is illustrative to think about what is going on in
these countries at the individual level. 

One morning, a rice farmer in southeast Asia might faces a choice.
He can continue a life of brutal, back-breaking labor from dawn to dusk
for what is essentially subsistence earnings.  He can continue to see a
large number of his children die young from malnutrition and disease.
He can continue a lifestyle so static, so devoid of opportunity for
advancement, that it is nearly identical to the life led by his
ancestors in the same spot a thousand years ago.

Or, he can go to the local Nike factory, work long hours (but
certainly no longer than he worked in the field) for low pay (but
certainly more than he was making subsistence farming) and take a shot
at changing his life.  And you know what, many men (and women) in his
position choose the Nike factory.  And progressives hate this.  They
distrust this choice.  They distrust the change.  And, at its heart,
that is what globalization is all about - a deep seated conservatism
that distrusts the decision-making of individuals and fears change,
change that ironically might finally pull people out of untold
generations of utter poverty.

Scratch a progressive, you will find a totalitarian.  That is why progressives support totalitarians like Chavez in Venezuela and why you find "progressives" supporting brutal Muslim totalitarian apartheid states.  That is why you will hear a lot from protesters about Nike wages being too low, but nothing about the impact totalitarians like Robert Mugabe have on creating poverty.  By the way, I am willing to offer them some help spotting dictatorships if they need it.

To their point that poor nations got that way because of rich nations, their argument relies on a zero-sum mercantilist view of economics that I deconstruct here.  Their other argument is that western colonialism ruined the poor nations, but if that is true, why do they attack the US the most, which had the fewest colonies of any of the G8, instead of France, which made the worst mess of its colonies?

Readers of this blog will know that every time I have read condemnations of Janice Rogers Brown with quotes from her that are "out of the mainstream", I have become more enamored of her. 

JRB is opposed by the left and the Democratic Party because she is a strong supporter of property rights against government intervention.  Reason has an interesting article noting that while Democrats in Congress were quick to attack her small government libertarianism, Republicans pointedly did not in turn embrace it.  First, a reminder of why Brown makes everyone nervous:

Property and contract are, for her, the lifeblood of liberty; and when, in
the late 1930s, the country and the Supreme Court began treating property
rights cavalierly, they set loose an inexorably advancing leviathan state.
To Brown, moreover, it makes no sense to treat speech and privacy rights as
sacrosanct but property rights as trivial, when the Founders viewed all
those rights as of a piece.

More striking than Brown's philosophy is her tendency to express it in
language reminiscent of Barry Goldwater in his intemperate prime. In a 2000
speech to the Federalist Society in Chicago, she said, "We no longer find
slavery abhorrent. We embrace it. We demand more. Big government is not just
the opiate of the masses. It is the opiate: the drug of choice for
multinational corporations and single moms; for regulated industries and
rugged Midwestern farmers and militant senior citizens." She spoke of the
Supreme Court's belated acquiescence to the New Deal as "the Revolution of
1937," resulting today in "a debased, debauched culture." There is much more
in this vein, and not just in her speeches. In a 2002 dissent involving a
San Francisco housing regulation, she declared that private property "is now
entirely extinct in San Francisco," replaced by "a neo-feudal regime."

And the Republic response?

Otherwise, Republicans ran away from Brown's ideas as fast as their legs
could carry them. Specter listed, approvingly, government regulations she
has upheld. Sessions: "She has ruled on hundreds of cases affirming
government regulations, for heaven's sake." Sen. Jim DeMint, (R-S.C.):
"While she would likely describe herself as a person who believes in small
government and limited regulations ... Justice Brown has voted consistently
to uphold economic, environmental, consumer, and labor regulations." Lott:
"She has consistently voted to uphold regulations in every walk of life."
You would almost think she was Walter Mondale.

It is depressing to me to think the Republican party is returning to its 1970's big-government conservative roots.

My best wishes to the people of London today.  London is perhaps my favorite city in the world.  Only a coin flip with my wife put us on the Paris metro rather than the London underground yesterday, so the bombings hit close to home.  This is only the second time in five years my wife and I have gotten away without the kids for more than a day -- the first was a trip to Manhattan from September 9-13, 2001.  Maybe we should notify Homeland Security when we make our travel plans next time.  I know my mom is getting exasperated with worrying about me near major attacks.

This is another in a series of my lamentations on this country not having a strong and credible opposition party.  Previously, I have derided the Democrats for not coming up with a viable foreign policy alternative, but they appear just as week on domestic policy issues.

I have made my disdain for Kelo fairly clear.  It has taken a while, but someone other than a major beneficiary of eminent domain (e.g. the NY Times, which got their new HQ building courtesy of an eminent domain condemnation) has tried to defend it.  The defender is Nancy Pelosi, and boy has it become clear why we don't have a stronger opposition party in this country.  The Democrats have chosen this mental midget as their Congressional leader?  Check out this interview, via NRO:

 

"Q: Later this
morning, many Members of the House Republican leadership, along with
John Cornyn from the Senate, are holding a news conference on eminent
domain, the decision of the Supreme Court the other day, and they are
going to offer legislation that would restrict it, prohibiting federal
funds from being used in such a manner.

Two questions: What was your reaction to the Supreme Court decision
on this topic, and what do you think about legislation to, in the minds
of opponents at least, remedy or changing it?

Ms. Pelosi: As a Member of Congress, and actually all of us and
anyone who holds a public office in our country, we take an oath of
office to uphold the Constitution of the United States. Very central to
that in that Constitution is the separation of powers. I believe that
whatever you think about a particular decision of the Supreme Court,
and I certainly have been in disagreement with them on many occasions,
it is not appropriate for the Congress to say we're going to withhold
funds for the Court because we don't like a decision.

Q: Not on the Court, withhold funds from the eminent domain purchases
that wouldn't involve public use. I apologize if I framed the question
poorly. It wouldn't be withholding federal funds from the Court, but
withhold Federal funds from eminent domain type purchases that are not
just involved in public good.

Ms. Pelosi: Again, without focusing on the actual decision, just to
say that when you withhold funds from enforcing a decision of the
Supreme Court you are, in fact, nullifying a decision of the Supreme
Court. This is in violation of the respect for separation of church --
powers in our Constitution, church and state as well. Sometimes the
Republicans have a problem with that as well. But forgive my
digression.

So the answer to your question is, I would oppose any legislation
that says we would withhold funds for the enforcement of any decision
of the Supreme Court no matter how opposed I am to that decision. And
I'm not saying that I'm opposed to this decision, I'm just saying in
general.

Q: Could you talk about this decision? What you think of it?

Ms. Pelosi: It is a decision of the Supreme Court. If Congress wants
to change it, it will require legislation of a level of a
constitutional amendment. So this is almost as if God has spoken. It's an elementary discussion now. They have made the decision.

Q: Do you think it is appropriate for municipalities to be able to use eminent domain to take land for economic development?

Ms. Pelosi: The Supreme Court has decided, knowing the particulars
of this case, that that was appropriate, and so I would support that.

(emphasis added)

This is just crazy.  I guess as a Kelo-hater, I should be happy in this case that the opposition is so weak, but my god it is a depressing revelation for the future on other issues.

• I got tripped up today by my American expectations.  The hotel had this little breakfast buffet in the lobby.  It had some coffee and juice and a few croissants.  It was not nearly as nice as the free breakfast at a Hampton Inn or Holiday Inn Express, but it was still a quick and easy way to eat and get out the door.  OOOPPSS.  My wife and I got hit with a bill for 52 euros, or over $65, because we grabbed some coffee and pastries off the buffet.  Bummer.
• Service is a strange thing here.  I try fairly hard to submerge my ugly-American impatient tendencies.  I know to expect that meals will be paced much slower here, and have come to enjoy that pace, at least on vacation.  Shopping, though, is another story.  I still just want to get the stuff I want, pay for it, and go.  I have made the following observations about French service:  When you have a service person's attention, they will serve you for as long as you need, chatting about the product and about your life, for hours if necessary.  The problem is, that they will do this even if 10 other people are waiting to be served.  The lines here are awful, and you have to wait in them for everything.  Women in the US complain about bathroom lines at sporting events, but the women's rooms here have lines all the time, everywhere.  Even my wife the europhile is getting fed up with 45 minute transaction times
• We chose to blow it out one night, and have a top notch French meal at a top restaurant.  We ended up spending a ridiculous sum, more than half the people in the world make in a year, for one meal.  It would embarrass me to spend so much consistently (heck it embarasses me this once), especially since there are equally fine meals out there for 1/4 or less the price.  Also, we were actually nervous for the first 20 minutes - is that nuts?  But there is nothing in the world that can make an American like me who knows the McDonald's value meal numbers by heart nervous like a great French restaurant.  We eventually got into the spirit of the once in a lifetime experience, enough that we were laughing pretty loud about the little fried goldfish we got for appetizers.
• By the way, condolences for the French and the Olympics.  Paris would make a fine venue.  The only real mar in the city's beauty is that it has a real trash and dog poop problem on the streets (no scoop laws here, at least none that anyone enforces) so an Aolympics might help them clean it all up.  Maybe they need a few years of Mayor Giuliani?  Really, it is a beautiful city - did I mention that?  Perhaps the most beautiful city in Europe even before WWII, and certainly the most beautiful after given that it was spared most of the bombing and fighting other great cities faced (not too mention the horrendous 1950's architecture they were rebuilt with.  I mean, my god, look at Berlin.  It was rebuilt during the most horrid period in modern architecture).
• More later on hotels and restaurants you might visit if you come here,
  plus I will just have to post a scan of our restaurant bill from tonight

I was reading the NY Times' International Herald Tribune today here in Paris, and saw something funny at the end of an article about the crazy process underway to select the 2012 Olympic venue.  By the way, this is the big issue in Paris right now - you can't walk anywhere without finding yourself in the middle of some sort of Paris promotional event, presumably being simulcast back to the selection committee in Singapore.

Anyway, the IHT had this funny line:

The last days of the race drew the president of France, the prime minister of Russia and the queen of Spain here.  New York City pulled Senator Hillary Rodham Clinton away from a busy schedule to lend her star power.

Uhh, you mean the president of France and the prime minister of Russia don't have busy schedules?  And wouldn't a more correct formulation be "while other cities were represented by their head of state, NY City could only muster a junior member of Congress"?  I hope any city but New York wins, because, given past history, NYC will likely get themselves into some financial hole hosting the Olympics that the rest of the country will have to bail them out of.

By the way, apparently in a bid to head off past corruption, the International Olympic Committee has banned its members from actually visiting host cities and their facilities ahead of the selection.  This seems kind of extreme - you have to pick between cities but you can't learn anything useful about them.  Its depressing that the members of the Olympic committee are so untrustworthy that the only way to prevent them from collecting bribes from potential host countries is to not allow them anywhere near the country.

I was going to write a Fourth of July post, but it kept looking like my past Memorial Day effort, so, since I am in France and ready to go consume more food, I will take a shortcut this holiday:

Every Memorial Day, I am assaulted with various quotes from people
thanking the military for fighting and dying for our right to vote.  I
would bet that a depressing number of people in this country, when
asked what their most important freedom was, or what made America
great, would answer "the right to vote."

Now, don't get me wrong, the right to vote in a representative
democracy is great and has proven a moderately effective (but not
perfect) check on creeping statism.  A democracy, however, in and of
itself can still be tyrannical.  After all, Hitler was voted into power
in Germany, and without checks, majorities in a democracy would be free
to vote away anything it wanted from the minority - their property,
their liberty, even their life.   Even in the US, majorities vote to curtail the rights of minorities all the time, even when those minorities are not impinging on anyone else.  In the US today, 51% of the population have voted to take money and property of the other 49%.

In my mind, there are at least three founding principles of the
United States that are far more important than the right to vote:

• The Rule of Law.  For about 99% of human
  history, political power has been exercised at the unchecked capricious
  whim of a few individuals.  The great innovation of western countries
  like the US, and before it England and the Netherlands, has been to
  subjugate the power of individuals to the rule of law.  Criminal
  justice, adjudication of disputes, contracts, etc. all operate based on
  a set of laws known to all in advance.

Today the rule of law actually faces a number of threats in this
country.  One of the most important aspects of the rule of law is that
legality (and illegality) can be objectively determined in a repeatable
manner from written and well-understood rules.  Unfortunately, the
massive regulatory and tax code structure in this country have created
a set of rules that are subject to change and interpretation constantly at
the whim of the regulatory body.  Every day, hundreds of people and
companies find themselves facing penalties due to an arbitrary
interpretation of obscure regulations (examples I have seen personally here).

• Sanctity and Protection of Individual Rights.
  Laws, though, can be changed.  In a democracy, with a strong rule of
  law, we could still legally pass a law that said, say, that no one is
  allowed to criticize or hurt the feelings of a white person.  What
  prevents such laws from getting passed (except at major universities)
  is a protection of freedom of speech, or, more broadly, a recognition
  that individuals have certain rights that no law or vote may take
  away.  These rights are typically outlined in a Constitution, but are
  not worth the paper they are written on unless a society has the desire
  and will, not to mention the political processes in place, to protect
  these rights and make the Constitution real.   

Today,
even in the US, we do a pretty mixed job of protecting individual
rights, strongly protecting some (like free speech) while letting
others, such as property rights or freedom of association, slide. 

• Government is our servant.
  The central, really very new concept on which this country was founded
  is that an individual's rights do not flow from government, but are
  inherent to man.  That government in fact only makes sense to the
  extent that it is our servant in the defense of our rights, rather than
  as the vessel from which these rights grudgingly flow.

Statists
of all stripes have tried to challenge this assumption over the last
100 years.   While their exact details have varied, every statist has
tried to create some larger entity to which the individual should be
subjugated:  the Proletariat, the common good, God, the master race.
They all hold in common that the government's job is to sacrifice one
group to another.  A common approach among modern statists is to create
a myriad of new non-rights to dilute and replace our fundamental rights
as individuals.  These new non-rights, such as the "right" to health
care, a job, education, or even recreation, for god sakes, are
meaningless in a free society, as they can't exist unless one
person is harnessed involuntarily to provide them to another person.
These non-rights are the exact opposite of freedom, and in fact require
enslavement and sacrifice of one group to another.

Don't believe that this is what statists are working for? The other day I saw this quote from the increasingly insane Lou Dobbs (Did you ever suspect that Lou got pulled into a room a while back by some strange power broker as did Howard Beale in Network?):

Our population explosion not only detracts from our quality of life but
threatens our liberties and freedom as well. As Cornell's Pimentel puts
it, "Back when we had, say, 100 million people in the U.S., when I
voted, I was one of 100 million people. Today, I am one of 285 million
people, so my vote and impact decreases with the increase in the
population." Pimentel adds, "So our freedoms also go down the drain."

What??
In a society with a rule of law protecting individual rights, how does
having a diluted vote reduce your freedom?  The only way it does, and therefore what must be in the author's head, is if
one looks at government as a statist tug of war, with various parties
jockeying for a majority so they can plunder the minority.  But in this
case, freedom and rule of law are already dead, so what does a
dilution of vote matter?  He is arguing that dilution of political
power reduces freedom -- this country was rightly founded on just the
opposite notion, that freedom requires a dilution of political power.

At the end of the day, our freedoms in this country will only last
so long as we as a nation continue to hold to the principle that our
rights as individuals are our own, and the government's job is to
protect them, not to ration them.  Without this common belief, all the
other institutions we have discussed, from voting to the rule of law to
the Constitution, can be subverted in time.

So to America's soldiers, thank you.  Thank you for protecting this
fragile and historically unique notion that men and women own
themselves and their lives.

Sometime when I was over the Atlantic, we passed 100,000 visitors since I started counting last December.  Thanks to all my readers!

After a couple of days here, some impressions:

• The airline flights that dump you off in Europe at 7am which seemed so convivial when I was consulting are less so when I am a tourist.  We had the experience of arriving at our hotel about 8am, which of course did not yet have a room anywhere near ready.  We had a nice day walking around, but we sure were exhausted by the time we got to our room and had a nap.  Note:  American Airlines 767's have very very uncomfortable business class seats - really a disgrace nowadays.
• The Louvre is magnificent, but is ridiculously big.  It is impossible to digest.  You really have to find a branch of art, like the Flemish painters, and stay in that area.  The Musee d'Orsay, which focuses on 19th century French art, is much more digestible.  Also, it has a cool location in a train station, which was a very important part of 19th century life.
• The French smoking thing has been joked about so much it is almost a caricature, but it is still a shock the first time in a restaurant.  We observed many American smokers reveling in their smoking freedom.  I wonder if there is a business opportunity to sponsor smoking trips to Paris, much like those Asia sex trips to Thailand.
• Wow, the food is expensive!  $50-80 entrees in some places, and for that you can get two slices of tenderloin.  It was good though, and we have yet to have a bad, or even so-so, meal.
• I would feel safer in a golf cart than some of the cars here.  You can really see the trade-offs with fuel economy we make in the US by having crash test standards.  Over here with no crash tests and $6.00 gas, you get lots of tiny cars.  Mini-coopers look average to large-sized here.
• The Champs d'elysees was amazing on Sunday afternoon - a sea of people going up the hill.  It looked like those pictures of the start of the NY marathon, but it went as far as the eye can see.  Amazingly, with all this foot traffic past the door, half the businesses were closed that day (welcome to Europe, I guess)
• There are more shoe stores here than fast food restaurants in Phoenix.  And my wife has stopped in every one of them

I am headed off to Paris this weekend, so blogging may be light the next few days.  I am going to try to blog from France, and try to get a sense for the issues being discussed there post-referendum.  In the mean time, I will leave you with this heartwarming scene from Team America: World Police.

I thought the movie was very funny, though if you don't like South Park-type humor, don't even bother.  I still can't get the Team America theme song out of my head, or at least the main refrain that goes

America... Fuck Yeah!

If I had a baseball team, I would play that at the 7th inning stretch.

I tend to divide up environmental regulations into two buckets:

1. Regulations aimed at curbing emissions that spill out of one person's property (e.g by air or water) to others
2. Regulations mainly aimed at land use restrictions that affect how someone may use their own land

The first type of law is essential to rational functioning of strong property rights in the modern world.  Otherwise, we would all be suing each other over molecules of pollution that cross our property lines.

The second category, including wetlands and open space and habitat protection, are a threat to property rights (something one could infer just from the fact that many anti-capitalist anti-technology leftists have jumped on the environmental bandwagon, mainly focusing on this second category of limitations).

Here is one of those situations that make me a true minority in this country:  I greatly value wide-open undeveloped spaces and ranges for wild animals, but I don't expect the government to provide them for me nor do I ask other citizens to provide them to me against their will.  Unfortunately, most of the other people in this country who value these things do in fact accept, and even demand, that government provide them.  Every day, landholders are told by various government bodies that they cannot do what they like with their land, because other people who do not own the land like the land the way it is.  These landholders are effectively expropriated of their land, in these cases without even the payment the New London Kelo victims received. 

This is why I have always supported the private land trust movement, of which the Nature Conservancy is the most well-known example.  These land trusts use private donations to buy out property owners and set aside property for various conservation purposes.  This way, the people who value the conservation of the land pay the price for it, not the person who happens to be owning the targeted land.

I was sad to see, therefore, the Nature Conservancy revealed in Senate hearings as having a number of ethical lapses.  , was all over this story.  They describe the problems found as follows:

*A pattern of dealings with insiders that gave preferential treatment on land deals.

*A pattern of dealings with the companies of board members

*Selling emissions credits, including a $10 million deal with General
Motors while GM's chairman John Smith served on TNC's board.

*Selling emissions credits that it may or may not have even owned,
essentially furthering its own environmental goals (buying land) at the
expense of another environmental goal (reducing greenhouse gases)

*Allowing oil and gas drilling on one of three known habitats of the
Attwater Prairie chicken, bumbling its way through the deal so that it
ended up in court, accused of cheating one of its partners, all while
pocketing over $8 million in royalties.

The report paints a picture
of an organization that had gotten so big, and so successful, that it
lost sight of why it was formed in the first place.

There is a lot of discussion about what reforms will help prevent this problem, and a lot of discussion about eliminating the tax deduction for conservation easements:

It has become clear that some people have been abusing the law that
allows tax deductions for conservation easements. The easement
deduction allows me to sell the development rights to my property to a
land trust. I keep the property the way it is, and everyone who buys it
from me agrees to keep it that way too. If it's wilderness, it stays
wilderness. If it's a ranch, it stays a ranch. In areas with lots of
development, that can be worth a ton of money. The big question, how
much? It's a subjective appraisal, and if both parties want to unfairly
jack up the value, the hearings have shown the IRS doesn't have the
manpower to catch it. And it's led to a cottage industry in easement
tax shelters, including millions of exemptions for golf courses,
driving ranges and backyards. Phony trusts were set up not to protect
land, but to act as tax shelters for the wealthy. As the facts come
out, it's outraging critics, and depressing supporters.

In these deals, one party keeps the land while another party. like TNC, buys the "development rights" and pays the legal bills over time to defend these rights.  Personally, I have not been a big fan of conservation easements.  "Forever" is a very long time, and there are always going to be incentives to cheat -- if not in this generation, then in the next.  Also, such "conditional" property makes me nervous, somehow splitting property rights into two pieces, like a treasury strip.  I can't say I can make a firm philosophic argument against it, but it makes me uneasy. 

I would much prefer land trusts like TNC to forget about being enablers for conservation easements and get back to their original mission - buying land outright for conservation purposes.  By buying it outright, you get away from all the problems of policing private land use of the easements an organization has taken on.

I have decided to continue to donate to the Nature Conservancy.  They do a lot of cool stuff, and philosophically I much rather spend my money to have property purchased for conservation rather than to lobby Congress to force someone to conserve at the point of a gun.  I just hope TNC can get its act together so it can continue to provide a viable private alternative to government coercion.

One of the worst parts about living through the eighties was listening to all the angst about Japanese companies "buying America".  I never really understood the issue that people had with foreigners buying American assets (beyond pure xenophobia).  It was all especially puzzling because most of the wailing came from people who are today wailing about American outsourcing.  So its bad when American companies buy productive assets in other countries AND its bad when foreigners buy productive assets in this country?

Anyway, I missed it the first time around, but apparently Paul Krugman is upset that a Chinese company might buy Unocal.  Here are his reasons for concern:

Yet there are two reasons that Chinese investment in America seems different
from Japanese investment 15 years ago.

One difference is that, judging from early indications, the Chinese won't
squander their money as badly as the Japanese did....

The more important difference from Japan's investment is that China, unlike
Japan, really does seem to be emerging as America's strategic rival and a
competitor for scarce resources - which makes last week's other big Chinese
offer more than just a business proposition.

His first is just laugh out loud funny.  We actually have an economist claiming that the world was better in the 1980's because there was a huge market inefficiency (ie, the Japanese overpaid for unproductive assets). 

His second argument seems to be that US supplies of oil are more secure if American companies own them.  This is stupid.  If he means that it is more secure economically, then he should have his economist merit badge taken away for life.  Even he must know that oil is a fungible commodity, and as such trades world wide at a price set by supply and demand.  If more of Unocal's oil goes to China, this replaces other oil coming from somewhere else that is now available on the market.  And, if he means it is safer politically, he forgot to study the last 50 years of history.  Every major oil producer of the world - Saudi Arabia, Mexico, Venezuela, etc are pumping oil that used to belong to American oil companies, but was nationalized and taken from them.  Does Mr. Krugman's statement mean that the left and the NY Times are suddenly more ready to support the property rights of American oil companies overseas? I doubt it.  It is actually an improvement over history that a totalitarian state like China is actually buying American oil assets rather than just expropriating them.

By the way, I call Mr. Krugman's view of national economic success the "monopoly board" view of the world.  In his mind, America and China are playing monopoly, and once China gets St. James Place, America can never own all the oranges.  This is not the way the world works.  When America grew economically in the last century, it did not mean that all the other countries had less opportunity to grow.  In fact, we pulled many countries along with us.  His zero-sum view is just the macroscopic counterpart to the zero-sum based worry about rich people getting richer in this country.

Marginal Revolution and Cafe Hayek both have good analyses of Paul Krugman's neo-mercantilism.

Postscript:  Gee, I hate to play the race card, but why is it we always get a national panic when it is China or Japan buying US assets and not when it is the Dutch, the English or the Canadians (who are far larger investors in US assets and companies than the Chinese)?

After 6 months, I still think TypePad is the best tool out there to quickly start your own blog.  However, and I know this point has been made before, but could you guys please add variations of the word "blogger" and conjugations of the verb "blog" to your spell check dictionary.  Thanks