Hurrah for Jindal!

Until his name came up as a potential running-mate for John McCain, I don't remember ever hearing about Bobby Jindal. I think this will change regardless of whether he joins McCain or not. Megan McArdle is a fan:

With a river of federal money flowing in, Louisiana, which used to be stuck at the bottom of state corruption indices, could have gone back to business as usual while the politicians and the powers that be diverted a few rivulets to their own use. Instead, Jindal and the legislature passed anti-corruption laws that in a surprising turn of events actually seem to have done something about corruption — suddenly the state is getting the best scores in the country. They pushed through disclosure rules for all government officials — state and local, appointed and elected. He got a law passed that forbid legislators from doing business with the state. And he took on a tax and regulatory structure that had been built around the notion that companies couldn't go anywhere, and could hence be bled dry.

Huey Long deliberately built a bridge lower than standard so that boat traffic couldn't go upriver. The days when New Orleans could enforce that kind of dominance are long gone, but the old institutional structures remained. For example, Louisiana had special taxes on utilities, on new equipment purchases, on businesses that borrowed money. The unsurprising result was that companies deferred maintenance and refused to buy new equipment, making them uncompetitive unless they paid low wages. It's classic rent seeking behavior by the legislature, and Jindal actually got rid of it; new businesses are now locating there, and others are upgrading.

Staving off disaster in Massachusetts

Katherine Mangu-Ward realizes that she missed some key elements after her move to Massachusetts:

Massachusetts must have been a terrifying place in 1995. A relatively recent arrival in the commonwealth myself, I had no idea that the mid-90s was a time when health care was unobtainable. I didn't know about the washed out bridges and unplowed roads. Nor do I recall seeing bands of feral children roaming the streets from 8:00 am to 3:00 pm due to the lack of public schools.

But a popular ballot initiative to eliminate Massachusetts's income tax — thus bringing the state budget back to 1995 levels — is being greeted with howls of protest and predictions that the state will degenerate into underfunded chaos.

Gas tax economics

Megan McArdle explains why gas prices are so high, and why mucking around with tax holidays is not going to fix anything:

Supply is elastic on the downside — companies can take the stuff off the market and store it if they don't like the price, or throttle back their refineries. But there's no way to expand the supply, because Americans can't import gasoline from abroad; each mix must be specially formulated to the air quality regulations of its regulatory region.

Lots of people are unaware of this: regional variations in price sometimes prompt the idea of bringing in supplies from other regions, but for regulatory reasons this generally can't be done. Individual states and provinces have differing standards for additives and blends — which can't be easily met by supplies for other markets — so they sometimes act to drive up the prices disproportionally within that market.

It's not a market failure . . . it's another example of unintended consequences of regulatory action.

Because supply is unresponsive to price on the upside, and prices are already quite high enough for companies to make a profit, the price of oil is currently basically set by consumer demand: they bid the price up to the point where they want to consume the maximum amount that refineries can supply. Oil companies can't sell more gasoline by lowering prices, and they also will not sell any less gasoline, because the current price is the price at which consumers want to consume all the gasoline they produce. Hence, if you lower the tax, the price stays the same, and 18.4 cents goes to the oil companies for every gallon.

Now, one might say that this is good because it will incent them to find more oil. But this is not, in my opinion, a very good argument. First of all, we're also considering mucking around with windfall taxes, which are a much bigger disincentive to invest than any piddling 18.4 cents per gallon. Second of all, oil companies can discover more oil, but they are hard put to increase refinery capacity, because no one wants any refineries near anyone; virtually all of our refineries are decades old, with improvements coming from throughput enhancement rather than new built capacity. The limiting factor on gasoline right now is refinery capacity, not oil supplies. And third of all, they're already making really quite a lot of money. We don't need to give them even more.

US greenhouse gas emissions up 6.6%

It's true! Of course, it pales in comparison to the 21.1% increase notched by those smug Kyoto signatory nations, of course.

H/T to Nick Packwood, who writes:

The average global increases in so called "greenhouse gas" emissions 1997 - 2004 has been 18%. The average decrease in greenhouse emissions amongst signatories to Kyoto is... let's see here... you are saying it is a 21% increase? But that is impossible. They signed an agreement.

QotD: Audio recordings

I am, sadly, old enough to have been assistant manager at an A&A Records and Tapes and to remember the excitement and trepidation that came with the introduction of the CD. It was not just the new colder sound of these things but a sense of loss at all that acreage of cover art reduced to the CD's smaller footprint. They were so compact we used to shelve each CD in a cumbersome plastic box three times its length; the new digital format seemed all too easy to steal. Little did any of us see where that logic would lead.

Nick Packwood, "The return of the repressed", Ghost of a Flea, 2008-02-14

Those untrustworthy Chinese economic numbers

Regular readers will know that I've been a long-term skeptic about the economic figures reported by the Chinese government (for example, here and here back in 2004). As a result, this post at the Economist is not very surprising:

As China's importance in the global economy increases, investors are paying more attention to its economic numbers. Yet the country's official statistics are notoriously ropy. Some commentators accuse China's government of overstating GDP growth for political reasons, others complain that the official inflation rate is fraudulently low. So which data can you trust?

One reason to be suspicious of GDP figures is that China is always one of the first countries to report them, usually only two weeks after the end of each quarter. Most developed economies take between four and six weeks to produce them.

However, the Economist still feels that the Chinese economy is larger than reported. My sense of distrust in the figures argues for it being neither as big nor as robust as the reported figures indicate. They're professional economic reporters . . . I'm a guy typing a blog entry. I wonder what the long-term odds are for either of us to be closer to the truth?

It's tough to disagree with this, though:

The prize for the dodgiest figures goes to the labour market. The quarterly urban unemployment rate is meaningless because it excludes workers laid off by state-owned firms as well as large numbers of migrant workers, who normally live in urban areas but are not registered. Wage figures are also lousy. There has recently been much concern about the faster pace of increase in average urban earnings. But this series does not cover private firms, which are where most jobs have been created in recent years.

Now that China is such an engine of global growth, it urgently needs to improve its economic data. Only a madman would drive a juggernaut at full speed with a faulty speedometer, a cracked rear-view mirror and a misty windscreen.

The nature of guilds

In a discussion on the technical writing mailing list earlier this week, someone proposed trying to organize technical writers in some form of union or guild. Kevin McLauchlan tackled the idea of a guild head-on:

Doctors and lawyers don't often work in groups of hundreds or thousands, but their guilds regulate them (a little) and keep their clubs exclusive (sorta), and collude with government, thereby keeping membership numbers controlled and prices up. For example, [in Ontario] the medical association just graciously "permitted" a new medical school to come into existence.

The other side of that is that they've been not permitting some/many to come into existence. This, in a province and a country that is becoming desperately short of doctors. Here in the land of socialized medicine, a large (and rapidly increasing) percentage of the population does not have a family doctor, simply because there are not enough licensed doctors to go around. Instead, people use the hospital Emergency room for every medical need, or they go to walk-in clinics (where they rarely see the same doctor twice . . . but at least some records are kept . . . but they don't always go to the same clinics because. . .)

Clinics are closing, or are going on reduced operating hours because they can't find doctors to work the time-slots. Lots and lots of our doctors (including my own GP) are foreign-born and foreign-trained, but many foreign-born, foreign-trained doctors are working as taxi drivers or other occupations because they are not permitted to practice medicine in this place that is so desperately lacking doctors.

Between government (that gives them the clout to enforce) and the medical association that does the enforcing, the number of doctors is kept artificially low. The newly arrived doctors from India, Malaysia, Arab counties, Eastern Europe, etc. are not permitted to become Canadian doctors. Part of the excuse that's given is that their skills need to be harmonized with the Canadian medical standards of practice . . . but there are not enough resources to process most of the applicants. But the lack of resources lies directly at the doorstep of the /g/u/i/l/d/ Medical Association that sets the numbers of med-school seats, the number of med schools that can be accredited, the number of programs and personnel that can mentor and supervise immigrant doctors until they get up to speed.

That kind of power and impunity can exist only when you've got government in your corner, supplying the legal clout to make your /g/u/i/l/d/ association pronouncements carry the force of law. The results are kinda harsh, when the turnaround time for a change of priorities is a matter of years or decades.

So, STC (or some other techwriter guild) would need to get government on-side in order to set quotas and price guidelines that could be enforced on the hundreds of thousands of companies that employ us in onesies, twosies, and small groups. They'd also need to enforce requirements for our services. Unlike engineers, we provide services that can be dispensed with, or that can be offloaded to non-professional, non-accredited techwriters . . . unless the law says that any product that is sold must be accompanied by documentation that carries the <STC?> seal of approval . . . having been created by <STC?> accredited writers. Of course, that kind of requirement would drive even more production offshore. Unlike the provision of medical services, product development and production can be done very far away from the people who eventually purchase the product.

Some ideas just won't go away

So it is with the idea of creating new states where existing ones are not meeting expectations. Katherine Mangu-Ward has more:

If Peter Thiel funds something, it's bound to be cutting-edge awesome.

He is a supporter of the Methuselah Mouse Prize, which seeks to slow, stop, and eventually reverse aging. He was a producer of the film Thank You for Smoking, based on Christopher Buckley's charmingly ambiguous novel about a pro-tobacco lobbyist. An early investor in social networking, he was involved with Linked In and was the first investor in Facebook. He's big at the Singularity Institute (reason's Ronald Bailey caught up with him at the Singularity Summit earlier this year, check out the interview in the May print edition), which ponders and pushes artificial intelligence in preparation for a Vernor Vingeian "intelligence explosion." His first success was PayPal, which he originally hoped "would grow to become an extra-governmental system of currency, something reminiscent of the world described in Neal Stephenson's novel Cryptonomicon, in which programmers use encryption to create an offshore data haven free from government control."

And last week, Thiel announced a $500,000 investment — the same amount he put into Facebook in June 2004 — in the Seasteading Institute. Seasteading, or "homesteading on the high seas," is an idea that has long attracted libertarians and others who would like to see a little more competition between forms of government. The idea is to get out into international waters and set up a floating outpost (or 12, or 1,200) from which people can come and go, experimenting with different types of legal, social, and contractual arrangements.

Micronations have been discussed before.

QotD: Biofuel warm-mongering

The biofuels debacle is global warm-mongering in a nutshell: The first victims of poseur environmentalism will always be developing countries. In order for you to put biofuel in your Prius and feel good about yourself for no reason, real actual people in faraway places have to starve to death. On April 15, the Independent, the impeccably progressive British newspaper, editorialized: "The production of biofuel is devastating huge swathes of the world's environment. So why on earth is the Government forcing us to use more of it?"

You want the short answer? Because the government made the mistake of listening to fellows like you.

Mark Steyn, "Chickenfeedhawks: Global warm-mongering", National Review Online, 2008-04-26

The Toyota Prius: the triumph of . . . marketing

The automotive chaps at The Times take a Prius out for a real-world driving test against a BMW sedan. The results weren't as clear-cut as you'd imagine:

The next day it became clear my Prius did not like motorways, at least not at 75mph into a headwind. My trip meter informed me I was now averaging about 45mpg; the Prius was not going to make it to Geneva on just one tank.

I took the precaution of buying a 10-litre can and filling it with petrol. Sure enough, the dashboard soon informed me the fuel tank was empty, the petrol engine stopped and for two surreal miles I coasted along on battery power. Only when I approached a long steep uphill stretch did I finally drift to a halt. As I filled the tank I consoled myself with my last chocolate bar.

Coasting down the mountain into Geneva my Prius averaged 99.9mpg for a full 10 minutes. It was the highlight of my journey and improved my overall average fuel economy by a full 2mpg. But it was not enough. For all my defensive driving, slippery bodywork and hybrid technology, my average fuel consumption was 48.1mpg. I’d lost to a Beemer and I was disappointed; I had never driven so slowly or carefully for so long in my life. I’m considering buying a V8 Range Rover and opening my own oil well in protest.

Lest it be said that the Prius is not intended to be used for long-distance travel, the writers arranged for a portion of the trip to be conducted in urban areas — where the Prius should shine on the fuel economy front — so that the test was more like a real-world trip than something concocted by advocates either for or against the Prius.

H/T to Mark Allums.

A (fiscal) plague on both their houses!

Steve Chapman casts a jaundiced eye over the last three presidential candidates still standing:

For some time now, the three presidential candidates have been striving to outdo each other on what Hillary Clinton calls "the commander-in-chief" test. She says that she and John McCain have passed it. McCain's response has been on the order of, "What do you mean, 'we'?" Recently, Barack Obama assembled a passel of retired generals and admirals to publicly salute him.

It's good to know they are preparing themselves for that 3 a.m. phone call. But I'm not convinced any of them is ready for the 8 a.m. call from the budget director reporting that the deficit is raging out of control. When it comes to combating the fiscal menaces we face, these three are all absent without leave.

The budget situation is already dire. In the last six years, the federal government has spent some $1.8 trillion more than it has taken in. This year, the deficit will hit an estimated $410 billion. If the economy falls into a recession, the gap will grow.

Believe it or not, these are the good old days. In the next few years, the budget will begin to show the effects of a mammoth event that has long been dreaded: the retirement of the baby boomers. Social Security and Medicare already account for one-third of federal spending, and over the next 30 years, they are expected to nearly double in cost as a share of the total economy.

Spitzer's fall may help make the case to legalize prostitution

As amusing as it has been to watch a high-flying hypocrite brought down to earth for indulging his hypocrisy, there are actually some useful ideas being aired:

I understand why Spitzer's alleged hiring of a call girl was stupid, selfish, reckless, immoral and a betrayal of his family. What I don't understand is why it was illegal.

It's not as though sex is otherwise divorced from money. If it were, hot young women would be found on the arms of poor older men as often as they are seen with rich ones. Had the New York governor wanted to buy a $4,300 bauble to seduce someone of Kristen's age and pulchritude, only his wife and his financial adviser would have objected.

It was Spitzer's effort to hide this pastime that attracted law enforcement attention. Prosecutors investigated him not because he had lipstick on his collar, but because he took steps to conceal his patronage of Emperor's Club VIP. By transferring cash to accounts controlled by fake companies, he roused suspicions of political corruption. By now, he probably wishes he had only taken a gratuity to grease a contract.

It's hard to feel excessive sympathy when a colossal hypocrite is exposed. Recently, Spitzer signed a measure increasing penalties for men caught paying for sex, who can now go to jail for as long as a year. But schadenfreude is a weak justification for laws that intrude into the bedroom.

More here.

Update, 14 March: A bit more on this same topic at Samizdata:

Recent large stories in Britain and the US keep the issue of whether prostitution should be legalised in the public eye. I think it should. The resignation this week of Eliot Spitzer, a US politician and former state prosecutor who quit after allegations about his use of prostitutes' services — despite his prosecuting them in his day job — and the recent conviction of the British murderer of five Ipswich prostitutes, convince me we should legalise it. The benefits are many:

People like Eliot Spitzer and other vicious, corrupt state officials would have fewer ways of annoying the rest of us, which is unquestionably a public good. Pimps who control prostitutes, or who attempt to do so, would have fewer opportunities to prey on such women. The spread of sexually transmitted disease would be reduced, if not eliminated because a client could shop around to find brothels that enforce hygiene checks and advertised themselves accordingly. If he caught a STD, the client could sue the brothel, just like a client can now sue a pizza joint if he or she gets food poisoning. And finally, because if an adult woman or man wants to sell sexual favours, that is their business, and no-one else's, period.

QotD: The Global Warming Creed

I believe in Gore, the Prophet All-Knowing, the Creator of the Internet, and in Global Warming, his brain-child:

Which was conceived from Global Cooling, born of his lust for power, after he suffered a stolen election and was considered dead politically.

He descended into Obesity.

The third year He rose again from the obscure, He ascended into media prominence, and sits at the right hand of Bono the Annoying, from whence he shall come to sell carbon credits to the suckers with guilty consciences.

I believe in the Mother Gaia, the holy Ecological Church, the communion of Hollywood stars, the forgiveness of consumerism, the recycling of all things, and life so miserable it seems everlasting.

Amen.

Chris Claypoole, "The Global Warming Creed", Libertarian Enterprise, 2008-03-09

QotD: Boomer Entitlement Syndrome

Susan Callaway seems to be offended when I spoke ill of the Boomers. Well get over it. Yours is the generation that has whined and begged for every free lunch that they could get from the government. Saying you weren't one of the whiners or beggars is like saying "Don't blame me, I voted for Kerry". So what. Even if you don't cash your Social Security checks every politician will still be doing all they can to win your aging votes and figuring out ways to dump the bill onto the next few generations. So what if you are voting against your generations desires, the rest of them aren't and that's the problem.

Ron Paul resonates with the young for a good reason. They are the ones who will get screwed the worst by all that Boomer pandering. They are the ones who are going to have to pick up the tab for the party and they don't like it. Unfortunately they are greatly outnumbered by their Boomer parents who instead of having kids decided to have extended childhoods of their own. Unfortunately we Gen X and Gen Y types don't get to have the same extended childhoods your Boomers got, we have to grow up and pay the bills your generation racked up.

Scott Graves, Letter to the editor, Libertarian Enterprise, 2008-03-09

T.J. Rodgers interview

Declan McCullagh interviews Cypress Semiconductor CEO T.J. Rodgers:

Why the antipathy toward McCain?

There's an article in Reason magazine about McCain. He's anti-free speech. He's a war guy. Those are about as bad as you can get from a libertarian perspective.

I got turned off by him in a personal meeting. I made a presentation to him that the government is wasting hundreds of millions of dollars in (technology-related) pork barrel spending. I showed that the pork barrel spending is not only fundamentally bad, but also harmful to the people getting the money, the semiconductor industry. When I got done with the presentation, he labeled the pork barrel spending "peanuts." He poked his finger in my chest and said that he's "going to get rid of your big fat stock options."

He's in favor of stifling free speech. He's in favor of the war. He doesn't truly care about lean government. You'd have difficulty picking between him and George W. Bush.

[. . .]

You're making libertarian points. Why aren't there more libertarians, or at least out-of-the-closet libertarians, in Silicon Valley?

First of all, I think Silicon Valley people, if you gave them the world's smallest quiz, my belief is you'd find that people in Silicon Valley are highly libertarian but they don't even know what that phrase means. It's not part of their vernacular. Silicon Valley people are highly apolitical. They're worried about their businesses, they're worried about growth, they're worried about technology. Sometimes they get involved in politics. They get involved on both sides of the fence...

If you would look at the people in Silicon Valley who identify themselves as Republicans, you'll find that they're free-market Republicans. What I think you'd find is that Silicon Valley Democrats have an economic free market base to them, and therefore look a lot like libertarians. Silicon Valley Republicans... aren't restrictive on social issues. You're not going to find any anti-gay, redneck Republicans in Silicon Valley.

Because they don't care that much about politics, they don't get beyond the nuances. But if you took the next layer of detail, you'll find that regardless of how they identified themselves, both sides are libertarian-ish in their leanings.

QotD: British terrortourists

While Britain is fast catching up to America—and leading Europe—in illiteracy, obesity, and violent crime (despite ubiquitous surveillance cameras and an ineffective ban on handguns), the Wittgenstein references in Monty Python still shape our assumptions of British cultural supremacy. But as the English social critic Theodore Dalyrymple observed in 2004, to profess an interest in high culture in today’s Britain is to be met with accusations of homosexuality.

So before President Ron Paul restores the gold standard, it should be acknowledged that the sagging dollar is providing one useful service: a long-overdue corrective to our self-image as lesser Brits. Europeans, who ranked the English as the “world’s worst tourists” in a recent Expedia poll, have long ago disabused themselves of such stereotypes. Take a look around New York, Boston, or Los Angeles, and spot the omnipresent gaggle of chavs, waddling through the Adidas shop, shouting drunken insults in local Irish pubs, converting the currency on every product within reach. England is just America writ small.

Michael C. Moynihan, "Take Them Back to Dear Old Blighty: The ugliest byproduct of the sagging dollar", Reason Online, 2008-03-06

The evolution of the hotel

Kerry Howley finds interesting things in A.K. Sandoval-Strausz's Hotel: An American History:

Hotels, he argues, were "a significant episode in the modern idea of a pluralistic, cosmopolitan society," and conservatives invested in the status quo were right to fear them. Transportation advances granted people a new mobility, and traveling Americans suddenly required social mores not predicated on years of shared community bonds.

[. . .]

Hotels were a new institutional form that upset expectations about the arrangement of daily life and alarmed defenders of domesticity. They were full of beds and liquor, associated with sex, theft, and violence. Guests interacted with no patriarch — only a relatively egalitarian ecosystem of managers, porters, and bellboys. As people began to take longer and longer hotel stays in the mid-18th century, sometimes even living in them, "an entire genre of screeds against hotel living" was born, mourning the decline of traditional gender roles in a world where cooks and maids left women hopelessly idle.

None of this did much to dampen Americans' collective zeal for travel and the institutions that would house them along the way. By the end of the 19th century, the American stranger had a new role in the social order: He was a guest.

It must be slow news season already

When stories like this one make the international media:

Freeloading hippie Mark Boyles, 28, decided to demonstrate his contempt for the modern world, materialism, and a bunch of other really terrific things by walking to Gandhi's birthplace in Porbander, India. Boyles is an acolyte of the "Freeconomy" movement, a method of living that, according to the group, "allows people to make the transition from a money based communityless (sic) society to more of a community based moneyless society." In other words, he's a middle class beggar. On the first day of his trip, according to this BBC report, he scored two free meals in the English town of Glastonbury. Hardly surprising; the town is, after all, listed as one of England's "hippie havens."

Boyles and two friends then managed, in a grubby version of Operation Overlord, to land in Pas-de-Calais, France, where the mission encountered into its first snag. According to the BBC, the wandering Freeconomist was quickly mistaken for an indigent "because he could not speak French [and] people thought he was free-loading or an asylum seeker."

QotD: Concern for the poor

I became a libertarian, politically speaking because — and I know this is going to sound sanctimonious but it is literally true — if you are really concerned about the poor people then you have to pick the system that in fact helps poor people. And the only one that has done that is democratic capitalism, period.

Ron Bailey, interviewed by Sean Higgins in "I Want to Believe?", Doublethink, 2008-02-25

Bill Buckley

William F. Buckley, Jr. died yesterday at the age of 82. Love him or hate him, he was unique in American politics. Reason's former editor Robert Poole has a farewell column posted:

I received the news of Bill Buckley's death with a great sense of loss. No, he was not a major intellectual influence on my becoming a libertarian. I have to credit Robert Heinlein and Barry Goldwater and Ayn Rand for that. But since for most of us libertarianism as an intellectual and political movement has been an offshoot of conservatism, Buckley in truth was a great enabler.

By creating National Review in 1955 as a serious, intellectually respectable conservative voice (challenging the New Deal consensus among thinking people), Buckley created space for the development of our movement. He kicked out the racists and conspiracy-mongers from conservatism and embraced Chicago and Austrian economists, introducing a new generation to Hayek, Mises, and Friedman. And thanks to the efforts of NR's Frank Meyer to promote a "fusion" between economic (free-market) conservatives and social conservatives, Buckley and National Review fostered the growth of a large enough conservative movement to nominate Goldwater for president and ultimately to elect Ronald Reagan.

There's also a PDF of Reason's 1983 interview with Buckely available for download here.

Update: Radley Balko has a few things to add:

The guy got some things wrong, but he got a lot right (in both senses of the word).

Buckley leaves an enormous legacy, but to the detriment everyone, the right left Buckley years ago. Where Buckley stood athwart the tide of history and beat it back with wit, sophistication, and argument, we today get best-selling Regnery screeds from lowest-common-denominator clowns like Ann Coulter, Dinesh D'Souza, and Glenn Beck. Where Buckley mistrusted government and aimed to slow the world down, he's been usurped on the right by the likes of William Kristol and David Brooks, men who want to use government to remake the world in their own image. Where Buckley flourished in cosmopolitan Manhattan and took delight in life's finer things, modern conservatism has grown disdainful of the marketplace of culture, commerce, and ideas abundant in urban areas (witness the last election, where many on the right weirdly smeared John Kerry as a "latte-sipper"—real Americans apparently drink Maxwell House). In fact, today's Bush/neocon-right is often contemptuous of commerce itself, sometimes calling the voluntary, unchecked exchange of goods, labor, and services—a pure free market—"ugly" and "crude."

QotD: The pitfalls of "Fairtrade" coffee

Despite Fairtrade's moral halo, there are other, more ethical forms of coffee available. Most Fairtrade coffee is roasted and packaged in Europe, principally in Belgium and Germany. That is unnecessary and retards development. Farmers working for Costa Rica's Café Britt have climbed the economic ladder not just by growing beans but by doing the processing, roasting and packaging and branding themselves.

But Café Britt is not welcome on the Fairtrade scheme. Most Café Britt farmers are self-employed small business people who own the land they farm. That is unacceptable to the ideologues at FLO International, Fairtrade's international certifiers, who will accredit farmers only if they give up their small-business status and join together into a co-operative.

There is evidence that Fairtrade is damaging quality, too. Its farmers typically sell in both Fairtrade and open markets. Because the price in the open market is solely determined by quality, they sell their better beans in that market and then dump their poorer beans into the Fairtrade market, where they are guaranteed a good price. That's worth considering next time you pop out for an espresso.

Alex Singleton, "Halo of Fairtrade casts a shadow on poverty", Telegraph.co.uk, 2008-02-24

QotD: The Boomers' Fate?

There seems to be much consternation over Ron Paul failing to win over the mainstream of the Republican Party. The answer is really quite simple, the majority of Republicans are within a few years of getting Social Security. A fiscally sound and Constitutionally honest government would have to tell those Boomers and their still living parents "Terribly sorry but you don't have a contract saying the next generations owe you a damn thing" and they bloody well know it. They may talk a good game about balanced budgets but when push comes to shove they will enslave their kids to provide for their old age.

I just wonder how long it will take for Gen X to start smothering their greedy selfish parents with pillows while they sleep. Especially when "saving" Social Security will mean our contribution will be 25% or more of our paychecks. Until the Boomers start kicking the bucket we wont get that "gimme gimme gimme" monkey off our backs.

Scott Graves, letter to the editor, Libertarian Enterprise, 2008-02-24

The essence of public health decision making

A couple of examples of the structural weaknesses inherent in allowing bureaucrats to make medical decisions:

Stationary ambulances: "Hospitals were last night accused of keeping thousands of seriously ill patients in ambulance 'holding patterns' outside accident and emergency units to meet a government pledge that all patients are treated within four hours of admission."

Some patients are more equal than others: "Officials said that allowing Mrs. Hirst and others like her to pay for extra drugs to supplement government care would violate the philosophy of the health service by giving richer patients an unfair advantage over poorer ones."

Both examples are from the British National Health Service, but they're matched by similar situations in Canada.

Paging Sisyphus! Call for Mr Sisyphus!

An interesting interview with Robert Bryce, author of Gusher of Lies: The Dangerous Delusions of "Energy Independence":

reason: How about domestic renewables as a solution to dependence on foreign oil?

Bryce: I'm not opposed to renewables. I have 3,000 watts of solar panels on the roof of my home. I understand the economics of renewables. But an incurable problem for both solar and wind is intermittency. The sun doesn't shine at night. I like to have lights and TV at night. Unless we come up with some incredibly efficient method of storing large amounts of electricity, it's not a viable source because we can't store it.

It's the same problem with wind. I consider wind the electric-sector equivalent of the ethanol hype. At a conference recently I asked a wind guy, "Without subsidies, how many projects now under way [regarding wind] would make economic sense?" He said maybe 30 percent.

reason: You sound skeptical about ethanol as well.

Bryce: The ethanol scam is the longest running robbery of taxpayers in American history. Some recent news reports, which I don't discuss in the book, include a report showing [that] corn-based ethanol releases [more] greenhouse gases than fossil fuels. That's just one indictment of the inefficiency of the whole process. It's also fiscal insanity — providing 51 cent per gallon subsides for making fuel from what's already the most subsidized crop.

In 2005 federal corn subsidies approached $9.4 billion, which is around the entire budget of the Department of Commerce, with 39,000 employees. It also takes orders of magnitude more water to make corn ethanol than [is used for] gasoline production. Given the problems in the West and Southwest with water, it's insane to think we're going to be able to produce sufficient ethanol to make a dent in gasoline use when the amount of water needed is so high.

Explanation for the kinda-obscure title of this post here.

Mergers

Grant McCracken muses over the not-likely-to-come-to-fruition MicroHoo merger, and finds that the evidence is that most mergers don't work out:

Mergers and acquisitions are fraught with difficulty and Mary was pointing out that the failure rate is sometimes as high as 60%. And this is after tough minded MBAs have examined the deal with their own particularly sophisticated, sighted, numerate version of due diligence.

When things go bad in a merger or an acquisition, the problem is sometimes not with the mechanics, not with the infrastructure of the deal. The problem is with the superstructure of the deal, the ideas, practices and cultures that must now be brought together for things to work. We are still inclined to suppose that mergers and acquisitions are straight forward, that the individuals who must now work together need merely resort to an instrumental logic to find common cause and a shared modus operandi.

But of course the truth is often otherwise. Corporations are cultural, drawing their answer to the Levittian question (what business are we in), and the Druckerian one (what customer are we for) from the vision of the founder, the history of the enterprise, the region of the country. Even the business school that supplies the C suite can make a difference here. I think it's safe to say Microsoft and Yahoo see the world differently and that a rapprochement would have been challenging.

One company that I used to work for was acquired by a similar-sized firm, and six years later the two organizations still were not working smoothly as a single entity. Most of the management from my original firm had left (in waves, rather than as a single "die-off"), and new managers were brought in, but the two firms' cultures never coalesced. When the combined firm was taken over by a third organization, almost the first thing the new owners considered doing was re-splitting the two original groups back out into separate entities again.

Government subsidies distort the market

In a post about shilling for environmentally friendly energy subsidies, Radley Balko touches on one of the biggest boondoggles of the 19th century, the building of the Union Pacific and Central Pacific railroads:

In 1862, Congress justified passing the Pacific Railroad Act as a way to forestall a secessionist movement in California during the Civil War. The government subsidized the Union Pacific and Central Pacific railroads at $16,000 per mile over an easy grade and up to $48,000 in the mountains. In addition, the government offered substantial land grants along the right-of-way. Despite these government subsidies, both companies were bankrupt in the early 1870s.

As an example of how government subsidies distort incentives, both railroad construction crews worked past each other building an extra 200 miles of parallel rail lines grades (and some parallel tracks) instead of linking up so their companies could earn more subsidy payments and land grants. The fact that government subsidies were not necessary for building a transcontinental railroad was proved when James J. Hill built the highly profitable Great Northern Railway from Minnesota to Seattle completely without them or land grants.

The UP/CP are an excellent example of how injecting government money into what should be a private endeavour will seriously distort the market, creating a huge incentive to "game the system" to maximize the unearned profits from the government, rather than by serving the public by actually running a business.

If you've read any of the histories of the Union Pacific¹, you'll very quickly discover that the company spent far more time and effort lobbying for subsidy, manoevering against potential competitors (by legislation, bribery, and political obstruction, not by actually serving their customers), and hiding the mind-boggling levels of waste, corruption, and incompetence of their day-to-day operations.

That's not to minimize the difficulties of actually building and running the railroad, which cost the lives of many men (disproportionally immigrant Irish and Chinese labourers), but the fact is that the railroad itself was a very distant second to the government largess to be diverted for private profit by the executives of the two corporations. The excesses and criminality of the various officers of the company had an even more important legacy: after the scandal broke, leaving both companies bankrupt, successive governments felt totally justified in heavily regulating all railroads, introducing economic burdens which would cripple most of them for nearly a hundred years (some of the worst regulatory burdens weren't lifted until the 1980's²).

^1. Except for the sanitized versions produced for children, which only cover the engineering achievements, not the grubby reality of the UP & CP in their early years.

^2. See the Staggers Act for information on the deregulation which belatedly allowed the revitalization of the American railroad industry.

Studies of the rail industry showed dramatic benefits for both railroads and their users from this alteration in the regulatory system. According to the Department of Transportation's Freight Management and Operations section's studies, railroad industry costs and prices were halved over a ten year period, the railroads reversed their historic loss of traffic (as measured by ton-miles) to the trucking industry, and railroad industry profits began to recover after decades of low profits and widespread railroad insolvencies.

The climate debate, all in one handy portal

Whether you're a Global Warming True Believer or an evil Climate Change Denier, you'll find lots of stuff to keep your blood pressure up at Climate Debate Daily, an aggregator of posts on both sides of the Climate Change holy war. It's run by New Zealand philosophy professor Denis Dutton (who also created the Arts & Letters Daily aggregator site).

For the record, I incline to the heretical side of that particular Jihad/Crusade/Inquisition.

New media model needed

Kevin McLauchlan had some very interesting things to say in a recent thread on copy protection (from the Techwr-L mailing list), which I reproduce here with his permission. I'm trying to encourage him to start blogging, BTW.

[. . .] what your argument fails to consider is that there was a large mainstream(ish) demand for movies, music, and other such product (including good ole text-and-pictures, otherwise known as books), in modern formats (computer and portable) that people preferred them, and that the traditional media empires were not meeting that demand. For the first few years, they weren't even aware of it.

There was really no squawk from the traditional media when the first hackers came up with the first methods of recording and presenting audio and video on computing devices, because they were doing it for their own pleasure and convenience, and that of a small circle of their geeky friends.

Much like Bill Gates ignored the internet while concentrating on his then-traditional (office and home-island users of software), the studios and publishers ignored the web and the culture that was rapidly growing it . . . and being grown by it.

When they finally did notice that there was some potential loss of revenue happening to their existing model (in which they'd prospered for decades), they reacted by whining and hollering "Don't do that!", and allowing years to slide by before introducing their own services.

When those services appeared, they were already outdated, and they annoyed people because it was profoundly obvious that their major premise was enforcement, while the minor focus (the needs and desires of customers) was given short shrift at best. That is, they have far less interest in serving their customers than in preventing rip-offs.

Let's see:
- paying customers are made to jump through hoops and are treated like dirt
- non-paying "customers" get variety, convenience, ease-of-use and responsive "providers"

I had some sympathy for producers and distributors when audio and video "piracy" meant that somebody made physical copies of tapes and DVDs and sold them for money. It was supportable that the media companies would go after the makers and sellers of such "pirate" goods. Notice that they didn't go after the consumers of such goods.

But these days, most of the copies being distributed are free. Somebody might be losing some revenue (though there are convincing arguments that it's the old formats that are losing out and the studios/distributors just didn't jump fast enough to be ready for the current formats), but nobody is directly gaining illicit revenue when another bittorrent completes. Yet notice that the industry heavyweights are going after users/consumers, now.

As for all the creative work going away if studios and 20-million-dollar-a-film actors can't get their exclusive rights enforced, not everybody thinks that's such a bad thing. Lots of craftsmen were displaced when horse-and-buggy went out of fashion. Some whined and pouted (and died broke). Some found different ways to make a living or found new industries to use their same skills (like high-end auto-makers still needed people who could work in leather and fine woods).

You might have noticed that there are increasingly high-quality "movies" being produced for YouTube distribution (among all the dreck, of course), and that's with the studio blockbusters still in theatres (and people still paying to see movies on the big screen). Lots of smart, talented people are simply bypassing the corporate model of entertainment and information, and taking their own work to the masses.

That is, the problem — too easy distribution of works in digital form — is also the solution. People who would once have been content to "distribute" their labors-of-love to just a few friends now have the ability to reach everyone on the planet who is interested, and beyond.

It's a solution from the perspective of the people who are driven to produce art and from the perspective of people who want access to art.

Have you noticed that bands and performers that are already richer than god, and who can count on selling millions of copies of their next studio-made album, are still willing and eager to take their show on the road? There are two forces making that work. One is that the performers crave a live audience. As good as it is to polish off a new CD and get paid royalties, they still feel the need to get out where real live audiences are. At the same time, "consumers" who enjoy a studio album are still prepared to shell out big bucks (often hundreds of dollars per ticket) to experience live performances.

If all the major studios and distribution labels were to close tomorrow, I'm confident that there would still be touring rock bands, and there would still be talented people in their own studios creating recordings for internet distribution. It might be a different crop of productive talented people. It might be some of the ones who are already famous and rich — those who didn't go into a big sulk about the departure of the corporate recording business.

The same would apply to film. There'd be an upsurge of live theatre, and there'd be some real gems of recorded video drama appearing among the YouTube crud. True artists and performers simply can't just stop. They are driven. Only the mostly-mercenary ones would fold up their production companies and go away. Maybe they've had their day and rightfully so.

Have you noticed that TV shows like "American Idol" and "So You Think You Can Dance" are not running out of talent? They tour the same big cities year after year, culling from the tens of thousands of people who choose to show up. Yet each year, there are more extremely gifted people among the also-rans and losers. It's not that new kids are growing up and becoming ready. The people who show up are all ages. For whatever reason, they didn't enter the contest previously. And that's just the ones who want fame and fortune (or the chance of it) via that particular route. There are tons and tons more talented artists of all kinds out there . . . I should say, out here, where we real people are. It's only the major studios and the top 2% earners among the "stars" who have a lot to lose if the world's entertainment-delivery model moves on . . . or moves back to an earlier model based on performers getting paid by the number of tickets they can sell to personal, live performances.

The same general argument applies to the written word and to other forms of art. If the concept of copyright was struck down tomorrow, some writers would stop writing. Most would keep doing what they are driven to do.

Yes, there's a shift in fortunes when there's a shift in paradigm. Some people drop out of sight. Some people adapt and continue to prosper. Some people find opportunity that wasn't there before.

There's a certain degree of success at selling MP3s, when the price is low enough. Nobody bothers to build timed expiry or number-of-playings expiry into simple recordings of songs. So people willingly pay a buck or two to download them, even though they could find free copies if they cared to look.

But the example was paying for a video download that was designed to die after 24 hours, whether it was convenient for you to view it within that time or not. That's just sick, and people have no sympathy. Theatrical and DVD releases still pay the production costs and generate profit for deserving movies. Demanding to get more than a buck or so of profit off a file that costs you nothing to serve, and using artificial methods to boost your revenue is ugly, and people shy away from it. The people who dreamed up that scheme are deliberately driving away potential customers; driving them into the open arms of the very "pirates" they vilify.

If people suddenly stop wanting the big-screen experience, then the model has finally changed, and first-run theatrical release will no longer pay the production costs of a blockbuster. Maybe the new model will no longer support $250-million dollar production costs. So be it.

It was a good ride for some people. The next wave will be a good ride for a different gang.

Maybe the new model will support only movies whose cost can be recouped by low-price, paid-for downloads, low enough in price that people will gladly pay the couple of bucks for a cupful of databits that they are going to show in their homes, on their equipment, using their electricity.

QotD: Economic Interventionism

It can even be argued that in one respect President Reagan was extremely fortunate: the problems he faced, though they had baffled liberals, were problems which gave conservatives no great intellectual difficulty. Liberals were then wont to say, indeed, that conservatives were offering simple answers to complex problems. But the problems were complex to liberals only because they insisted on misunderstanding them at a very simple level. Just as the Ptolemaic theory that the sun goes around the earth can be made to yield accurate predictions only by qualifying it with a multitude of exceptions and special cases, so the liberal belief that inflation was caused by unions and corporations seeking higher prices led to a multitude of difficulties as each intervention to hold down prices created more problems which required more interventions which in turn created more problems and so ad infinitum. And what was true for inflation also held for most areas of policy. It was the complex solutions advocated by liberals that caused the complex problems — at least as much as the other way around. No wonder liberals suffered from malaise.

John O’Sullivan, "Flashback: After Reaganism", National Review

The economics of the sex trade

An article in this week's Economist has some recent findings about the sex trade in Chicago and in Ecuador:

These studies contribute to our understanding of the suppliers of paid sex, but tell us little about their customers. The session's organiser, Taggert Brooks of the University of Wisconsin, attempted to fill this gap in knowledge. He shed light on the sex industry's demand side in his analysis† of men who attend strip clubs. He argued that habitués of strip clubs featuring nude or semi-nude dancers are in search of "near-sex" — an experience of intimacy rather than sexual release. They are aware that paid sex is on offer elsewhere, should they desire it.

Strip-club patrons are more likely to be college-educated (cue some uneasy seat shifting from conference delegates), to have had an STI, and to have altered their sexual behaviour because of AIDS, than non-patrons are. They are typically unmarried, relatively young (against the stereotype of old married men) and are characterised as "high-sensation seekers".

One of the more surprising findings was that condom use is significantly higher among prostitutes in Ecuador than in Chicago:

As in Chicago, the paid-sex market in Ecuador is tiered, with licensed brothel workers earning more per hour than unlicensed street prostitutes. These gradations might reflect different tastes: brothel workers tend to be younger, more attractive and better educated. They are also slightly less likely to have an STI. Condom use is the norm: 61% of street prostitutes surveyed used a condom in the previous three transactions. In Chicago, condoms were used in only a quarter of tricks.

Government-provided services

I've often made the case that the government is generally bad at providing services, even in the case of soi disant "natural" monopoly situations. About the only thing that governments do well is kill people . . . and even the most incompetent government can do a crackerjack job of that. This story is an example of why government-provided goods and services are a waste of time, energy and resources, compared to letting individuals and companies provide them:

A new bus-stop has been built in Lashikar Gah as part of the 'reconstruction' effort.

The report does not say whether it is a replacement for a pre-war bus-stop. Somehow I doubt it. It is very well-equipped, having its own mosque and a pharmacy, as waiting times "can be rather long".

An odd approach. In most of the world a bus-stop is a place where buses happen to stop. Of course bus-stops, like ports and railway stations all round the world provide opportunities for traders, places of worship, bars and cafes and so forth, but they seldom have them built in. Bus companies and their passengers are primarily interested in selling and buying travel. The pause at the roadside to move from foot to wheel, wheel to foot, refuel, refresh, is just procedural necessity.

Okay, you ask, what's the problem? It's a big, over-built bus station, so what is your point? This is my point:

[. . .] a government bus-stop is built to different, higher, standards. A throwaway line at the end of the report reveals just how long those waiting times are: "There are no buses yet."

So much for opening up the wine market . . .

Jacob Sullum looks at the lack of progress in opening up the domestic wine trade after the US Supreme Court decision on the topic:

In a new report, the Specialty Wine Retailers Association (SWRA) notes that liquor wholesalers have been throwing money at state legislators in a largely successful effort to maintain their government-enforced monopolies on the distribution of alcoholic beverages. Those privileges were threatened by a 2005 Supreme Court decision overturning state laws that prohibited out-of-state vintners from shipping wine directly to consumers while allowing in-state wineries to do so. The Court found that such laws violated the Commerce Clause by erecting discriminatory trade barriers. Since then the wholesalers have been urging state legislatures to comply with the ruling not by opening up their markets but by imposing uniform bans on direct shipping. According to the SWRA (whose members want the freedom to buy directly from wineries), those lobbying efforts have been accompanied by a total of $50 million in donations to state political campaigns, an amount that "dwarfs that of any other sector of the American alcohol industry as well as numerous other groups." In Texas, for example, "alcohol wholesaler political contributions were greater than the political contributions of all gambling and casino interests, retail interests, food interests and all business services . . . combined." This generosity, says the SWRA, "coincides with the enactment of alcohol wholesaler-supported policies in nearly every state that protect the wholesaler."

Yet another proof of the dangers of regulation to a free market. Adam Smith wasn't thinking of the wine trade when he wrote "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." People of the same trade are even more effective in this sort of conspiracy when they can get the government to do their dirty work for them.

Why mandating higher MPG sooner won't work

Shikha Dalmia explains why mandating higher miles-per-gallon on car makers isn't the panacea everyone seems to assume:

This is an impossible task. The federal standards will be tough enough for automakers to deliver without compromising on space, safety, power and (above all) low prices — all things that consumers value more than gas mileage. There is simply no technology now available that can combine everything that consumers want with the stipulated gas mileage. If there was, automakers wouldn't need a mandate — they'd run, not walk, to put it on the market.

But why are California's goals so much tougher, even though the federal rules allow just four more years to another 1.2 mpg? Because cars have a long production cycle — models now in the planning stage won't be available until 2014.

So there's simply no time to come up with new designs that will do the job. That means the only way automakers could comply with California's deadline is by withholding from consumers the higher-emission vehicles they want in states that insist on it.

In other words, they'd have to pull the vast majority of their vehicles from those markets, not only SUVs and light trucks, but even most sedans.

Consider Toyota, the darling of the greens: It now makes maybe two vehicles — manual-transmission Yaris and hybrid Prius — that meet California's standards. Toyota's Camry, the top-selling car in America, gets only 25 mpg in combined city and highway driving.

Indeed, the net effect of the California standard would be to impose either small compacts or hybrids on all new-car buyers — even though hybrids costs $3,000 to $5,000 more than their non-hybridized versions and have a much shorter lifespan.

QotD: Economics, government style

This is terrific logic. Americans should be bothered with useless, unsolicited junk mail so that the USPS can continue to pay otherwise unneeded postal workers to deliver it. Makes sense to me.

I thus propose a federal "Agency for Digging Holes in Americans' Front Yards." Then, because of the holes-in-people's-front-yards problem that will inevitably result, I propose a second "Agency for Filling In Yard Holes."

These two agencies will create thousands of new federal jobs. And as we all know, new jobs are good for the economy.

Radley Balko, "Public Choice in Action", Hit and Run, 2008-01-06

QotD: The tone of the campaign

It strikes me as a little-remarked phenomenon in this election that, for the first time since maybe 1988, the Democrats are running a serious candidate with an essentially Naderite worldview on the evils of Corporate Greed. I haven't paid much attention to the Blue Team so far — the Red crack-up being so much more entertaining — but whenever I do I hear some Democrat espousing economic-policy ideas (hatin' on corporations, hi-fivin' Lou Dobbs on trade) much further to the left of Howard Dean in 2004, Bill Bradley in 2000, and Bill Clinton in the 1990s.

With the one-day Hucka-BOO-yah on the GOP side, the big winner in Iowa tonight seems to be illiberal economic populism.

Matt Welch, "Million-Dollar Haircut; Ten-Cent Head", Hit and Run, 2008-01-03

Oil prices

Megan McArdle links to a very useful chart at WSJ Online, saying:

One of the things that I was struggling to get across at a dinner a few weeks ago is how discontinuous prices on inelastic goods can be. That is, a few percentage points increase in demand against a relatively fixed supply doesn't produce a few percentage points increase in price: it can produce huge spikes. That's not intuitive; we feel as if prices and demand should grow at approximately the same rate. But people in the world have a lot of spare income they can use to bid up the price of oil; the speed with which its price is increasing is a measure of just how useful the stuff is.

Part of the problem is that most media folks are too young to personally remember the first two oil crises, so that the current situation is unique in their collective experience. They communicate that in so much of their coverage of the oil market and the political ruckus influencing it.

How not to fix a banking crisis

Jeff Taylor introduces some cold water reality to a fantasy castle-in-the-sky "fix" to the sub-prime mortgage crisis:

"It is probably in their best interest to walk away. They have no equity," Whalen says of the hapless borrowers.

The possibility of their underwater borrowers actually taking a walk terrifies the banks, however. Banks would have no choice but to write down and make real phantom losses lurking just off their books. What to do? How about pretending that the loans aren't actually bad. How do you do that? Pretend that the borrowers can pay them back. How do you do that? Pretend the teaser rate is the real rate. Presto, problem solved.

At this point, some adult would ideally step in and say, "no, that's fraud." But clearly Treasury is not that mature. And it appears the Fed has resigned itself to some form of greater idiocy coming out of Congress on the subprime front that maybe, just maybe, the teaser freezer can head off.

However, the stubborn fact remains that banks will lose money on teaser rates. Regulators and investors both know this. Who exactly are we trying to fool? Besides inattentive voters.

Of course, nobody in the highly educated, fast-paced, exciting world of banking ever noticed that lending large sums of money to people with little or no real ability to repay the principal might be a risk. Bailing them out with public funds is exactly the wrong thing to do . . . which makes it the odds-on favourite of both stricken bankers and politicians needing to be seen to be "doing something".

QotD: Fake rare wine

The extraordinary inflation of rare-wine prices — of which the Jefferson bottles are the most conspicuous example — has led in recent years to an explosion of counterfeits in the wine trade. In 2000, Italian authorities confiscated twenty thousand bottles of phony Sassicaia, a sought-after Tuscan red; Chinese counterfeiters have begun peddling fake Lafite. So-called "trophy" wines — best-of-the-century vintages of old Bordeaux — that were difficult to find at auction in the nineteen-seventies and eighties have reëmerged on the market in great numbers. Serena Sutcliffe, the head of Sotheby's international wine department, jokes that more 1945 Mouton was consumed on the fiftieth anniversary of the vintage, in 1995, than was ever produced to begin with.

Patrick Radden Keefe, "The Jefferson Bottles: How could one collector find so much rare fine wine?", The New Yorker, 2007-09-03

QotD: The economics of bioethanol

Promoters of the ethanol mandate assert that it would help the United States achieve energy independence and slow the accumulation of greenhouse gases that are driving climate change. Evaluating the scientific and economic claims being made for bioethanol can be vexing, but a few urgent questions come to mind: if bioethanol is such a good energy deal, why must refiners and consumers be forced to use it? Again, if it's such a great idea economically, why does the federal government offer a tax credit of 51 cents per gallon for blending ethanol into gasoline?

In fact, the subsidies are probably higher than that. For example, a 2006 report by the International Institute for Sustainable Development estimated that if one took into account state renewable fuel tax breaks and direct agricultural subsidies that reduce other costs, the total amount of the ethanol subsidy rises from $1.05 to $1.38 per gallon of ethanol

Ronald Bailey, "Bioethanol Boondoggle: Political viability is more important than commercial viability", Reason Online, 2007-12-04

Regulating small businesses to death

Radley Balko visits "Old Town Alexandria", which is struggling to maintain its historical look:

People who decry the Wal-Mart-ification and Gap-ificaiton of America need to realize that regulation often does more harm to local businesses than predatory pricing, loss-leader business models, or some other imagined corporate evil.

I've lived in or near Old Town for most of the last 10 years. It's not [un]common to see an independently-owned antique shop or art gallery get boarded over, only to be replaced in ensuing months by a franchise. It's not difficult to see why. Franchise operators can tap the resources of the parent company, particularly when it comes to accessing legal help with experience navigating through and working with local zoning laws and business regulations.

Local officials who simultaneously decry big box stores and national chains while doling out burdensome regulatory structures and complicated permit processes should understand that regulatory burdens hit the smaller, independent places hardest, because they're the places that have the smallest amount of discretionary cash to hire legal aid (or, if you're really cynical, to make the appropriate campaign contributions). They're on a tighter budget and, therefore, have a smaller margin of error when it comes to hassles like delaying an opening because some bureaucrat determined their signage is a couple of inches out of compliance.

There's a larger lesson in all of this, too. Those who push for federal regulations to rein in "big business" often don't realize that the biggest of big businesses don't mind heavy federal regulation at all. They have the resources to comply with them, not to mention the clout in Washington to get the regulations written in a way that most hurts upstarts and competitors.

Big businesses know that a heavy regulatory burden is the best way to make sure small- and medium-sized businesses never rise up to challenge them.

IT industry latest envirocriminals

According to a report from New Scientist, the IT industry is the latest in a long series of environmental criminal organizations, plotting the demise of Mother Gaia:

"Computers are seen as quite benign things sitting on your desk," says Trewin Restorick, director of the group. "But, for instance, in our charity we have one server. That server has same carbon footprint as your average SUV doing 15 miles to the gallon. Yet, whereas the SUV is seen as a villain from the environmental perspective, the server is not."

The report, An Inefficient Truth states that with more than 1 billion computers on the planet, the global IT sector is responsible for about 2% of human carbon dioxide emissions each year — a similar figure to the global airline industry.

The energy consumption is driven largely by vast amounts of customer and user data that are stored on the computer servers in most businesses. The rate at which data storage is growing surpasses the growth in the airline industry: in 2006, 48% more data storage capacity was sold in the UK than in 2005, while the number of plane passengers grew by 3%.

Of course, the solution is to scrap all those inefficient, Gaia-raping computers and go back to the practice of keeping all data on paper, tabulated by hand. Think of all the millions and millions of people who will be able to get jobs as office clerks, archivists, shipping/receiving clerks (to handle the vast increase in paper shipments), paper mill workers, and lumberjacks this wonderful innovation would benefit.

Let's just ignore the false correlation between air travel growth and data storage capacity growth, shall we? It's about as meaningful as comparing the rate of growth of any two radically dissimilar things.

After posting this, I might suggest the magazine change its name to New Credulist.

H/T to James Lileks.

Change your sexual orientation, get 10% off your flight

Jon, my virtual landlord, sent along this link, which shows how carefully companies need to position their discount offers.

Alaska Airlines and Horizon Air decided to offer a 10% discount to gay travellers who booked their flights through a particular page on their website (at the time this was reported, the page was titled "Gay Travel", but it had changed to "New York City on Sale" soon afterwards.

I have no problem at all with airlines or other businesses offering discounts to individuals or groups, but this is an example of how not to do it. How much does offering the discount to people based on their sexual orientation (or declared sexual orientation, which isn't quite the same thing) differ from offering a discount based on the colour of their skin? Would that not cause serious objections from government and private organizations? Could Alaska and Horizon have managed to find a way to increase their business that didn't run the risk of alienating the a significant number of their existing customer base?

Toronto council wastes money . . . in other news, water is wet

I was amazed to find this column in the Toronto Daily Worker Toronto Star today:

Toronto city councillors do seem tragically hooked on spending needlessly and foolishly — despite constantly crying poor.

The mismanagement of the Union Station file being a recent example.

The private sector wanted to fix up the place, pay the city an annual fee and make some money off the venture. That deal fell apart. GO Transit wants to buy it, but the city isn't willing to deal. So now a city-inspired fix-up plan has hit $388 million and counting — and hopelessly dependent on cash from the federal government.

Another example. Budget committee voted Wednesday to borrow $700,000 to purchase food carts so the city can then rent them out to food vendors. Why not let the vendors get their own carts? Because the city wants to control the trade, keep entrepreneurs (conglomerates, John Filion says) from cornering the market.

Why the city has created this business to compete against restaurants is another question. But let's say it's good to be selling a variety of food from the sidewalks. Why must city hall get involved in the purchase, maintenance and distribution of the carts?

If Royson James isn't careful, he'll find himself the "token right-winger" in the TorStar newsroom! He may never do lunch in this town again!

All joking aside, this is the kind of thing you very rarely find in the local media: an article that isn't demanding yet more government spending and more government control over businesses and the lives of private citizens. Huzzah, Mr. James.

It's tough to disagree with the sentiments here:

Councillors should be hanged, one a day, at noon, in Nathan Phillips Square. Charge admission. We'll net enough money to pay off most of our civic bills.

To the tumbrils with them!

QotD: Where factoids come from

Decades ago, in the days when I labo(u)red in the Central Laboratory at the bottle factory, one of my collegues was dispatched to a conference on air pollution. Upon his return, he related the contents of a paper there presented.

I don't remember the details, but recall the main thrust of it.

In those days, there were numerous claims that "air pollution costs every man, woman, and child in the United States $137.63 every year" or some such number. The paper in question addressed the source of that widely published figure.

It developed that around 1890, a Pittsburgh (The Smokey City) newspaper had printed an article which reported the cost of cleaning the exterior of each of several office buildings during the previous year.

A a year or so later, someone else totaled those figures, divided by the number of buildings reported, multiplied by the number of office buildings in the Golden Triangle and reported "Air Pollution Cost to Pittsburg Businesses".

Still later, someone took that figure, divided by the population of Pittsburgh, multiplied by the population of the Allegheny County, and published "Cost of Air Pollution for Allegheny County in 1910".

Later, someone divided that by the number of steel mills in Allegheny County, multiplied by the number of steel mills in the state and called the result "Pennsylvania's Cost of Air Pollution".

Later, someone multiplied that figure by the number of states east of the Mississippi to arrive at "Cost to Eastern United States Due to Air Pollution".

Along around 1925, someone adjusted the figure to account for inflation.

In the 1930's someone divided the 1925 figure by the population of the states east of the Mississippi to arrive at an "every man, woman, and child cost of air pollution".

Someone else compared the unadjusted pre-1925 figure to the adjusted 1925 figure, divided the difference by the population of the eastern states to obtain "Increase per capita in Cost of Air Pollution in a Single Year".

Just after WW2 (the big one), the 1930's "every man, etc.." figure was adjusted for inflation, multiplied by the population of the United States, divided by the number of states, and published as "Cost of Air Pollution to Each State".

Finally, after a few more such manipulations over the years, the then- current cost of $137.63 was published.

As noted in the beginning, that's not exactly what the paper said, but the general idea is there. Along the way it was noted that, for example, an alleged total cost for Pittsburgh in 1900 had been divided by the 1914 population of Pittsburgh to get a cost per capita, then multiplied by the 1920 population of Pennsylvania to get a total for the state, even though the population numbers changed from year to year.

The paper's conclusions were:

1) There is a cost incurred by air pollution.

2) No one knows what that cost is.

3) If it is $137.62 per capita, that's just good luck.

4) That the quoted "Cost of Air Pollution . . ." should be scrapped at once.

Robert Netzlof, posting to Yahoo Group "Railroad_Modeling_Still_Makes_Me_Grumpy", 2007-11-21

QotD: The start of the Christmas season

Why does the Christmas celebration start earlier every year? The commercial reasons are obvious; many retailers do a significant portion of their business during Christmastime, so the sooner the sleigh bells ring, the happier stores are. This year, retailers are said to be worried that gasoline and home-heating prices are poised to soar, so they hope holiday shoppers will spend before that happens. But there is a deeper reason Christmas starts earlier each year: We want to live in the Christmastime world, and this has nothing to do with religion. In the Christmastime world, children are happy, family is gathered round, and all the year's exhausting and stressful overwork has at least led to a pile of presents. Candles are lighted, and we listen for a sound in the distance. Just as our ancient ancestors must have dreamed of living always in the moment of the harvest, we want to live as long as possible in the moment of the holidays — regardless of faith, since Santa comes to everyone. Christmastime also evokes the strongest positive memories of most people's childhoods — of presents, singing, anticipation, and the adults forcing themselves to get along. The Christmas weeks are the time we believe all is right with the world, whether or not we actually go over the river and through the woods to grandmother's house. We want to enter the time of believing all is well, so every year we push up the start date.

Gregg Easterbrook, "TMQ: Cover Them!", ESPN Page 2, 2007-11-20

This nicely explains it

A post at Samizdata exactly captures my own feelings:

In recent times I have attacked the Economist for pretending to be pro free market whilst, when one reads it closely, not really being so. Articles like the one on the Australian elections mean I can no longer fairly make this charge. The Economist having now 'come out' as an openly leftist publication.

I've subscribed to The Economist for over 20 years, but I'm letting my current subscription lapse unrenewed. For the last few years, I've been less and less happy with both the editorial and news reporting aspects of the newspaper. They still pretend to support free markets, but so many of their articles in recent years have been apologies for more state involvement in the economy, more state control of private areas of endeavour, and generally more statism than laissez faire.

I'm going to miss reading it, but . . . I'm really missing The Economist of several years ago . . . not what they're currently publishing under that name.

QotD: Local food debunked

[. . .] locally grown food has its own environmental costs. Academics from New Zealand have produced evidence that it is environmentally friendly to produce dairy products, apples and lamb in New Zealand — where there is plenty of space to accommodate natural, energy-efficient methods of farming — and ship them around the world. Maybe the New Zealanders would say that, but it's not a crazy observation. Eating local can consume fossil fuels too: McKibben enjoyed berries in the winter because he froze them for months. Local tomatoes are grown in northern climes in gas-heated greenhouses. And local doesn't necessarily mean "natural": local apples can be stored for months — in storage sheds filled with nitrogen.

The local food movement would argue that local food is about more than just the environmental cost of transportation. Fair enough. But the connection between local food and some of its supposed benefits is pretty tenuous. If it's fresher food, cheery farmer's markets and decent conditions for farm workers that we want, let’s address those aims directly without this fetish for localism.

There's a twist in the tale, too. Two-thirds of the social costs of the food distribution system have nothing directly to do with the environment at all: They are attributable to accidents and congestion. More than half of those costs are caused by driving to the shops. My socially responsible advice to you, then, is not to worry about from how far away your food came, but to walk — not drive — to the supermarket.

Tim Harford, "Frequent Flier Food", Forbes, 2007-11-15

How big government influences big business

Radley Balko shows why telephone companies doing the federal government's bidding isn't necessarily the fault of big business:

You can inveigh all you like against corporate power. But corporations by themselves can't force us to do anything we don't want to do. Only the government has the power to do that — or corporations with power on loan from the government.

The federal government is enormous. It has a massive and growing influence over what happens in the private sector. Witness (as I've pointed out many times before) the fact that the richest counties in America today aren't near the country's entrepreneurial epicenters, but in the D.C. suburbs, home to most of the country's federal employees and government contractors. Now as lefties, you may find all of this to be sweet potato pie. But know that a federal government of today's size and scope also gives whoever is controlling it enormous leverage to bend the private sector to his liking. That's great when your party is holding the reins. Not so good when it isn't.

Sure, in an ideal world, all the telecos would've consulted their lawyers, realized that what the Bush administration was asking was illegal, and boldly told the White House where to stick its nosy information requests. But come on. Incentives matter. Such a move may have been principled, but it would have been foolish. Corporations are obligated to their shareholders to protect their bottom lines. Pissing off the people in power who with a swipe of the pen can swing hundreds of millions of dollars, either to you or to your competitor — well, that's just not good for the bottom line.

In a truly free economy, this obligation to shareholders is a good thing. Because in a free market, shareholder interests are generally in line with customers' interests. Piss off your customers, they take their business elsewhere, and you're shareholders are angry.

Unfortunately, in a market where the government is likely to be one of a particular industy's biggest customers, shareholder and (non-government) customer interests start to clash. You see, the telecos made a calculated decision. Billions of dollars in federal contracts over the long-term, combined with the other value they saw in in winning favor with the Bush administration and the Republicans in Congress (a favorable turn of phrase in the Federal Register, for example, can mean millions) was in their estimation more lucrative than protecting the privacy of their non-government customers in the short-term.

Shouldn't that tell you something about just how frighteningly large and influential the federal government has become? The telecos concluded it's better for their collective bottom lines to risk pissing off all of their other customers than to risk pissing off this one.

QotD: The net

What's happening here? What is it about the network that makes it so potent? Simply this: the network, in every form, is anathema to hierarchy. The network represents the other form of organization, not a contradiction of hierarchy, but, rather, a counterpoint to it. I've rewritten Gilmore's Law to reflect this:

"The net regards hierarchy as a failure, and routes around it."

For the fifty-five hundred years of human civilization, hierarchy has always had the upper hand. Now the network, amplified by all those wires and routers, is stronger than hierarchy, and battle has been joined. But this isn't going to be some full-on Armageddon, a battle between the Empire and the Alliance; this is the Death of a Thousand Cuts. The network is simply kicking the legs out from under hierarchies, everywhere they exist, for as long as they exist, until they find themselves unable to rise again. What it really come down to is this: we are assuming management of our own affairs, because we are now empowered to do so. It doesn't matter if you're a maize farmer in Kenya or a video producer in Queensland; these mob rules apply to us mob.

Mark Pesce, "Mob Rules (The Law of Fives)", hyperpeople, 2007-09-28

At least Colby agrees with me . . .

Colby Cosh finally admits to feeling similar concerns about the widespread belief in official Chinese economic figures:

Are the spectacular Chinese economic growth numbers of the post-Deng era reliable? The West has been tricked into bad policy decisions before because economists foolishly trusted Communist growth estimates. The George Mason economist Bryan Caplan has just voiced what I've been thinking since the early 1990s (which is admittedly a long time to wait for data to be falsified)

[. . .]

The two-headed creature so often talked of as "Chinanindia" (I think at this point we can just start calling it "Chindia") has taken over from Japan in our imaginations as the next "obvious" successor to the economy supremacy of the West. Japan turned out to be the wrong horse to bet on, and still hasn't fixed all of its macroeconomic issues. And it is often forgotten that even by official numbers China's economy is still much smaller than the U.S.'s and is dwarfed by the combined size of NAFTA and the EU.

Of course, I've been riding this hobby horse occasionally since 2004.

Micro microeconomics

You can tell how well an economy is performing by certain (trailing) indicators: how well low-level service jobs are performed. When the economy is doing well, these jobs are being filled by less skilled, less competent, less motivated workers. When the economy is doing poorly, these jobs are being staffed by people who are often seriously over-qualified for the work, but need the money. I've often jokingly referred to this as "Russon's Law of Economics", always in the context of suffering through terrible service at a store or restaurant.

On that basis, I'd have to say that the Ontario economy is performing far better than the official numbers indicate: service and entry level jobs are being performed as badly as I've ever seen. For example, in the office complex at work, there's a coffee shop offering the usual variety of hippy-dippy frappy latté options. It's becoming a joke between me and the manager that they can't get my own order right twice running (unless he or the assistant manager does it). I've had several unidentifiable beverages offered to me that then have to be thrown out and re-made properly. And, of course, the staff turn over at a fairly high rate (I've been going in there for three months, and over that time, only the manager and assistant manager are still there).

That's not too surprising . . . coffee shop jobs aren't the sort of thing that people aspire to as career moves. But it's not just coffee shop jobs that are showing this kind of downward drift in skill and attention. My employer has been trying to get a set of business cards printed — for months — and the printer seems to be staffed by illiterate and incompetent shaved baboons.

In this run, there are four managers who need new business cards. The information is sent to the printer electronically, and they set the cards and fax back proofs for us to examine and approve. We went through nine proofs before we could sign off on them.

Now think about this for a second . . . a business card has only a few key elements: the company name, the person's name, the title, the address, the email address, and the telephone numbers. Even if you got each of them wrong, it shouldn't take more than one more proof to fix things, right?

I can only assume, on the evidence presented in the successive proofs, that they were throwing away the draft each and every time and starting over from scratch . . . because each proof showed new and different errors!

I wasn't keeping track of the errors (because I never thought it would take so long to fix them), but the first time out, the company name was missing from three of the four cards. The next time, that error recurred, but now they'd used the same telephone number for all four cards. The time after that, still no company name on three of four, but now a different — wrong — number was used for the cell phone numbers on all the cards. And so on, and so on.

The actual printed cards finally showed up yesterday, and there's still a minor glitch on my own card, but it's close enough to correct that it's not worth the time and effort to try to get it fixed.

What's even scarier is that this is the fourth printer we've used, and (according to the person who deals with the printers) the other three were worse.

Oh, yes. The economy is doing just fine . . .

QotD: The Farm Question

Here's how the American free enterprise system works. You have an idea for a business. You find the money to start it up. You try to give customers something they want at a price low enough to keep them happy but high enough to earn a profit. Either your plan works, allowing you to make a living, or it doesn't, indicating you should find a different line of work.

Unless, of course, you are a farmer, in which case all this may sound unfamiliar. A lot of American agriculture operates in an environment where none of the usual rules apply — where the important thing is not catering to the consumer, but tapping the Treasury. It's a sector that, ever since the Great Depression, has been a ward of the government, both coddled and controlled.

By any reasonable standard, federal agriculture policy is past due for a major overhaul. But judging from the latest farm legislation moving through Congress, not much is going to change.

Back in the 1930s, when the economy was a wreck, the survival of capitalism was in doubt and Oklahoma was blowing away, you could understand the impulse for Washington to intervene on behalf of farmers. But the days when agriculture meant a lifetime of toil for a meager living are just a memory. Today, farmers monitor soil conditions by computer, drive air-conditioned tractors and have a higher average income than nonfarmers.

Yet many of them continue to enjoy treatment other industries can only dream about. Imagine the government rigging the market to assure high prices to people selling concrete or cameras. Dairy farmers and sugar growers get exactly that, courtesy of the Department of Agriculture. Farmers who plant a host of other crops receive compensation anytime their prices fall below a fixed minimum.

Steve Chapman, "Take the Federal Out of Farming", Reason Online, 2007-10-25

Sushi: 19th century McDonald's equivalent

Katherine Mangu-Ward reveals the dirty secret behind sushi:

For traditionalists in 19th-century Japan, a new sushi place was a sign the neighborhood was going to hell. In 1852 one writer grumped about the proliferation of sushi stalls in booming industrial Tokyo. The McDonald's of their day, the stalls offered hungry factory workers a quick, cheap meal of fish and sweetened, vinegared rice. If the fish wasn't top of the line, well, a splash of soy sauce and a dab of spicy wasabi perked up a serving of fish gizzards nicely, with some antimicrobial benefits to boot.

Today that writer's spiritual descendants dwell on food chat boards like Chowhound, where calling a new Japanese place "inauthentic" or deriding it as "strip mall" or "food court" quality is the kiss of death. When we think of high-end, "authentic" sushi today, we envision rich, fatty slices of smooth tuna and creamy salmon arranged on a pristine plate — the height of elegant Japanese cuisine. But sushi wasn't always elegant, and salmon and tuna are relatively recent additions to the menu. In that sense, sushi's appearance in food courts worldwide is more a return to the dish's common roots than a betrayal of authenticity. Sushi has always been in flux, with new ingredients and techniques added as convenience demanded. Globalization has sped up that process exponentially, bringing novelty to an old food and bringing traditional food to new places. The story of sushi is the story of globalization writ small — very small, on tiny slivers of raw fish.

Sad, but not surprising

I thought it'd been a long time since I received a catalog from Laissez Faire Books . . . they're shutting down operations:

The catalog has for decades been the best way to keep up on the thankfully ever-growing flood of books of interest to libertarians. While in an Amazon and abebooks age, the need for one special place to go to to obtain sometimes obscure books may be smaller, LFB and its catalog editors' ability (special hat tip to libertarian legend Roy Childs, who edited the catalog in the late '80s and early '90s and read and understood more libertariana than any random 20 ordinary libertarians) find and compile in one place and intelligently review and contextualize,books for the libertarian community will be sorely missed.

As one of the comments said (I hope tongue-in-cheek): "SamB: Goddam big business book sellers running out these small mom and pop laissez faire book stores! The government should do something about this!"

QotD: Prices

Price is the single most important item of information that's necessary for individuals to act effectively within that part of our civilization we call the market. Price tells every market participant what to offer, how much of it to offer, and at what level of quality. Yet orthodox Marxism forbids the very activities that generate that all-important information.

The idea, of course, is that the benevolent State should establish "fair" prices, so the lovely Proletariat won't get screwed by evil capitalist pigs. But no single individual or institution can establish price (although that never keeps them from trying), it is established by facts of objective reality, playing against an aggregate of all the economic decisions each of us makes every day, practically every hour, in the process of living and working, buying and selling, bidding in the market for what we need or want, accepting bids on what we make or do.

This doesn't require any sort of formal auction process. If, for instance, something about the idea of high-quality gourmet earthworms in marinara sauce is unappealing, people simply won't buy them — no matter how little you charge — the message conveyed by price is that you should stop making the stuff and leave the poor little earthworms alone.

L. Neil Smith, "The End", Libertarian Enterprise, 2007-10-14

"This is my railroad"

One of the most interesting railroad promotional films ever made: This Is My Railroad, Part 1 and Part2. It's portentious, hokey, and triumphal, yet tells more about both the Southern Pacific and the regions it served than anything I've ever seen. If you want to know why the 1940's and 50's were the golden age of railroads, this film will give you a bunch of clues.

One of thousands of public domain short films now available from the Prelinger collection at the National Archive.

H/T to Jeff Scarbrough.