Fail to Succeed

Arnold Kling and Nick Schulz on how market failure is just as important as market success.

Delusional

Mario Rizzo is amazed (somewhat) at how the American political system continues to ignore reality. His three issues:

1. The War on Drugs

2. The War on Terror

3. The Bankruptcy of the Welfare State

Anyone familiar with the work and philosophy of banking giant John Allison knows the first tenet of his philosophy is approaching everything from a realistic standpoint. Rizzo's examples are case and point how not to do that, and consequently cause massive collateral damage.

Where are the Philosophical Foundations?

Why, in the end, there isn't a whole lot of difference between liberals and conservatives.

(HT: Cato-at-Liberty)

Kindle

I received a Kindle for Christmas. I was a bit skeptical at first, but now I can't put the thing down. I can download close to any book, newspaper, magazine or blog anytime, anywhere for the cheapest price on the market in less than a minute.

Capitalism is wonderful.

Sullum on The Right to Health Care

Jacob Sullum offers his thoughts on the supposed right to health care. A snippet:

While liberty rights such as freedom of speech or freedom of contract require others to refrain from acting in certain ways, “welfare rights” such as the purported entitlement to health care (or to food, clothing, or shelter) require others to perform certain actions. They represent a legally enforceable claim on other people’s resources. Taxpayers must cover the cost of subsidies; insurers and medical professionals must provide their services on terms dictated by the government.

A right to health care thus requires the government to infringe on people’s liberty rights by commandeering their talents, labor, and earnings. And since new subsidies will only exacerbate the disconnect between payment and consumption that drives health care inflation, such interference is bound to increase as the government struggles to control ever-escalating spending. Rising costs will also encourage the government to repeatedly redefine the right to health care, deciding exactly which treatments it includes.

I wrote about this topic here.

Yes, We Still Make "Stuff". And More of It. And It's of Better Quality. And It's Cheaper.

From Mark Perry:

For the year 2008... if the U.S. manufacturing sector were a separate country, it would be tied with Germany as the world’s third-largest economy.

(HT: EconLog)

Wise, Sobering Words

As the new health care legislation passes through Congress, I felt it was appropriate to link to William Graham Sumner's 1916 essay, The Forgotten Man. Here is the concluding paragraph, though I strongly urge all to read it entirely in its unfettered brilliance:

The fallacy of all prohibitory, sumptuary, and moral legislation is the same. A and B determine to be teetotalers, which is often a wise determination, and sometimes a necessary one. If A and B are moved by considerations which seem to them good, that is enough. But A and B put their heads together to get a law passed which shall force C to be a teetotaler for the sake of D, who is in danger of drinking too much. There is no pressure on A and B. They are having their own way, and they like it. There is rarely any pressure on D. He does not like it, and evades it. The pressure all comes on C. The question then arises, Who is C? He is the man who wants alcoholic liquors for any honest purpose whatsoever, who would use his liberty without abusing it, who would occasion no public question, and trouble nobody at all. He is the Forgotten Man again, and as soon as he is drawn from his obscurity we see that he is just what each one of us ought to be.

David Harsanyi on Obama's Rhetorical Hype

Here.

Obama clearly isn't the first, only or last politician to engage in such theatrics. The problem is he's so damn good at it.

Sumner on Health Care and Insurance

Here.

Read more about HSAs here.

Liquidity Trap/Stimulus/Wages Links

Chicago economist Casey Mulligan on the "paradox of toil", stimulus, unemployment, Krugman, and liquidity trap.

The Marginal Revolution boys offer their thoughts here and here.

Sumner here.

And here's a link to Krugman's blog, where he has a number of posts on the topic.

Question for liquidity trap proponents: can the Fed actively buy debt (as oppose to passively inflate through zero interest rates), both private and public, to further increase the money supply? If so, would this make fiscal stimulation unnecessary?

Dogmatism vs Pragmatism

Scott Sumner, who is quickly becoming one of my favorite modern thinkers, offers some thoughts and insights on comments made by the BB&T Chairman and dogmatic libertarian John Allison.

I consider myself a dogmatic libertarian with the strong desire to become a pragmatic libertarian. I think it is near impossible to identify one's personal value system and philosophy as pragmatic without first being dogmatic. Let me explain.

By dogmatic, I mean one feels very passionate about what they believe in yet allows that emotion to significently determine their argument. In addition, their exposure to the true depth of the philosophy they are attempting to defend is shallow. Consequently, they have an argument heavy on emotion and light on intellectual depth.

The pragmatic thinker tips the scale. He is heavy on understanding and possesses a deep understanding of his argument, but is able to keep his emotions in check and make the appropriate, practical concessions to his opponent and his environment.

If one were to look at it in terms of Atlas Shrugged, the dogmatic libertarian would only be able to defend the work (and most likely not particularily well), whereas the pragmatic libertarian could both defend and critique it.

I think this view applies to both liberals and libertarians, but not conservatives, as I find much of their thinking contradictory and convoluted.

From Freedom to Choose

From p. 179 of Milton and Rose Friedman's Freedom to Choose:

We are told that the nation benefits by having more highly skilled and trained people, that investment in providing such skills is essential for economic growth, that more trained people raise the productivity of the rest of us. These statements are correct. But none is a valid reason for subsidizing higher education. Each statement would be equally correct if made about physicial capital (i.e., machines, factory buildings, etc.), yet hardly anyone would conclude that tax money should be used to subsidize the capital investment of General Motors or General Electric. (1980)

Oh, how the times have changed. Freedom to Choose opens with this quote from former Justice Louis Brandeis:

Experience should teach us to be most on our guard to protect liberty when the Government's purposes are beneficent. Men born to freedom are naturally alert to repel invasion of their liberty by evil-minded rulers. The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding.

Wise words to always keep in mind.

An Unfortunate Incident

Emotion is playing too large a role in much of the health care debate. Ezra Klein, a rising liberal intellectual star, resorts to the level of ignorant hysteria when discussing Senator Joseph Lieberman's recent filibuster move. Klein writes:

Lieberman seems primarily motivated by torturing liberals. That is to say, he seems willing to cause the deaths of hundreds of thousands of people in order to settle an old electoral score.

Michael Cannon promptly takes Klein to task for these comments.

We all feel passionate about what we believe in. It's why Rob and I spend a fair amount of our spare time working on this blog. But though essential as the fuel that drives us to make the world a better place, emotion often clouds our better judgement. In this case it resulted in vitriolic, unwarrented slander and an egregious display of confirmation bias.

This debate is an important and necessary one. But there is no need to call those on the other side murderers simply because they disagree.

Marijuana a Gateway Drug?

I recently got into a brief debate with someone over whether drugs, and in particular marijuana, should be legal or not (the discussion arose after I made the (somewhat) tongue-in-cheek comment that if Detroit wants to survive, it should become the next Sin City).

Anyways, this person said he was against legalizing marijuana because it is a gateway drug. Now the Gateway Drug Theory as I understand it, when it comes to marijuana, is more or less defunct as a legitimate scientific theory. At the very least, it has been acknowledged by most in the scientific community that tobacco and alcohol are much "stronger" gateway drugs than marijuana.

This gateway argument doesn't hold for two primary reasons. The first is the age old rule of statistics: correlation does not equal causation. In other words, substitute the word "milk" for "marijuana" and you have the same exact argument. I believe that substance use or abuse is much more a revealer of who someone is and the conditions that affect their life as oppossed to being causes of a "bad lifestyle." Of course drug use/abuse can contribute to a downward spiral, but I'm unconvinced it is primarily due to drug use or is a chicken/egg problem.

Secondly, I think this argument reveals a great deal of confirmation bias within the proponent. And that confirmation bias is that a lot of people, for whatever reason, hate and are freaked out by weed. Even though marijuana is far less dangerous than tobacco and alcohol, there is a bizarre taboo that surrounds marijuana that has only been perpetuated by decades of federal taxpayer-funded propoganda campaigns. Why people have such an irrational fear of marijuana relative to alcohol and tobacco is beyond me, but if you find yourself discussing this issue with someone and they refuse to acknowledge that tobacco and alcohol are just as gateway-relevant as marijuana and thus should be made illegal as well, than this is most likely the reason why.

If anyone is familiar with scientific papers that find marijuana a more potent gateway drug than alcohol and tobacco, please forward on to me. My searches have been futile so far.

Capitalism and Rights

Rob and I are having a bit of a back and forth concerning the subsidization of higher education. I'm having some difficulty following his argument, though, so I want to move it over to a post and get a little more philosophical.

Rob, as you stated earlier, you think capitalism is an amoral system. Yet you believe that the benefits of a capitalistic society establish specific moral standards. Take the case of higher education. Modern, mainstream higher education is made possible by capitalism. Mass production of study materials, construction of buildings and campuses, coordinating of dining services, the instant, all-encompassing spread of ideas around the world and historical amounts of leisure time are just a few indications and example of how capitalism has paved the road for millions to receive a low cost, high quality higher education that they never would have received under any other economic system.

This amoral system, thus, is doing a great deal of good. And you think that individuals have an inherent right to the benefits of this amoral system.

So my question for you is how can an amoral system be the parent of moral standards? In other words, how can higher education be a moral good every citizen has a right to if its creation was the result of amoral forces?

My answer is that it can't, but those in power pretend it can and most people like the simple utopian appeal and buy into it. This, in my opinion, is the essence of politics.

But before I say any more though I am interested in hearing what you have to say.

Update on Posting

Posting from me is going to be relatively limited for the indefinite future. Combination of work, studying and some personal projects are taking priority.

Carmen Reinhardt on the Financial Crisis

Just listened to an EconTalk episode featuring University of Maryland Professor of Economics Carmen Reinhardt. Very interesting take on the financial crisis, and at one she said the subprime market was (is?) essentially "an emerging market within the United States."

Whether true or not, I think it is healthy to view the crisis from as many angles as possible, and this strikes me as a particularly interesting one.

Your Public Choice Story of the Day

WSJ reports U.S. Senator Max Baucus nominated his girlfriend for U.S. Attorney.

Important to note that the article also writes:

The spokesman says Mr. Baucus and Ms. Hanes decided during the nomination process that she should withdraw her name because the couple wanted to live together in Washington.

I have very few facts about this case and ultimately I think the right thing was done by withdrawing Ms. Hanes' name after the nomination process began.

But I also think we need to remember that politicians are human beings that face the same self-interested incentives that regular people do. But they have an enormous amount of power relative to the average American, so they deserve an far more scrutiny and skepticism when they make decisions.

Competing Macro Views

Some would say the current state of macro is in disarray as it is having a great deal of trouble explaining the current economic situation. But I don't think disarray is so much occuring as is intense competition. Right now there are a ton of competing views trying to explain the siuation. Krugman, Kling, and Sumner seem to me to be the big three right now. Here's Kling on the current state of macro and the competing views:

I am prepared to offer pushback against the Sumner-Hetzel viewpoint. However, it really deserves the status of the "null hypothesis." In a more reasonable world, everyone would be starting from the presumption that Sumner and Hetzel are correct. Those of us arguing folk-Minskyism and telling the Recalculation Story should be the ones fighting an uphill battle to bring our ideas into the policy debates. That this is not the case, and that SC is now on the fringe, is one of the most remarkable stories of this whole macroeconomic episode.

21st Century Idealism

My free-loading, entitlement-obsessed generation. At least in California.

Structural Evolution is the Root Issue

I don't agree with a whole lot of this Robert Reich post, but he is spot on with this paragraph:

The basic assumption that jobs will eventually return when the economy recovers is probably wrong. Some jobs will come back, of course. But the reality that no one wants to talk about is a structural change in the economy that's been going on for years but which the Great Recession has dramatically accelerated.

Recalcuation Theory, in a very, very small nutshell. The sooner this reality is addressed, the better.

(HT: EconLog)

Your "Really?!?" Story of the Day

Via Reason, the British nanny state in a nutshell.

More on Climategate

Via Cafe Hayek, "believer" Clive Crook on Climategate. His final paragraphs:

Megan McArdle adopts a world-weary tone similar to The Economist's: this is how science is done in the real world. If I were a scientist, I would resent that. She has criticised the emails and the IPCC response to them, then says she still believes the consensus view on climate change. Well, that was my position at the end of last week, and I suppose it still is. But how do I defend it? There is far more of a problem here for the consensus view than Megan and ordinarily reliable commentators like The Economist acknowledge. I am not a climate scientist. In the end I have to trust the experts. That is what we are asked to do. "Trust us, we're scientists".

Remember that this is not an academic exercise. We contemplate outlays of trillions of dollars to fix this supposed problem. Can I read these emails and feel that the scientists involved deserve to be trusted? No, I cannot. These people are willing to subvert the very methods--notably, peer review--that underwrite the integrity of their discipline. Is this really business as usual in science these days? If it is, we should demand higher standards--at least whenever "the science" calls for a wholesale transformation of the world economy. And maybe some independent oversight to go along with the higher standards.

Rob thinks this a problem endemic to science. I agree, to a small extent, but believe this particular case is mostly a matter of injecting politics into a place it has no place being. We saw what politics did to the lending industry and finance when it got too entrenched; we're now seeing how it effects the scientific community.

Bailouts that Beget Bailouts

Has capitalism, true free-market capitalism, ever been allowed to flourish in history? Probably not, on a major scale. But I can say with near certainty that crony capitalism has become more entrenched in the international economy than ever before.

Read the Sorkin article. This would be funny if it wasn't so scary.

Will Wilkinson on Climategate

Here:

The scientific implications of the Climategate files are probably small, but the political implication is certainly large–because of the politicized nature of climate science confirmed by the files. Verification of the existence of conspiring enforcers of orthodoxy weakens the strongest rhetorical weapon in the alarmist arsenal. The idea that the science behind predictions of potentially catastrophic warming is rock solid and that the putative scientific consensus reflects the rock solidity of the science licenses the inference that there is no scientifically respectable excuse for skepticism of or disagreement with the consensus. That is a big stick to thump people with. But the Climategate files strongly suggest that at least some of the science is not rock solid and that the scientific consensus is at least in part the product of silencing or marginalizing those who might upset it. The files have made “How can we be sure that you did not fudge your data” and “How do we know that dissenting voices have been given a fair hearing?” questions that we now must ask rather than questions skeptics can be effectively shouted down for asking. The files show that suspicion is warranted. That’s a big deal.

I've been a climate change skeptic for this exact reason. Injecting politics into science is like having the Yankees act as the employer for all MLB umpires; you just can't trust the results.

Central Planning is Good When It Fits Your Purpose

Bill Easterly hits the nail right on the head when it comes to "military development" and "nation-building."

critics of top-down state plans for economic development are also not fans of top-down state plans for military development. If the Left likes the first, and the Right likes the second, that just shows you how incoherent Left and Right are.

(HT: EconLog)

Unnecessary and Sad

Tim Lynch on the recent murder of four Tacoma, Washington police officers and what it (may) reveal about our criminal justice and prison system.

I would, however, caution against a blanket condemnation of pardons, as well as any hasty move to simply abolish parole. The American criminal-justice system is thoroughly swamped. Right now there are more than 7 million people under criminal-justice “supervision.” About 2.5 million are behind bars, and about 4.5 million are on probation or parole. This system is greatly overburdened by non-violent drug offenders. Conditions vary by jurisdiction, but in general there is no prison space left. So it is unrealistic for us to say, “If a prisoner violates parole, send him back to jail immediately!”...

The best way to curb violent crime is to lock up violent criminals. Sounds like a no-brainer but our system is swamped with drug offenders. Problems fester while the pols try to deflect criticism away from themselves.

More Deficit Discussion

James Hamiliton the Krugmanian argument for deficits.

Krugman's response.

(HT: Cafe Hayek)