Capital Freedom

Perception Management

2009-12-25T20:16:00.003-05:00

Hope and change, hope and change ...

It seems that this was the message we heard last year, and we certainly were hoping for change after years of fiscal irresponsibility.

During the last year of the Bush administration, the budget deficit increased by about $450 billion. In the last year of Obama's presidency, it has increased by $1.8 TRILLION, or four times as much. What happened to fiscal responsibility? What happened to "not adding a single dollar to the deficit," as Obama promised just a couple months ago? Yet it seems that the public perception has been so well managed that people still believe that fiscal responsibility is on its way.

So how much is $1.8 trillion anyway? Given approximately 300 million people in the United States today, this is $6000 in debt for every man, woman and child. That's an additional $30,000 in debt for a family of five this year alone. And that number does not include interest and does not apply to the taxes that have already been paid.

So where is fiscal responsibility? Seems like the adage "if you tell a lie long enough, people will believe it" is true. Sorry, Virginia, but Santa Claus does not live in a white house in Washington, D.C.

An Apple a Day Keeps Government Health Care Away

2009-09-30T12:26:00.005-04:00

It has been a while since I've posted, but I was compelled to provide insight into the "Public Option" also affectionately known as HR 3200. The full text of the bill can be found here.

I am still in the process of reading the bill, as it is 1,017 pages long.

Here's the introduction, as stated in the bill itself:

(1) IN GENERAL- The purpose of this division is to provide affordable, quality health care for all Americans and reduce the growth in health care spending.

(2) BUILDING ON CURRENT SYSTEM- This division achieves this purpose by building on what works in today’s health care system, while repairing the aspects that are broken.Comments Close Comments Permalink

(3) INSURANCE REFORMS- This division--Comments Close Comments Permalink

(A) enacts strong insurance market reforms;
(B) creates a new Health Insurance Exchange, with a public health insurance option alongside private plans;
(C) includes sliding scale affordability credits; and
(D) initiates shared responsibility among workers, employers, and the government;ts Close Comments Permalink

Comments Close Comments Permalink

Comments Close Comments Permalink

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so that all Americans have coverage of essential health benefits.Comments Close Comments Permalink

(4) HEALTH DELIVERY REFORM- This division institutes health delivery system reforms both to increase quality and to reduce growth in health spending so that health care becomes more affordable for businesses, families, and government.

The first thing I notice is that the general purpose is for government to "provide" health care. But that's not all -- it aims to reduce the growth in health care spending as well. After that, I expected the next sentence to mandate that gravity stop weighing Americans down.

What is wrong with the current system? As far as I can tell, the only issue that people are addressing is that the cost of medical procedures and visits to the doctor is often higher than what they would like to pay. Certainly no one *wants* to go to the doctor or *wants* to have surgery, let alone pay for it.

So what is the alternative? We know from economics 101 that if we control costs through regulation -- let's say we mandate that health care is free -- that suddenly demand rises and instead of allocating health care to those who value it most, we have to use other methods of allocation, such as first-come, first-serve, lotteries, relying on connections, etc. Health care, while it may become "cheap" becomes more scarce because it can't keep up with demand. I know what many of you are thinking, "People don't particularly enjoy going to the doctor -- how is demand going to increase?" Here's one way. Suppose that I have to bear the full costs of my decisions, good and bad, and I am contemplating taking up smoking, excessive drinking, and eating copious amounts of grease-laden food. I may think twice about engaging in unhealthy behavior if I know that I will have to bear the cost of medical procedures that become necessary as a result. However, if I know that the cost is a "shared responsibility" as it states in the introduction to HR 3200, I am more likely to engage in unhealthy behaviors now because the future cost is lower.

As I've said in previous posts, the extra few ounces of prevention that we take when we bear the full cost of our actions make a big difference. Knowing that a doctor's visit will cost me at least provides some motivation to ensure that I wash my hands thoroughly, that I put bandages on cuts, that I get adequate sleep, that I eat a balanced diet.

But what happens to that "ounce of prevention" when you institute "free" health care? Suppose that apples cost $1 and doctors cost $0. Following the "an apple a day keeps the doctor away" saying really isn't compelling when doctors are cheaper than apples, is it?

Bailouts & Bonuses

2009-03-18T14:00:00.001-04:00

It is widely recognized that bonuses are not a guaranteed supplement to a salary. They are typically given out of a company's profits, and when those profits are not there, bonuses are often withheld until the company is in a better position to award them. This is a function of a long-term plan that most companies operate under in a free market. However, when you institute a plethora of regulations, loopholes, and "free" taxpayer money, you have just warped this basic incentive towards long-term success. If I know that in spite of poor performance, I will receive large sums of money, am I likely to work harder and conserve that money towards promoting a stronger business model? Or am I more likely to spend that money now because I know that more will soon be on the way once the first round of funding runs out?

Instinctively, we react negatively when we hear about how our money is being given to AIG and doled out in large sums to executives. We are paying to run a company whose business model we disagree with! That is not fair! Of course, we blame the evil executives and call them greedy. But we forget that Congress and government intervention are fueling this greed. People are far more greedy when they are not spending their own money. We naturally agree with the free market, which gives us the incentive to forego short-term gain (and long-term losses) in favor of slow but steady long-term gains. The free market is just and fair, rewarding good decisions and punishing bad ones. The free market forces companies to make better decisions and spend wisely because otherwise they risk losing their incomes if they fail. Are the executives at AIG greedy? Sure! But we should not forget that it is the free market that reins in their greed and forces them to work for their bonuses, at least in the long-term. When we introduce government into the equation, we change the natural course of the market and give companies like AIG a free pass to do business with a short-term mentality rather than a long-term strategy. This is exactly what we are seeing now. AIG has not turned around in the last few months even with billions of dollars being handed over! What becomes the solution? If you ask Congress, they say that AIG just needs more money, or more conditions on how the next round of money should be spent.

What we seem to forget is that keeping the AIG name alive, does not mean that we are keeping AIG from failing. AIG has already failed. Any money that has been lost is already gone. We can either continue putting money into the bonfire in hopes of getting it back, or we can finally stop fueling the fire and let it slowly burn out.

No Health Care for You!

2009-02-10T15:57:00.002-05:00

We should have known that a bill that gets pushed through late on Friday nights and referred to with the word "emergency" is probably the kind that would need even more scrutiny than most. Fortunately, Betsy McCaughey with Bloomberg has brought to light some provisions that may be harmful to your health, noting that these are the handiwork of Tom Daschle, who, prior to being exposed for owing $140,000 in back taxes, was Obama's choice for Health and Human Services Secretary. Amidst the spending in the stimulus bill are provisions for health rules that will affect everyone in the United States. In it, McCaughey writes, the Office of the National Coordinator of Health Information Technology is given the power to "monitor [your] treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective."

McCaughey found that the provisions in the bill are nearly identical to those in Daschle's book, Critical: What We Can Do About the Health-Care Crisis. Daschle's book promotes setting up an appointed government agency to overrule the decisions you and your doctor make and "calls it the Federal Coordinating Council for Comparative Effectiveness Research (190-192). The goal, Daschle’s book explained, is to slow the development and use of new medications and technologies because they are driving up costs. He praises Europeans for being more willing to accept 'hopeless diagnoses' and 'forgo experimental treatments...'"

Wait a minute ... "slow the development and use of new medications?" Isn't that what the FDA already does with it's testing processes that take 8-10+ years and billions of dollars for new drugs to enter the market? And, while we're talking about a "stimulus" bill, isn't this exactly the opposite of what a stimulus is supposed to do?

And what are these "hopeless diagnoses" that Daschle speaks of? What about breast cancer that has spread and requires expensive treatments? What about AIDS for which there is no cure -- are "experimental treatments" that could save people's lives, or at minimum make their last days more bearable, now a thing of the past? What about cerebral palsy? Lou Gehrig's disease? Alzheimer's? What about rare diseases that doctors know little about?

Do we really want a bureaucrat sitting behind a desk examining our medical history and deciding how our physician is allowed to treat us? Is there any stranger to whom we would give control over our bodies and health? We would be reluctant to give that sort of carte blanche to anyone outside of our immediate families -- if that! Ironically, I doubt if the decisions by this appointed government agency will be made with as much expediency as the stimulus plan that establishes it. How long do you think your medical record is going to sit on someone's desk while you wait for a decision on whether you can get medical care or not?

During his term as Senator of Illinois, President Obama stated that he rejected the Born Alive Infant Protection Act of 2002 that would require a second physician to be present during abortion procedures to administer care if an infant were born alive, because, it was "designed simply to burden the original decision ..." If "burdening the decision" is a terrible thing, Mr. Obama, how can you reconcile this position with the creation of an entire government organization, costing more in your stimulus plan than the Army, Navy, Marines and Air Force combined, that is designed for the sole purpose of burdening the decisions between doctor and patient?

What Crisis?

2009-02-09T11:41:00.003-05:00

Hearing words like "crisis" and "catastrophic" used to describe today's current pre-"stimulus" economic climate has me wondering: how bad is it really? Is the average American going through foreclosure? No. Are the millions of renters worried about house prices dropping? No. Am I personally suffering right now? No. Am I unable to get health care? No. As a matter of fact, I would bet that most of us are faring pretty well, even if our stocks aren't looking as good as they were a few months ago.

But, you say, what about the people who are losing their homes (by which, I assume you mean the few who actually are losing their primary residences, not the ones who are deliberately walking away from their second, third, fourth, fifth investment homes)? Foreclosure is not a new phenomenon. In normal markets, there are foreclosures. In fact, most of the delinquent loans reinstate under more favorable terms, usually by extending the loan term to reduce the monthly payment, or forgiving a portion of the principal. Banks have an incentive to restructure their clients' loans because banks do not want to lose their revenue and right now they certainly do not want to be in the real estate business. This was not the case during the housing bubble. From 2004 - 2006 in particular, banks were all too happy to enter the real estate business because they could turn around and sell the house for a profit.

But, what about people who have lost their jobs? At 7.2%, unemployment today is still low by historic standards. Unemployment right now also does not represent an across-the-board decline in jobs. Rather, it represents a transition from one sector to another. People who used to be in the mortgage and banking industries are moving to other sectors. This process takes time and there is some, temporary unemployment. People are not unemployed because there is no work for them to do; they are unemployed because in their previous role, they were not able to bring as much value as they cost.

What about people who have lost money in the stock market? This is a complicated issue, as stock prices reflect expectations of higher taxes to pay for national health care programs, bailouts, stimulus packages, higher corporate tax rates in general, increased capital gains taxes on stockholders, etc. All of these cause stock prices to go down. Is the solution then to raise government spending, thereby raising future taxes and inflation, which will cause stock prices to further plummet? When faced with higher capital gains taxes, people opt to either sell their stock now before the tax hikes go into effect, or they abstain from entering the market. Either way, demand drops and as we know from Economics 101, this means prices fall too.

More spending on socialized health care, government bailouts of companies that made bad decisions, and $800,000,000,000 quick-spend plans is not "the price we have to pay" to "get us out of a catastrophe." The expectation of increased spending and higher taxes under the new administration is what led to many of the declines in the stock market, caused companies to have difficulty increasing capital to retain employees, and is causing more economic woes than are warranted. Instead of proving these expectations to be correct, let's turn the course around by allowing consumers and businesses to tell the government to take a back seat and see how capable we are of deciding where our money goes without their so-called help.

Inflation and Growth Are Not Synonymous

2009-02-07T21:56:00.003-05:00

People often cite the monetary contraction that occurred around the beginning of the Great Depression as a reason to adopt Keynesian ideas that state spending and creating inflation by increasing the money supply are appropriate ways of increasing aggregate demand and spurring growth. In the five-year period from 1929 to 1933, the money supply dropped by one third. The effect is that each remaining dollar is more valuable in proportion to the amount that the money supply has declined. This causes the dollar to rise in value relative to other currencies, and is preferable when the country is an importer of foreign goods because, for fewer dollars, it is able to obtain more goods and services from overseas.

One would expect that imports in this time period would have risen dramatically; however, this was not the case. Instead, due to the high tariffs that were imposed at the same time -- most notably, the Smoot-Hawley tariff of 1930 which raised import taxes to unprecedented levels -- imports declined by 66% from 1929 to 1933, despite the contraction of the money supply which would have otherwise had the opposite effect on imports. In retaliation for the strict protectionist policies of the 1930s, other foreign trade partners imposed restrictions and raised tariffs on U.S. products, further crippling industries in the U.S.

The fact that a monetary contraction coupled with the most protectionist policies of the time were contributors to a depression should not lend credence to the idea that printing more money to spend is an effective method for increasing productivity. Assuming the same protectionist tariffs were in existence today and that the U.S. were an importer of many foreign goods, inflationary policies would magnify the decline in imports by decreasing the value of the dollar on the world markets and would spark more retaliatory policies from our trading partners and further economic declines.

Finance 101

2009-02-07T15:02:00.006-05:00

Politicians are constantly prescribing new programs to cure all of our financial woes and make everyone richer, healthier, thinner, smarter, happier and nicer. Now, if politicians were producing things of value with their own labor and money, they would be helping the economy. Instead, they take your money and your employer's, friends', neighbors' and family's and future generations'. When that isn't enough to pay for their expensive tastes in government programs, they just print more and make all of your dollars worth less. As overly simplistic as this explanation sounds, these are their only two options.

Somehow, politicians seem to believe that Americans will buy into (no pun intended) the idea that increased government spending is the cure. Undoubtedly, these Americans are the same ones who believe that they can pay off their debt by getting a new credit card. We can see on an individual level that people maximize their long-term wealth by spending on necessary things and investing what they can so that they are able to consume more in the future. When we face tough times, we spend less and we spend intelligently. The federal government would do well to follow the same sound financial strategy.

The Administration Has Begun...

2009-01-30T18:54:00.002-05:00

Many Americans were very excited about the election of Barack Obama, believing he would bring change. And change is here.

Remember the "expensive" war in Iraq? Expensive it was, but nowhere near as expensive as the new "stimulus." Projections for how much the war in Iraq would cost in 2009 if it were to continue at its current rate were $136 billion. But President Obama's administration has made this number negligible, coming in with an Emergency Stimulus plan at nearly a trillion dollars. $1 trillion sounds like a big number, but just how big is it? $1 trillion is approximately the amount of individual income taxes that the government collects in a year ($1.0237 trillion in 2006, to be exact). That's right, for the amount of this "stimulus," Americans could have an income tax free year. Think about how much more everyone could do to stimulate the economy if they were allowed to keep their earnings instead of seeing it redistributed to those who are less productive than themselves.

This leads to the real reason why "stimulus" plans are not only misguided, but counterproductive. Anyone who has had a job knows that if you are known to be unproductive, if you don't show up to work, and if you don't carry your weight, your company does not offer you more money -- it (eventually) will fire you. The company offers its money to those people who were productive and helped the company succeed, so that it can continue to succeed in the future. This is the opposite of what these so-called stimulus plans do. They promote redistribution programs, which take money from those who were productive and give it to those who are not. But look at what great items are on the ticket... $600 million for the federal government to buy new cars, $650 million for DTV conversion coupons, and even $200 million towards planting grass on the National Mall.

Yet, the sentiment seems to be that economists nationwide are in full support of the need for the government to "jumpstart the economy" as though it is a car whose battery has died and there's some external force capable of making it run. President Obama seems to believe, "There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy." The CATO Institute issued an article disputing this, signed by hundreds of economists. Among them were Nobel Laureates and respected college professors, but this is still by no means an inclusive list. These economists say, "With all due respect, Mr. President, that is not true." Government does not make the economy run. Economics is the interaction of billions of individuals who, in pursuing their own living, make the lives of others better. It is not taxes or government spending that spur new invention, new medicines, and new technologies. It is the promise of profit that drives people to devote themselves to countless hours of research and education. It is profit that causes even the most selfish people to concern themselves with the needs of others, and to meet those needs. Government ignores this true driver of growth and prosperity, and arrogantly presumes that our money is its money to throw away.

The Return of Capital Freedom

2008-03-15T11:47:00.002-04:00

Since April 2006, nearly two years ago when I last posted, many changes have occurred ... and many things have stayed the same ...

A brief (and by no means all-inclusive) list:

In the market ...

The 10-year Treasury rate was 4.84% -- today it is 3.56%
Subprime loans lost their popularity as investments -- for reasons other than default risk
The conforming loan limit increased from $417,000 to $729,750
$1.23 bought 1 Euro -- today $1.56 buys 1 Euro
12¢ bought 1 Chinese Yuan -- today 14¢ buys 1 Chinese Yuan
1 gal of regular gasoline cost $2.56 -- today 1 gal costs $3.20

Throughout the world ...

Former Pakistan Prime Minister Bhutto was assassinated after her return to Pakistan
20 million toys from China were recalled due to safety concerns
A list of "new sins" was released by the Catholic Church, including pollution and making "too much" money

In politics ...

Bids for the upcoming presidential election have been the highlight of the news
There is no "conservative" or "classical liberal" Presidential candidate

In taxes ...

The "rich" still pay most of the taxes, while a single woman earning $46k with two children pays no federal income taxes and receives around $3k Earned Income Credit
Still, no one claims the poor aren't paying their "fair share"
Taxes on gasoline average $0.47/gallon ... not to mention all of the indirect taxes associated with its production ...

In the blogging community ...

Capital Freedom has returned ...

There's No Such Thing As a Free Pretzel

2006-04-05T09:07:00.000-04:00

When someone coined the phrase, "There's no such thing as a free lunch," they could just as easily have said there's no such thing as a free bag of pretzels, soda, or pillow. These are just a few things that airlines have begun to charge separately from the ticket price.

You might react strongly, as some passengers did, and claim that those greedy airline companies are just trying to pry more money from your wallet. "Sharon Ansara, a government supervisor from El Paso, Texas, flew an American Airlines flight from Dallas to Washington Monday morning. 'We didn't even get peanuts," she said after the 2-1/2 hour flight. "They offered us a snack pack for $4. It stinks.'"

Some airlines still offer their passengers a "free" lunch. "Continental Airlines is one of the few that still offers hot meals on domestic flights. Sandy Gorie, 45, a real estate project manager, lives in Cleveland and takes Continental to Washington on Monday mornings and returns on Friday nights. 'I've been doing this since November and my Continental experience has been great,' she said."

My flight is not made significantly more enjoyable by eating "free" bags of pretzels or drinking "free" soda or juice from little plastic cups. I don't mind bringing my own snacks or drinks in my carry-on bag. I am sure others value the convenience of being served in-flight meals to some extent, as do I. But how much do they value it? Airlines seem to have found that people are more concerned about the price of the ticket than whether their bag of pretzels will cost them $1. "American spokesman Tim Wagner said that passengers have made it clear that their first priority in buying an airline ticket is price. The company offers a la carte services -- such as snack packs -- for those willing to pay for them." Airlines will be able to earn more money from those with a high willingness to pay, and less from passengers like myself, who are not willing to pay for snacks on flights.

This reasoning reminds me of Landsburg's explanation of why popcorn at movie theatres is so expensive. Here's a brief summary: "Most people think that it's so expensive because the movie theater has a monopoly over concessions. Since you can't buy popcorn anywhere else, the theater owner has you over a barrel. But this view assumes that moviegoers decide to see movies without considering how much it's going to cost to buy popcorn or a soda. Are moviegoers so shortsighted as to carefully consider the price of admittance to a theater but not the price of concessions? No, say economists who have studied this issue. Moviegoers are well aware that popcorn is overpriced. But the price remains high because theater owners have learned that exorbitant prices enable them to reap big profits from moviegoers who care little about cost, while still collecting ticket fees from those who are concerned about the cost."

After reading about American Airlines and Continental, I did some research and looked up flights departing from Dallas, TX and arriving in Washington-Dulles International Airport, similar to the flight where Sharon Ansara, the government supervisor from El Paso, complained snack packs cost $4. American Airlines costs approximately $379 for a non-stop flight (about 2.5 hours total flight time) and no "free" snack. Continental Airlines, which would have offered her a hot meal, costs approximately $374 for a flight with 1 stop (about 5 hours total time). While Sharon might have received her "free" food, she would have had to pay with two hours of her time with only a $5 discount. Although I'm not sure what a government supervisor does or how much a government supervisor earns, two and a half hours of Sharon Ansara's time is probably worth more to her than $5 and a hot meal.

Dining with Lobbyists

2006-03-30T09:55:00.000-05:00

Politicians have the unique ability to steal money from some people and give it to others. Regular people like myself don't. I've never been asked to disclose my dealings with lobbyists. It should be no surprise to anyone that a lobbyist has never invited me to dinner. Lobbyists have never given me thousands of dollars or expensive gifts. In fact, it shouldn't even surprise you that lobbyists have never given me as much as a dollar.

Politicians are approached by lobbyists constantly. Politicians can get lobbyists what they want.

Yet in recent news, politicians are trying to pass laws that limit their relationship with lobbying groups: "The Senate lobbying bill bans accepting meals from lobbyists, require lobbyists to make quarterly reports of their contacts with lawmakers, and force lawmakers to wait two years before accepting jobs lobbying Congress, up from the current one-year moratorium."

Regarding the new bill, "Sen. Susan Collins, R-Maine, said this increased openness would 'make a big difference' in enhancing public confidence. 'We cannot tackle the big issues facing our country if the public does not trust us to act in the public interest,' said Collins, chairman of the Homeland Security and Governmental Affairs Committee."

The public just might be able to trust politicians to act in the 'public interest' if politicians renounced their ability to make some people better off at the expense of others, not by passing finance reform measures, disclosing lobbyist ties, or creating new ethics committees. Congress is certainly willing to create a few regulations here and there and give up a few of the perks of the job in order to retain this, their most important ability.

Indoctrination Education

2006-03-07T23:40:00.000-05:00

High school teachers in New Jersey and Colorado have used public classrooms as a forum for expressing their political views. Those who agree with their viewpoints applaud their teaching and those who disagree state that a classroom is not the proper forum to express political opinions.

The New Jersey high school teacher, Joseph Kyle, decided to hold a war crimes trial in which President Bush was the defendant. John Gibson, a Fox News commentator, noted that such a trial assumes that war crimes have been committed and that President Bush is a likely suspect. Meanwhile, Kyle had the support of local school officials and the school principal, who believed that there was nothing improper about the mock trial.

Many of Kyle's supporters think his idea for a mock trial of Bush for war crimes is ingenius, although I might note that it is certainly not original. Aljazeera had already reported about a mock trial of President Bush and British Prime Minister Tony Blair for war crimes back in January of this year, stating that "International activists and lawyers involved in the defence of Saddam Hussein say they will hold a mock trial of George Bush, the US president, and the British and Israeli prime ministers for alleged war crimes committed in Iraq and the Palestinian territories."

The debate has focused on whether the teacher's actions are appropriate in the public classroom setting. This is certainly the wrong focus. Can we ever expect unanimity on what topics should be approached, how subjects should be taught, or how rules should be enforced? Any reasonable person would have to admit that short of teaching absolutely nothing at all, such unanimity is unattainable. Regardless of which side is taught, parents and students will scream 'indoctrination!' This is why parents should be free to choose the type of education that is suitable for their children. This is why the costs of education should be borne solely by those who choose it, so that they can rank their preferences in order of importance and pay for the quality and kind of education they deem appropriate. Trying to create a one-size-fits-all public education system inevitably becomes a struggle to provide an education that no one absolutely hates, rather than an education that people truly love. In the end, we've created a public school system that fits no one.

Reinventing Katrina

2006-03-01T22:33:00.000-05:00

Just what did they know and when did they know it? That seems to be the never ending question posed by the media in regard to Hurricane Katrina. Until now. The Associated Press obtained a video containing a briefing of the president on the day before Hurricane Katrina struck. In it, the president assured all that "We are fully prepared."

But the federal government does not prevent hurricanes. Nor can it assure us that everyone is "fully prepared." All government can do is take money from those who chose not to live in hurricane-prone areas and give it to those who did.

But in the news media's quest for a good story, they've ignored such realities.

Preferring to believe that government is God, the media has characterized its response as that of an emperor fiddling while New Orleans drowned. They write about Bush "at his vacation ranch in Texas" and a "relaxed Chertoff, sporting a polo shirt." This month's issue of Popular Mechanics has a great article entitled "Debunking Katrina Myths," in which the authors shed light on many of the exaggerations put forth by news sources. One myth is that government response was the slowest in history. However, this is not the case. "In fact, the response to Hurricane Katrina was by far the largest--and fastest-rescue effort in U.S. history, with nearly 100,000 emergency personnel arriving on the scene within three days of the storm's landfall."

Another pervading myth is that Katrina was one of the strongest hurricanes in history. This is also simply untrue, as Popular Mechanics points out, "it was in fact a large, but otherwise typical, hurricane. On the 1-to-5 Saffir-Simpson scale, Katrina was a midlevel Category 3 hurricane at landfall. Its barometric pressure was 902 millibars (mb), the sixth lowest ever recorded, but higher than Wilma (882mb) and Rita (897mb), the storms that followed it. Katrina's peak sustained wind speed at landfall 55 miles south of New Orleans was 125 mph; winds in the city barely reached hurricane strength. By contrast, when Hurricane Andrew struck the Florida coast in 1992, its sustained winds were measured at 142 mph. And meteorologists estimate that 1969's Category 5 Hurricane Camille, which followed a path close to Katrina's, packed winds as high as 200 mph."

While the Popular Mechanics article lists a few suggestions for lessons to learn from Katrina, many of which still utilize tax dollars but with an emphasis on local rather than federal response, it missed the most important lesson: Government is not God. It is this lesson that allows us to shed the belief that government knows best and can make our decisions and provide for our every need. It is this lesson that allows us to refute policymakers who claim, as Mayor Nagin did, that rebuilding New Orleans is "too important to be left to the market." It is this lesson that allows us to prosper.

Newsworthy Accidents

2006-02-22T19:16:00.000-05:00

People in the media continue to assert their "right to know," that is, someone else's obligation to inform them, every time a story that they deem newsworthy comes out. As entertaining as the jokes about Vice President Cheney's hunting accident may have been, the story simply wasn't worth harping on for days. Cheney's mishap has no broader implications.

However, other accidents do have broader implications. We don't always hear about them, and they rarely make front page news.

How many of you knew, for example, that only weeks ago a Fairfax County, VA police officer "accidentally shot and killed an optometrist outside the unarmed man's townhouse ... as an undercover detective was about to arrest him on suspicion of gambling on sports."

Of course the media did not assert it's "right to know" when the officer's name was not divulged. According to the Washington Post, "The officer, a 17-year veteran assigned to the police tactical unit, was not identified. He was placed on leave with pay while police conduct both an internal administrative investigation and a criminal investigation."

Yet this officer's mistake cost 37-year old Salvatore Culosi his life.

Perhaps the media is more forgiving of police officers, whose job is to know how to handle weapons responsibly to protect people. While I can choose the people with whom I go hunting, I have no say in whether a police officer in my county is careful when arresting unarmed individuals. While most Americans will probably never encounter Vice President Cheney, let alone go hunting with him, many of them will encounter police officers. If news sources wanted an accident to be truly outraged about, this is it. If news sources really wanted to assert their "right to know," here's where they could do it. Instead, they are happy to drop the story without publishing the outcome of the investigation and without knowing even the officer's name.

2006-02-14T00:47:00.000-05:00

If that's the case, why is she holding a sign to protest?

A photograph of a Muslim woman exercising her freedom of expression, courtesy of Yahoo news

Freedom of Speech & Religion

2006-02-13T09:41:00.000-05:00

In the United States, we have devoted the first amendment to the Constitution to protect freedom of speech, freedom of the press, and freedom of religion. We’ve limited the role of government in deciding and enforcing all moral questions. Instead, we have designated government’s role as an alliance of people and states dedicated to protecting life, liberty and property.

However, universally it seems that people continue to run to government screaming of various perceived injustices. We allow government to take on the role of the elementary school teacher, to whom we run when the other kids make fun of us or don’t share their toys or refuse to let us join them in a game of football at recess. It is not enough that we have the right to our own lives, property and freedom. We want property belonging to others. We redefine terms like “public use.” We want our speech to be unrestricted, but insist that others do not have the right to insult us. We make up terms like “hate speech” so we can ask government to regulate what others say.

After Danish cartoonists published cartoons that negatively depicted Mohammed, a prophet according to Islam, there were more cries against freedom of speech. Arguments ranged from declaring that the press is an institution to serve the public interest to declaring that the cartoons fall under the category of “hate speech” and cannot be protected. They’ve all tried claiming that the issue is not freedom of speech, per se, but an issue of fairness or some other newly invented right.

Here are some of the arguments I’ve seen:
"The Danish cartoon controversy is not about freedom of religion versus freedom of expression, as the media is framing the debate. This is about the role of the media and journalists in our society … everyone should be respected and sensitively represented by the institutions that are intended to serve the public interest." [emphasis added]

"There is a fine line between criticism and abuse. One has the right to criticise aspects of Islam, but one should not have the right to make fun of Muslims or their faith."
(Both taken from Bangladesh news sources).

“Jyllands-Posten refused to publish caricatures of Jesus in 2003 because they would “offend” its readers. Why then is its invitation to caricature Muhammad protected by free speech provisions?” asked authors Na'eem Jeenah, Charles Amjad-Ali and Salim Vally in their article entitled, "This is Not About Freedom of Speech."

Why? As the owner of the paper and printing equipment, the newspaper can decide what it wishes to publish and what it does not. Had the newspaper chosen to publish caricatures of Jesus in 2003, those would have been protected under free speech. The decision not to offend in one instance can be motivated out of one’s moral convictions or one’s desire to keep profits high.

But the main reason why is to avoid occurrences such as this one, which are common in countries that allow the government to influence what is published or said.

"Two weekly newspaper editors charged with "harming religious feelings" by reprinting offensive caricatures of the Prophet Mohammed were released on bail Sunday after a request was made by Jordan's press watchdog." according to an Israeli newspaper.

Let’s not take the wrong lesson from the Danish cartoon controversy. We have freedom of speech not because we agree with everything that is said, but because we would like to speak when others do not necessarily agree with us. We have freedom of religion not because we believe all religions are equally valid, but because we wish to worship or refrain from worship as we choose. Freedom of speech should not come with the disclaimer that “anything you say can be held against you in a court of law.”

Cost to Whom?

2006-02-08T08:43:00.000-05:00

This week, President Bush sent Congress a $2.77 trillion budget plan. CNN reported on Monday that the plan "would also make his first-term tax cuts permanent, at a cost of $1.4 trillion over 10 years, and still achieve his goal of cutting the deficit in half by 2009." (Emphasis added)

The "cost" is that some taxpayers get to keep a little bit more of their money over the next decade. It does not mean that Americans have lost $1.4 trillion by 2016. Instead, that money will have been spent on goods and services that people value. It will be invested in companies, used to generate wealth and develop new technologies. Just because the money is not in the hands of bureaucrats does not mean it has disappeared.

The real cost to taxpayers is the $2.77 trillion dollars that the government spends. Regardless of whether we see any of the benefits from government programs, we are forced to bear the cost of politicians' spending whims. There's no way to 'opt out' of these programs, even if we can fully demonstrate that we are not the recipients of the benefits the programs offer. I can't say "Mr. President, I am not going to pay for your 'No Child Left Behind' initiative. I obtain no benefit from the program. I have no children, and if someday I do, I will use my own money to educate them."

According to the article, "Democrats attacked what they said were Bush's skewed priorities. They said he was trying to impose austere budgets that will harm programs for the poor while protecting tax cuts Democrats said were going primarily to the wealthy." Certainly there are some people who are better off as a result of government programs which take money from others and distribute it (in various forms) to those who did not earn it themselves. Does this mean that Democrats have a valid claim that cutting programs that helped the poor is a costs poor people? It is no more valid than if I claim that if my parents last year gave me a $100 gift certificate and this year gave me a $75 gift certificate, it has cost me $25.

Before we start labeling costs, we'd better ask ourselves one simple question: cost to whom?

What Remedy Will the Court Prescribe?

2006-02-02T16:41:00.000-05:00

A Washington Post headline today read, "Women Sue Wal-Mart Over Morning-After Pill."

At first, one might think that women who had taken the drug had experienced complications, that the drug was ineffective, or that it conflicted with another drug they were taking at the same time. But Wal-Mart doesn't even carry the 'morning-after' pill. That's exactly why the women are suing.

According to the Post, "Backed by abortion rights groups, three Massachusetts women sued Wal-Mart on Wednesday, accusing the retail giant of violating a state regulation by failing to stock emergency contraception pills in its pharmacies. The lawsuit, filed in state court, seeks to force the company to carry the morning-after pill in its 44 Wal-Marts and four Sam Club stores in Massachusetts." The article notes that state policy requires pharmacies to stock all "commonly prescribed medicines," and that one of Wal-Mart's competitors, CVS Pharmacy, stocks the morning-after pill in all of its stores.

To be honest, I'd never thought of it before, but now I'm considering a few similar lawsuits. I went to Nordstrom before forecasts of sleet and snow came out. Knowing that my worn tires would be slippery in snow or ice, I set out to buy some emergency tires. Believe it or not, Nordstrom actually refuses to carry tires. At other department stores located at ends of malls - Sears, for example - tires are commonly held items. Perhaps the courts can also consider forcing Nordstrom to start carrying tires.

Even more recently, I stopped by a hair salon. As I perused the products in the displays, I noticed that the salon did not carry my brand of shampoo and conditioner. How unfortunate! Normally, I'd think to go to another store to find it, not to the nearest courthouse.

The promise of profit, of enjoying one's choice of career, of providing specialized and valuable services all inspire people to take on the risk of starting a business. These entrepreneurs enable people like you and me to have what we want when we want it. They're not miracle workers or public servants. They have every right to choose which services to provide, which products to sell, when to open, when to close, and the placement and number of locations to have.

I sell my services to my employer. If for some reason, I refuse to provide a service that my company demands, the company has every right to stop purchasing my services (i.e. they can fire me). However, we would not expect to grant my company the right to obtain a court order to force me to provide a service that I refuse to provide. Like the Wal-Mart shopper who can't find the products she's looking for, my company would simply take its pocketbook elsewhere.

The Business of Solving Crime

2006-01-31T17:57:00.000-05:00

Chicago's Mayor Daley has endorsed legislation to mandate that licensed Chicago businesses open more than 12 hours per day install both indoor and outdoor surveillance cameras. This, Mayor Daley believes, will lead to a reduction in crime and will help police solve crimes that occur. He said, ""Block clubs, community organizations want cameras. ... They can't walk down the street. ... Their kids have to go around a corner away from the gang-bangers. You can't walk to church. You can't get on the CTA. ... Cameras really prevent much crime. Cameras also solve a lot of crime. The terrorist attacks in London were solved by cameras. The whole incident was solved by cameras," according to the Chicago Sun-Times.

Mayor Daley is correct in saying that installation of surveillance systems serves as both a deterrent to crime and a tool in solving crimes. However, Mayor Daley is still wrong to propose legislation mandating that businesses open over 12 hours per day install cameras.

Just how many cameras are we talking about? According to Chicagoland Chamber of Commerce President Jerry Roper, 12,000 businesses are open in Chicago for more than 12 hours per day, many of them restaurants and hotels. "Some places will take a look at the cost and say, 'We'll only be open for one shift or a shift and a half. They'll take a look at their last two hours and say, 'I'm not making that much anyway. I'll just close earlier.' Employees will lose that money," Roper said.

According to the article in the Chicago Sun-Times, "[l]ast week, business leaders lined up in opposition to the mandate on grounds it could add anywhere from $5,000 to $20,000 to their costs -- even before monitoring expenses." Apparently, businesses are not buying into the idea that installing cameras will be a smart move. Perhaps they do not perceive as high a crime risk as elected officials do. Had the business owners thought that the risk of being robbed was sufficiently high, and the cost of being robbed was also high, they would have already taken precautions such as installing cameras. Instead, businesses often take less costly precautions. They may keep less cash on hand, store valuables in safes, have alarm systems for after hours, etc. For cost effective solutions to crime, I'd trust the business owners themselves over Chicago's Mayor Daley.

All's Fair in Law & Politics

2006-01-26T10:21:00.001-05:00

If you can't beat 'em, sue 'em! At least that seems to be Saddam Hussein's strategy now.

The former Iraq dictator is bringing a lawsuit against President George W. Bush and Prime Minister Tony Blair for, of all things, using weapons of mass destruction in the commission of war crimes. Hussein's lawyers say that they plan to sue in the International Criminal Court in the Hague. According to the Washington Times, Bush and Blair have been accused of "destroying Iraq" and "committing war crimes by using weapons of mass destruction and internationally-banned weapons including enriched uranium and phosphoric and cluster bombs against unarmed Iraqi civilians, notably in Baghdad, Fallujah, Ramadi, al-Kaem and Anbar ... The suit also accuses the U.S. president and British prime minister of torturing Iraqi prisoners, destroying Iraq's cultural heritage with the aim of eliminating an ancient civilization, and inciting internal strife. "

Last, but not least, we find that Hussein is not only a concerned Iraqi, but an environmentalist, also accusing Bush and Blair "of polluting Iraq's air, waters and environment." Perhaps there is some truth to the hypothesis Walter Williams put forth in his August 31, 2005 article, "What's a way for OPEC to gain more power? I have a hypothesis, for which I have no evidence, but it ought to be tested. If I were an OPEC big cheese, I'd easily conclude that I could restrict output and charge higher oil prices if somehow U.S. oil drilling were restricted. I'd see U.S. environmental groups as allies, and I would make "charitable" contributions to assist their efforts to reduce U.S. output."

According to a Yahoo news source, "Saddam also wants all Iraqis who have had relatives killed or had property damaged [to] receive at least $500,000 each." With his newly discovered strategy, perhaps Hussein still has a career in politics. Five hundred thousand dollars, especially in Iraq, is a much better deal than "middle-class tax cuts."

Separating Church & State

2006-01-23T17:10:00.000-05:00

In Italy, a complaint against the Roman Catholic Church has been filed by an atheist who claims that it has fraudulently deceived people by claiming that Jesus existed. According to CNN,

Lawyers for a small-town parish priest have been ordered to appear in court next week after the Roman Catholic cleric was accused of unlawfully asserting what many people take for granted: that Jesus Christ existed. The Rev. Enrico Righi was named in a 2002 complaint filed by Luigi Cascioli after Righi wrote in a parish bulletin that Jesus did indeed exist, and that he was born of a couple named Mary and Joseph in Bethlehem and lived in Nazareth. Cascioli, a lifelong atheist, claims that Righi violated two Italian laws by making the assertion: so-called "abuse of popular belief" in which someone fraudulently deceives people; and "impersonation" in which someone gains by attributing a false name to someone. Cascioli says that for 2,000 years the Roman Catholic Church has been deceiving people by furthering the fable that Christ existed, and says the church has been gaining financially by "impersonating" as Christ someone by the name of John of Gamala, the son of Judas from Gamala.

Here's a question: if a complaint such as this one were filed in the United States, would any court ruling inherently violate the principle of separation of church and state? Would the state's ruling serve to respect one religion over another or prohibit the free exercise thereof?

If the complaint took place in the United States, one would certainly ask how a lifelong atheist would have standing; as a lifelong atheist, who has himself claimed to be "born against Christ and God," it is not likely that he has personally been a victim of fraud by the Roman Catholic Church.

In the United States, the question of whether the Christ exists is not one for government to answer.

Elementary School Lobbyists

2006-01-17T19:03:00.000-05:00

On the agenda tomorrow for the District of Columbia Council is a public hearing to "assist the Council in selecting a fruit to be designated by an act of the Council as the official fruit of the District of Columbia."

Luckily, sixth grade students at Bowen Elementary do not have math, literature or science to study. Instead, they are researching fruits that might be appropriate as the official fruit of Washington, D.C. The story was introduced in November of 2005, when Council Chairman Linda Cropp introduced a resolution asking the elementary school students to find a suitable fruit based on its "abundance in the jurisdiction, its popularity in the jurisdiction, or for its symbolic meaning."

We might conclude that the Council has nothing better to do with its time. Au contraire - in November of last year, Council Members undertook many other tasks with taxpayers' money, including establishing the "Office of Gay, Lesbian, Bisexual and Transgender Affairs within the Executive Office of the Mayor," and establishing "standards for responsible business practices by large retailers by ensuring that they pay living wages, provide benefits, and respect free speech" through the Large Retailer Accountability Act of 2005, along with the usual tasks of making sure that you cannot park in the front lawn on private property and must use a hands-free device while driving and talking on your cell phone.

Of course, the Council Members only want to teach youngsters about the political process, as it states in the resolution: "That having school children propose an official fruit to the Council through proposed legislation will teach the children about the political process and the importance of public participation in civic life and show all our residents that all people, young and old, can get involved in politics and in their own government." After all, children should understand at a young age that all one has to do to impose his will on others is appeal to politicians to enact a law.

2006-01-13T01:28:00.000-05:00

I say we all pitch in and get them the large print version.

Photo of Sen. Charles Schumer from drudgereport.com

Roe v. Wade v. Alito?

2006-01-12T00:00:00.000-05:00

Regardless of what Samuel Alito's opinion may or may not be on abortion, democrats are grasping at straws with Alito's supposed attempts to undermine Roe v. Wade.

In particular, they cite Alito's dissent in a 1992 case in Pennsylvania, Planned Parenthood of Southeastern Pennsylvania v. Casey. At that time, Pennsylvania had a law which required that a married woman seeking an abortion notify her husband first. Note that the law clearly did not require the consent of the husband -- only notification. The law also made exceptions for women who believed that telling their husbands could threaten their safety. It hardly amounted to a threat to Roe v. Wade and did nothing to limit a woman's ability to obtain an abortion. No one on the pro-life side would have seen the law as a victory in even the most minute sense of the word.

However, former head of the NARAL Pro-Choice America, Kate Michelman, was quoted saying, "What we need to get at here is how Judge Alito could have believed that forcing women to notify their husbands before having an abortion was not an undue burden on women. That opinion treated women like little girls."

Rather than restricting the ability of a woman to abort her child, the law merely required the married woman to behave as though she was, well ... married. To ask the government to legally recognize a marriage between a specific man and woman is to ask that the man and woman be treated as a unit. Assuming that marriage is voluntary, the man and woman have both agreed to this union and the accompanying treatment under the law. There's a very simple way to avoid the responsibilities that come with marriage: don't get married.

If voting to uphold the Pennsylvania law constitutes an attempt to overturn Roe v. Wade, perhaps we should be concerned that upholding the Kelo v. New London decision constitutes an attack on a woman's right to property. Perhaps we should be more concerned that a woman's right to keep and bear arms is under attack by more than just laws requiring the woman to inform her husband of her gun collection stored in the basement (unless, of course, telling him could threaten her safety). Perhaps we should question whether a woman truly has the right to her own body, when she must not only notify but receive the consent of a doctor to obtain medicine or when the FDA decides what she is permitted to use to treat pain and illness.

If violating Constitutional rights is no longer in vogue, someone needs to inform the politicians in the confirmation hearings. Before they point the finger at Alito, a good look in the mirror might just be in order.

Lincoln, the South & the Civil War

2006-01-11T09:00:00.000-05:00

John V. Denson at lewrockwell.com wrote an informative article yesterday on the Civil War. It begins,

Most establishment historians today might as well be the Orwellian historians writing for the Ministry of Truth in George Orwell’s novel 1984, especially in relation to the War Between the States. They rarely, if ever, mention the Hampton Roads Peace Conference which occurred in February of 1865, because it brings into question most of the mythology promoted today which states that Lincoln and the North fought the war for the purpose of abolishing slavery and the South fought for the purpose of protecting it, and therefore, it was a great and noble war.

The pervasive myth that the Civil War (the War Between the States or the War of Northern Aggression) was fought over slavery bypasses any reasonable debate over the merits of a decentralized government and 'states' rights' from a overly powerful federal government. Instead, history books proclaim Lincoln as the "Great Emancipator," conveniently ignoring that the Emancipation Proclamation was purely a tactical move to win the war and only applied to states that would not renounce their intentions to secede.

Read Denson's article. It provides a historical account that you are not likely to find in your average history book.

Why Worry?

2006-01-08T19:56:00.000-05:00

The news has been providing continuous updates on Ariel Sharon, prime minister of Israel, who suffered a massive stroke. Many have expressed concerns over potential consequences of Sharon's death or inability to resume the position of prime minister.

One article references a reason why Israelis may be concerned, noting that: "Israelis from all walks of life have lamented Sharon's likely departure from the political scene because, with his larger-than life persona and warrior credentials, Sharon was widely seen as the man most capable of untangling the Israeli-Palestinian conflict."

Generally speaking, Americans are less concerned about the health of the president or other high ranking elected officials. We feel that we can worry less about who might take the place of a leader, because to some extent we trust the measures in place to check the power of our leaders. This is not the case in many other countries.

Many countries have relied heavily on their leaders to maintain stability, order, and peace. In doing so, they have sacrificed the autonomy that limited government provides. By allowing their leaders such a pivotal role, they have put all of the proverbial eggs in one basket. In the event that the leader is no longer able to rule, the people are left to wonder what will become of them. Who will provide them with stability? Who will make laws? Who will tell them the proper way to tie their shoes or which end of the egg to break?

Truly we can draw a valuable lesson from observing others worry over the fate of their leaders. Knowing that we can capably lead ourselves and ensuring that our leaders do not have the ability to destroy the work of others will allow us to worry less about who is in power, but rather worry about how much power we allow our leaders to have.

Mining for Regulations

2006-01-05T19:51:00.000-05:00

It was sad to hear of the mining accident that occurred at the beginning of this week, in which twelve miners were killed after an explosion in a West Virginia mine.

In typical reactionary fashion, many people have suggested establishing stricter safety regulations for mines. Naturally, they hope that more stringent requirements will result in fewer deaths and injuries. BBC News notes that while the U.S. has significantly fewer mining deaths than China (30/year in the U.S. compared to China with 8,000/year), the current requirements of "at least four mandatory inspections by the Mine Safety and Health Administration each year" and penalties ranging up to $60,000 per safety violation may not be enough. Claudia Cole, widow of a Kentucky coal miner who was killed last year when the roof collapsed on a mine in Harlan County, Kentucky, hopes that the tragedy will help prevent other deaths from occurring. "'[The miners are] safer than they were back in the 1930's,' Cole explains. 'But to me they're not doing everything they could. If they were, there wouldn't be these deaths.'" According to the article, Cole would like to see more safety rules come from the recent mining accident. An NPR interview cites "[t]ougher government regulation and technology improvements" as the reason why mining accidents have decreased over the past two decades. Davitt McAteer, former assistant secretary for mine safety and health at the Department of Labor, says, "Trouble is, no matter how many safety measures we introduce into the workplace, the dangers are recreated every 24 hours ... Miners have to be a lot more vigilant than other workers."

Miners understand quite well that their job is a dangerous one. They do not take these risks blindly. For their level of education, they are highly compensated due to the risky nature of the profession. If the workers truly wanted a safer job, they would settle for one that requires the same level of skill and would inevitably pay less.

As much as I dislike hearing stories of miners killed in accidents, the risk level that the miners take is not mine to decide. The amount of additional compensation for risk is not mine to take away. Safety isn't free.

We all take risks, and I would venture to say that we all take risks with our own lives if we feel the benefit exceeds the risk of an undesirable outcome. I drive a convertible sportscar. It's not the safest car in the world, but I knowingly take the risk of driving a car that would not survive a major accident. Members of my family would prefer that I drive a safer car and sacrifice the enjoyment I derive from my current vehicle. Luckily, they have not yet appealed to the government to impose safety regulations that my car would not pass. Just as miners exercise greater caution while they are at work in the mines, I exercise greater caution while driving as another way to counter the risk that my surroundings impose. Regardless of how insignificant my personal example is, the principle applies equally to other risky scenarios.

As we enter 2006, let's not start out with additional regulations, but leave important decisions to those whom they will affect.

Separating Money & Power

2006-01-02T21:34:00.000-05:00

A reader asked me an excellent question last week: What is the proper separation between private businesses and government?

It is true that businesses often influence government by lobbying for legislation in their favor. Why is government influenced at all by businesses? The answer is simple - because government has the power to grant them favors that will amount to millions of dollars.

Complaints of the intermingling of government and private companies come from both the right and left. Democrats complain of Republican administrations awarding contracts to private companies without requiring companies to bid on them (Halliburton & the George W. Bush administration), and Republicans complain of Democratic administrations allowing dishonest executives to spend the night in the White House and giving them huge subsidies (Enron's Kenneth Lay & the Clinton administration).

Both complaints miss the point. The problem is not with one administration or another (although one does not have to look far to find them). Instead, the problem is that government has gained the unconstitutional ability to pass laws that benefit some at the expense of others.

I may have directed readers to Bastiat's work previously, but it is worth rereading. 'The Law' describes what Bastiat terms "legal plunder" and suggests, "the proper purpose of law is to use the power of its collective force to stop this fatal tendency to plunder instead of to work. All the measures of the law should protect property and punish plunder. But, generally, the law is made by one man or one class of men. And since law cannot operate without the sanction and support of a dominating force, this force must be entrusted to those who make the laws. This fact, combined with the fatal tendency that exists in the heart of man to satisfy his wants with the least possible effort, explains the almost universal perversion of the law. Thus it is easy to understand how law, instead of checking injustice, becomes the invincible weapon of injustice. It is easy to understand why the law is used by the legislator to destroy in varying degrees among the rest of the people, their personal independence by slavery, their liberty by oppression, and their property by plunder. This is done for the benefit of the person who makes the law, and in proportion to the power that he holds ... God has given to men all that is necessary for them to accomplish their destinies. He has provided a social form as well as a human form. And these social organs of persons are so constituted that they will develop themselves harmoniously in the clean air of liberty. Away, then, with quacks and organizers! Away with their rings, chains, hooks, and pincers! Away with their artificial systems! Away with the whims of governmental administrators, their socialized projects, their centralization, their tariffs, their government schools, their state religions, their free credit, their bank monopolies, their regulations, their restrictions, their equalization by taxation, and their pious moralizations! And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty; for liberty is an acknowledgment of faith in God and His works."

Exporting Crime?

2005-12-28T09:13:00.000-05:00

Officials in Canada are blaming the United States for recent increases in violent crime. A CNN article states, "Canadian Prime Minister Paul Martin and Toronto Mayor David Miller warned that Canada could become like the United States after gunfire erupted Monday on a busy street filled with holiday shoppers, killing a 15-year-old girl and wounding six bystanders -- the latest victims in a record surge in gun violence in Toronto ... 'It's a sign that the lack of gun laws in the U.S. is allowing guns to flood across the border that are literally being used to kill people in the streets of Toronto,' Miller said. Miller said Toronto, a city of nearly three million, is still very safe compared to most American cities, but the illegal flow of weapons from the United States is causing the noticeable rise in gun violence. 'The U.S. is exporting its problem of violence to the streets of Toronto,' he said. Miller said that while almost every other crime in Toronto is down, the supply of guns has increased and half of them come from the United States."

Regions with strict gun control legislation often blame neighboring areas for "exporting crime" when the neighboring areas have fewer restrictions on firearms. They cite that the guns used to commit crimes often come from areas where firearms are less restricted. The idea is not new. In 2003, a group calling themselves "Americans for Gun Safety" issued a report stating that Georgia was exporting firearms used to commit crimes in other states. The report included, among other things, a list of the "top ten crime gun exporting states," alleging that:

"Of the 109,870 crime guns traced by BATF in 2001, 36,828 (33.5%) were originally purchased in one state and used in crime in another. The top ten crime gun export states in 2001 were:
1. Virginia – 2,489 crime gun exports
2. Georgia – 2,428
3. California – 2,228
4. Florida – 2,048
5. Texas – 1,851
6. Mississippi – 1,772
7. Ohio – 1,697
8. Indiana – 1,684
9. North Carolina – 1,454
10. Alabama – 1,301
Of these leading crime gun exporting states, only California and North Carolina require criminal background checks for all handgun and assault rifle sales at gun shows. In fact, on average the states that have failed to close the gun show loophole are the source of 53.4% more crime gun exports than states that have closed this loophole. In a published federal report, BATF indicated that gun shows were the second leading source of firearms recovered in illegal gun trafficking investigations. This finding is borne out in the raw data from 2001, which show that almost none of the top crime gun exporting states require criminal background checks for unlicensed firearms sales at gun shows."

(Note: I would be reluctant to take the statistical evidence presented above as fact. The report states that criminal background checks are not required at gun shows, a statement which is blatantly false. Contrary to the "gun show loophole" myth, it is federally mandated that all engaged in the business of selling firearms call the FBI prior to every sale, regardless of whether the sale is from a store or a gun show. The FBI runs an instant criminal background check and authorizes the sale.)

It is not areas with less gun control that have more crime. Instead, we see a flow of crime towards areas with fewer guns. Why?

Contrary to what many proponents of gun control believe, there are significant positive externalities from residing in an area with many gun owners, particularly when individuals are permitted to carry firearms concealed from view. Perhaps your .45 clashes with your outfit one day, perhaps it is inconvenient for you to carry a gun with you everywhere, or perhaps you hate guns and would never dream of owning one. A criminal has no way of knowing that you are unarmed.

In Virginia, carrying handguns openly is legal and carrying them so that they are concealed and accessible is legal with a concealed carry permit. In Washington, D.C., neither is legal. If we compare the crime statistics between Washington, D.C. and Fairfax County, VA, we see that crime is much higher in D.C. than in Virginia. In 2000, there were two murders reported in Fairfax County, with a population of nearly 1 million. In the same year, 239 murders were reported in the District of Columbia, with a population amounting to less than 600,000.

The United States is not exporting crime to Canada, nor is Virginia exporting crime to D.C. Instead, it is the gun control legislation in Canada and D.C. that produces helpless targets on which criminals prey.

Legal to Give, Illegal to Sell

2005-12-24T21:22:00.000-05:00

Stories like this one showcase the generous, caring nature of individuals who are willing to go through risky surgeries to donate a kidney to save the life of another person. With well known sayings like, "'tis better to give than to receive," who can deny that giving up an organ is a noble thing to do?

While it may be better to give than to receive, the truth is that few people choose to give up an organ during the course of their lives, especially to a stranger. We hear of cases where someone has donated a kidney to a loved one, but rarely do we hear of cases where someone has donated a kidney to a complete stranger. The reasons are obvious. The surgery is inherently risky, the recovery can be costly and difficult, and the gain is limited by law to the warm fuzzy feeling obtained from helping someone.

From elementary economics, we know that when maximum prices are imposed on a valued item, the quantity supplied declines. In this case, the maximum price is zero. Naturally, the number of organs supplied decreases. For this reason, people wait for years for a matching donor, and often die waiting.

It is selfish to demand that people's generosity be the only means of obtaining an organ because we don't like the idea of profit-motivated people selling a kidney to a dying person. Should I be required to rely on the generosity of others for food, shelter, medicine or other items necessary for me to live? I would expect that I would be much less likely to obtain any of those items and stories about how a generous food donor saved my life would start making headlines.

Bundling Up for Alaska

2005-12-23T08:31:00.000-05:00

I see no benefit to myself of knowing that there are acres of pristine ice & snow in Alaska where elk and caribou may run freely without having to look at mechanisms for extracting oil. I’ve never actually interviewed the wildlife in Alaska to ask if they share the Sierra Club’s aversion to all things “not natural.” My hunch is that we humans find “unnatural” structures more repulsive than do the animals on which we have projected our preferences.

Regardless, Sen. Ted Stevens’ combining drilling in ANWR with a defense spending bill is like trying to sell a carton of eggs with a margarita. Unfortunately in voting, it’s an all-or-nothing deal. Like many Democrats, I would have voted against the measure as well – but not because of my ties to environmentalists or my aversion to drilling for oil in Alaska, but because I would not have voted to spend more of other people’s money on the troops and Katrina victims. Of course, I didn’t hear anyone complaining about the “$2 billion to help low-income households pay this winter's heating expenses,” also contained in the bill.

The term ‘bundling’ is used to describe when multiple items are packaged together as one. It can be a good sales tool by reducing the search costs of the person trying to buy related items or trying to obtain multiple functions in one item. My cell phone, for example, combines the functions of a voice recorder, camera, phone, calendar, and alarm clock with some other features I never use. Bundling is an effective technique in politics, and I can’t really fault Stevens’ attempts to use it. Politicians use this technique all of the time. We are always voting for package deals when we elect candidates. We can’t choose the features we like from one candidate and the features we like from the other candidate. Instead, we take the qualities we like with the qualities we don’t.

Don't Worry, Buy Imports

2005-12-14T10:05:00.000-05:00

The news seems to have an infatuation with listing the latest data on the so-called trade deficit that we run with other countries, saying that "The U.S. trade deficit widened unexpectedly in October to a record $68.9 billion despite a drop in the cost of imported oil, as the deficits with China, Canada, the European Union, Mexico and OPEC all hit records, government data showed Wednesday." To set the record straight, there is no trade deficit. As I've explained before, trade with other countries is good.

Suppose you sell me a watch. I give you $20 and you give me a watch. My cash account dropped by $20, but my goods account increased by a value that I perceive to be greater than $20. (Were it an “even” exchange, I would have been indifferent between the watch and my $20 bill). To you, the $20 was worth more than the watch, so while your goods account dropped by some amount that you perceive to be less than $20, but your cash account increased by $20. Neither of us owes each other any additional amount and both of us are better off. There is no “trade deficit.”

I could have knitted the sweater I’m wearing today. But I didn’t. Someone living across the world did. Should I be concerned that some portion of my wealth went to the person who knitted my sweater? Should I be worried about my “trade deficit” with someone because they reside in another country? Of course not. Obviously I believe the person earned it and I am better off, or I would not have made the purchase in the first place.

Don't worry - buy the Swiss watch, the French wine, the Japanese car. You're not creating a "trade deficit."

Hindsight Is Never 20/20

2005-12-08T09:15:00.000-05:00

Suppose you are an air marshal. You observe a passenger behaving erratically, running through the aisles of the airplane. He claims to have a bomb in his carry-on luggage. Your job is to protect the passengers in the plane – and yourself. You don’t know if he is bluffing or if he actually has a bomb. In the time it takes to find out, you and the rest of the passengers (including the man claiming to have a bomb) could be dead. What do you do?

Sadly, air marshals in Florida were faced with a similar scenario yesterday afternoon. Acting on the information that they had, they chose to shoot the man rather than to risk the lives of the remaining passengers. It was later discovered that the man did not have a bomb in his possession, and was 44-year-old American, Rigoberto Alpizar. His irrational behavior may have been explained by his bipolar disorder and need for medication.

It is easy and far too common for reporters to hand out blame after more facts come to light. By that time, the reporters do not have to rely on incomplete information. However, they often forget that the actors in their stories are almost always acting on incomplete or incorrect information. The event demonstrates that the cost of obtaining information is not zero. In hindsight, Mr. Alpizar was not a threat. But in the real world, we don’t make decisions based on hindsight. We can only make decisions based on what we know now.

I was once asked for my opinion on sending the military into Iraq. I answered that I would have to know the end results before making a determination. My answer was clearly wrong. Much like poker or blackjack, you never know what cards the other person has. Your decisions can be based only on the cards that you hold and what you know of the statistical possibilities that the other person or the dealer has a better hand than you. You can’t wait until the game ends to place your bets.

Doing Away with Christmas

2005-12-06T07:39:00.000-05:00

With retailers trying to determine whether to say “Merry Christmas,” “Happy Holidays,” or just “Have a nice day,” many people commenting on the news have said that in the name of political correctness we are “doing away with Christmas.” Still more have claimed that this will hurt the retail industry. After all, much of their profits are made when people purchase Christmas gifts for friends and family.

Yet their claims have no more foundation than the reasoning FDR gave for moving Thanksgiving one week sooner (to allow for an extra week of shopping after Thanksgiving and before Christmas), or than those who believe not conducting any transactions during the course of one particular day will defeat “consumerism” (Buy Nothing Day). The “extra week” is taken into account by buyers and sellers and has no effect, except to harm the calendar industry by making its already printed calendars obsolete. Proponents of the “Buy Nothing Day” forget that people have lots of buy nothing days throughout the year. Religious people often set aside a buy nothing day each week, usually falling on either a Saturday or Sunday. It doesn’t hurt the retail industry or defeat “consumerism.” People simply make their purchases on other days.

Retailers wouldn’t fall into bankruptcy if there were no Christmas. You and I would still be earning the same salary and would still exhibit the same budget constraints and endless wants. However, our expenditures would shift to different things. We might throw more lavish birthday parties and buy more expensive birthday presents. We might buy nicer things throughout the year, instead of setting aside money throughout the year to spend in December. There will be no discernible effect on retailers.

Merry Tuesday, everyone.

Education is Not a Public Good

2005-12-03T16:16:00.000-05:00

For those of you who may not have followed the extensive comments section in my post earlier this week, the discussion evolved into one of whether education is a public good. For those who believe that it is the responsibility of government to take your money to pay for public goods, answering this question is important.

A public good is defined as, "one which is capable of being used by many persons at the same time without reducing the amount available for any other person."[1] We say that a public good exhibits two characteristics: it is both non-excludable and non-rival. We might also term this inexcludability of consumption and jointness of supply. The value of pi, 3.1415926....., is a public good. Its production costs (or discovery costs, as the case may be), are entirely fixed; there are no variable or marginal costs. I can use this constant repeatedly without paying anything and can use it at the same time as mathematicians around the world. As a result, I may utilize this constant to make unnecessary calculations. At the same time, my use does not preclude others from simultaneously using pi to perform their own calculations and no one pays a fee each time they make calculations with pi. The true "value" to "society" of pi's discovery remains unknown. Perhaps I valued my first use of pi at $10 and the thousandth use I value at only $0.01. Because I am not paying for each use, one cannot observe my demand for pi.

Some have argued that education is a public good. However, it clearly does not exhibit the same characteristics described above. When people claim that education falls under the definition of a public good, what they mean to say is that some results of education are public goods -- results like the discovery of pi.

However, most results of education are entirely excludable. I reserve the use of my ability to perform financial analyses for the company that pays for it. I was not educated for the benefit of society, but for my own benefit and the benefit of the company that will pay me the most for it. In fact, the company that I work for did its best to ensure that I exclude its competitors from the use of my knowledge for some time, by requiring me to sign a non-compete agreement in exchange for my salary.

Even though I'm sure many of my tax dollars go to educating children that live nearby, I'm not allowed to go over to little Suzie's house and demand that since I helped pay for her to learn to read, she needs to read at least one entry in my blog. Education goes to the person receiving it, to use as he pleases. An individual's knowledge cannot be consumed by everyone simultaneously.

[1] Alchian, Armen A. and Allen, William R. Exchange and Production: Competition, Coordination, and Control, 3rd Ed., Wadsworth, Inc., 1983.

Selective Rights

2005-11-28T14:10:00.000-05:00

Students at Oak Ridge High School in Tennessee published and distributed a newspaper containing articles about birth control and tattoos. School administrators retrieved the 1,800 copies of the newspaper from the classrooms, stating that such topics were inappropriate for some of the younger students.

The school administration is now under scrutiny for potentially violating the students’ first amendment rights.

Quite frankly, I’m surprised this story made the front page on CNN’s website. It’s not news to anyone that the Bill of Rights is selectively applied in a public (government) school setting. I’m sure an article in the school newspaper about which rifle the student is using during this year’s hunting season wouldn’t go over so well with a lot of government school administrations either. But it wouldn’t make national news. University of Tennessee journalism professor Dwight Teeter says this will teach students “a terrible lesson in civics.” I wonder if he is as concerned about 1st Amendment rights when students are subject to disciplinary action for wearing a shirt that bears the emblem of a firearm or cigarette manufacturer. What is the lesson that students draw when they can be suspended under ‘zero tolerance’ rules for possessing a bottle of Tylenol? What lesson do they draw from virtually being held captive throughout the day, without the freedom to step outside the classroom without a hall pass? What lesson do they draw when they are forced to be in the school and then can be subject to searches without probable cause? What lesson do they draw when bureaucrats decide whether they learn intelligent design, evolution, or a combination of the two?

This is the problem with mandatory public education. Were there more choices in education, parents who disagree with their children being exposed to topics such as birth control or tattoos will not send their children to school that permit those stories to be published. Those who would like their children to be free to publish stories on any topic will send their children to schools where no topics are forbidden. We would not have to rely on bureaucracies to decide what was taught and what was not. In the current system, students are accustomed to violations of their rights on a daily basis. The sad thing is that they will eventually become adults trained to quietly accept violations of their rights.

Black or Gold?

2005-11-26T14:02:00.000-05:00

The name “Black Friday” has come to refer to the day after Thanksgiving in which stores throughout the United States open early with various items on sale and consumers rush to begin their Christmas shopping or just to take advantage of some of the good deals.

So why is it called “Black Friday” and given a sinister connotation?

It rings of the name “Black Tuesday” given to the stock market crash of October 29, 1929, often erroneously thought of as a failure of capitalism. The prefix “Black” before a day often refers to days in which government made errors in monetary policy, days in which government trampled upon the liberties of its people, or days in which a tragic event occurred. None of these describe the sales and voluntary transactions that occur on the Friday after Thanksgiving.

For a change, why don’t we refer to “Black Friday” by a less ominous term? Perhaps we can call it “Gold Friday” or “Sale Friday” or “Lots-of-people-shopping Friday.” The prefix “Black” should not be applied to a day that does not represent a tragedy in some way. Crowded stores and numerous voluntary transactions hardly constitute a tragedy.

Thanking the Market

2005-11-26T13:02:00.000-05:00

As I was shopping on “Black Friday” (see my next post on why it is improperly named), I noted that at a few stores the salespeople and cashiers were considerably bigger and presumably stronger than I am. In the spirit of Thanksgiving, I was quite thankful that a market system has emerged in which we generally do not use violence as a means of rationing food, clothing, and shelter. If it were a system where the bigger and stronger prevail, I would no longer have a competitive advantage.

Because we have a system of exchange in which both parties voluntarily participate, in which each party offers something of value to the other party, it doesn’t matter how big or strong a person is. What matters is how much value he offers to obtain the goods he wants. In this system, we equip ourselves by seeking education, by working diligently, and by finding ways in which we can better serve our fellow man. In this system, we are rewarded for making life easier for others, by providing for the wants of others, by delivering a valuable good or service. In this system, strangers cooperate, violence is lessened, and all benefit.

Mens Rea or Mea Culpa

2005-11-21T17:24:00.000-05:00

At least one reader has mentioned the concept of mens rea as the justification for holding ‘hate crimes’ as a worse crime than crimes that cannot be shown to derive from disliking a particular race, religion, national origin, etc. However, mens rea is not the distinction between one evil mindset and another. It is the distinction between the existence and the absence of evil intent. Proving mens rea is required for some crimes in order to account for accidents and situations in which an individual unknowingly violates another’s rights. It is meant to distinguish between criminal actions and honest errors when the actions and fault are not in question.

Sometimes observable actions do not reveal the mental state of the accused. For example, a driver may crash into another vehicle, killing the driver of the other vehicle. The court does not automatically convict the driver of murder. It must also prove mens rea, Latin for ‘evil mind,’ to show that the driver purposefully and knowingly killed the driver of the other vehicle. Otherwise, the first driver is presumed to have accidentally killed the other driver and may be found guilty of a lesser offense depending on the circumstances.

Sometimes the person committing what would normally be considered a crime is not capable of understanding that his actions violate the rights of another. The lack of mens rea is what protects a two-year-old from facing charges of theft. If a two-year-old child takes a candy bar from a store shelf without intending to pay for it, the child is not found guilty of stealing because he is presumed to not fully understand the meaning of his actions at such a young age. The child may not understand that taking a candy bar deprives the store owner of his property and may not know that his actions constitute theft. Were the child closer to adulthood, the courts would not make such an assumption.

Mens rea refers to any criminal intent, where the criminal is fully aware of his actions and their consquences and performs them regardless. Someone who deliberately murders someone for fun, without regard to their race, nationality, or religion, has criminal intent just as someone who murders someone because of their race, nationality, religion, etc.

We may place a value judgment on certain types of motivating factors. We may find it more despicable to harm a weak individual than a strong one. This does not mean that we create separate laws to apply to harming those who can't lift more than 50 lbs or run a mile in less than 7 minutes. We may believe it worse to steal from someone who earns $25,000/year than someone who earns $150,000. This does not mean that we create separate laws pertaining to stealing from a person with a high salary versus stealing from a person with a low salary. Both of these scenarios provide a corollary for the hate crime legislation that continues to be promoted by politicians today.

Generously Giving

2005-11-20T18:33:00.000-05:00

The Washington Post has a number of articles on charitable giving today in the business section. It discusses specific examples of prosperous people who have very generously donated or sponsored charities. It also lists some figures for private donations to specific events. According to the figures in the article, people in the United States donated $26 million for the earthquake in Pakistan on October 8th of this year, $2.2 billion to hurricane victims in the Gulf Coast, $1.6 billion to the victims of the tsunami in Asia last December, and $2.8 billion in response to the September 11th attacks. These are all gifts to strangers. But how much more do we give to those whom we dearly love? Are we more likely to help a family member or friend in need or a stranger? The figures in the article don't measure the time we donate, the innovations we create that make life better for everyone, or the help we routinely offer to those around us.

Generosity is not the only motivating factor, however. We often donate when we no longer value the items that we are donating but instead value something else that we may obtain by giving up the items. For example, I often give away clothes that I no longer wear. It is not out of my generosity, but out of my own self interest. Sometimes I value more space in my closet more than I value the sweater I purchased two years ago. In giving, I not only benefit the recipient, but benefit myself. The amount I give is also directly related to my income. As my income rises, I give more than I may have given the year before. If my income were to increase by a sudden decrease in taxes, I would be inclined to give even more. Again, I don't have to be generous; I may simply purchase more expensive items and then give away my old items that I no longer value. Regardless of my motives, everyone benefits.

Equal Protection?

2005-11-18T18:22:00.000-05:00

One of the serious issues with hate crime laws, other than policing thought, is that the laws are not applied equally and, assuming that they provide any protection for victims at all, do not provide protection equally. Take some of the Virginia hate crime legislation for example.

§ 18.2-57. Assault and battery.
A. Any person who commits a simple assault or assault and battery shall be guilty of a Class 1 misdemeanor, and if the person intentionally selects the person against whom a simple assault is committed because of his race, religious conviction, color or national origin, the penalty upon conviction shall include a term of confinement of at least six months, 30 days of which shall be a mandatory minimum term of confinement.
B. However, if a person intentionally selects the person against whom an assault and battery resulting in bodily injury is committed because of his race, religious conviction, color or national origin, the person shall be guilty of a Class 6 felony, and the penalty upon conviction shall include a term of confinement of at least six months, 30 days of which shall be a mandatory minimum term of confinement.

A criminal who randomly targets people is given a less harsh punishment than a criminal who targets people due to their race. A criminal who targets people who wear red clothes somehow does not deserve as harsh a punishment as a criminal who targets people of a certain religion. A criminal who assaults someone for looking at them in the 'wrong way' is no less of a criminal than one who assaults someone for having skin colored the 'wrong way.' Yet the criminals who target people randomly or target people based on some other factor are no kinder or gentler than the criminal who has a politically incorrect motive.

Virginia extends the Class 6 felony classification to a simple assault on someone whom the assailant knew or had reason to know was a law enforcement officer, correctional officer, firefighter, or rescue squad member, and requires a mandatory minimum term of confinement of six months if convicted. Is is any worse for a criminal to assault a police officer than to assault the grandmother down the street? Are the police officer's rights violated more than the grandmother's simply because of his profession?

If we are going to have hate crime laws, why stop at only race, religion, color or national origin? Perhaps some criminals target only people under 5'5" or perhaps they only target people with blonde hair. Perhaps some criminals target people who speak with accents or people who are over 60 years old. Perhaps the criminal targets anyone that he finds annoying. Truth be told, it really doesn't matter much to us why someone's rights were violated. We are only concerned with the fact that the criminal violated someone's rights and the likelihood that the criminal will continue to violate the rights of others.

Hate crime legislation does nothing to decrease hate, and cannot be shown to decrease the amount of crime committed as a result of hate. Its purpose is merely to make a political statement that certain types of intolerant thought should not be tolerated.

Hate Crimes

2005-11-18T01:31:00.000-05:00

"Hate crime" legislation is a fairly new phenomenon. In the days before a "hate crime" was a legally definable term, crime was crime. All crimes are somehow motivated by hate -- we don't generally steal from or murder those whom we love. For whatever reason, government agencies seem to enjoy tracking "hate crime statistics" based on their definition of a "hate crime."

Government is not to be the arbiter of all moral questions. It is not to police thought, even thought deemed immoral by many people. Its job is not to denounce hatred motivated by race, nationality, gender or hair color. Its job is not to make value judgments such as hatred based on race is worse than hatred based on jealousy. Yet that is exactly what hate crime legislation does. It punishes one type of thought over another, when the actions taken may be identical.

Quite simply, I am free to like or dislike anyone for any reason. "Hate," as much as we may find it repulsive, does not violate anyone's rights. Forcibly taking someone's life, liberty or property is an action that one must take to violate the rights of another. Government's job, its sole reason for existence, is only to protect people's rights.

The Government's Windfall Profits

2005-11-14T23:09:00.000-05:00

Gasoline prices have been dropping steadily. Just last week I paid $2.13/gallon. What happened to the greedy oil executives? Did they suddenly decide that profits weren't so important after all? Or perhaps in the absence of hurricanes and other phenomena that shift the demand for oil upward, prices naturally drop.

Although we generally find it best to use a combination of gasoline and automobiles to get from one point to another, as the price rises, other means become more profitable. Long ago, oil companies discovered that the demand for gasoline is not as inelastic as once thought. In one form or another, substitutes abound and people make changes to their lifestyle rather quickly. For example, in the short time that gas prices were high, I noticed that traffic was much lighter, but friends of mine who use public transportation noticed that there were more people who also utilized buses and subways. More people were carpooling or biking. Now that the price of gasoline has dropped, more people have resumed driving to work and traffic seems to have increased.

Oil executives, as much as they would like your money, simply can't force it from you. They have to offer you a deal that you are willing to accept and a deal that is better than a deal from their competitors. Politicians are under no obligation or incentive to offer you either. We complained about gasoline prices rising by $0.25-0.50/gallon in the short run, yet for years we have paid approximately $0.36/gallon in taxes, or more, depending on where you reside. There are 42 gallons in a barrel and we consume approximately 8 million barrels each day. In aggregate, this amounts to $120,960,000.00 per day in windfall profits for the government. (Caveat: some forms of oil receive different levels of taxation. For example, diesel fuel is taxed at five cents more per gallon, whereas home heating fuel is taxed less.) Using the $0.36/gallon approximation, the government receives $10.886 billion per quarter in windfall profits. This is much higher than Exxon Mobil, a company being investigated for earning $10 billion last quarter.

Government makes this windfall profit every quarter. Exxon Mobil does not. Lest we forget, taxes that we pay on oil are only a small portion of the taxes related to the production and distribution of oil. Exxon will pay corporate income taxes on their $10 billion earnings. Exxon employees will pay income, Medicare, and Social Security taxes. Gas stations will pay real estate assessment taxes and will pay taxes on their profits. Trucking companies will pay taxes on their vehicles used to transport oil and truckers will pay income taxes as well. Rather than investigate the "windfall profits" of Exxon Mobil last quarter, perhaps we might investigate the "windfall profits" that our government takes every quarter.

Spending Cuts = Anti-American?

2005-11-13T21:50:00.000-05:00

Every so often, I add up the year-to-date amount on the 'taxes' section of my paystub. It's no small percentage of my salary.

The politicians in Washington, D.C. are talking about cutting spending in the tune of $50 billion. (This will have little effect on my paycheck, but it's a start.) However, there are some elected officials who strongly oppose spending cuts.

Nancy Pelosi (D-California) was quoted saying that the spending cuts are, "anti-family, anti-taxpayer and anti-American."

Quite the opposite. As an American taxpayer myself, although I cannot claim to speak for all American taxpayers, I am quite certain that spending cuts are pro-American and pro-taxpayer. The only ones who might disagree are those whom my tax dollars are subsidizing. However, the recipients of beneficial legislation and subsidies are not the American taxpaying families. They are the big businesses that those on the left publicly criticize, yet surreptitiously hand over large sums of money.

There is no question that money is best spent by those whom it is intended to benefit. Just as I would not ask politicians to go to the grocery store and buy whatever they thought I might want, I would not ask politicians to decide what kind or how much education I should pay for, what projects I would like to support, which people I would like to offer assistance, or which industries I would like to shield from competition.

$50 billion dollars, 295,734,134 people in the United States = $169 per person. For the average taxpayer, $169 amounts to less than the federal income tax amount for two weeks' pay. Unlike some politicians who would rather see your money in someone else's pockets, I think we can trust the American taxpayers with a little more of their own money.

Misguided Riots

2005-11-09T17:39:00.000-05:00

Many young, unemployed people are rioting in France.

But of course, you knew that. How could you miss the news with pictures of cars set on fire and people running through the streets?

One of the reasons given for the riots is that people have little money and want jobs.

A video from cnn.com shows a brief interview with some of the young rioters. They claim that there are no jobs, nothing for them to do; another hopes for the government to provide a solution.

Yet those who hope for the government to solve their problems hope in vain. For years, the French government has passed laws that create poverty and unemployment. For years, the French people have demanded that government provide exactly what they want. When the laws that they demand are passed, their situations only worsen.

I don't understand why there is any poverty in France. They have a minimum wage that far exceeds that of the U.S. Shouldn't they be richer than us? Shouldn't all of their poverty have been abolished? France "takes care of its citizens" by providing them with health care, making it more difficult for employers to fire workers, and ensuring that workers aren't overburdened by a 40 hour work week.

CNN notes that France has an unemployment rate of 25% in some areas. Youth unemployment is even higher. Yet people in the U.S. consistently cite the policies of European countries for the U.S. to emulate, without taking into account that consequences will occur.

Allow me to direct you to a paper which examines a trend that was visible nearly ten years ago in France. The trend has only escalated to the point of the riots occurring now. Next time, let us think twice about asking our government to take care of us. Perhaps the French should too.

Cheap Substitutes

2005-11-06T15:08:00.000-05:00

In the course of cleaning this afternoon, it crossed my mind that there are many substitutes for flu vaccines -- substitutes that cost less than the billions of dollars that the government wants to pay for subsidizing the development of a vaccine (which may or may not yield any results). These substitutes you probably already own or can access easily.

As I glanced at my can of Lysol, I noticed that not only does it kill mold and mildew, but it also kills the influenza virus. Perhaps if there was an outbreak of avian flu, I might just use Lysol more often.

This, of course, is only one substitute. Staying home, washing your hands, even wearing surgical masks are all ways to prevent infection. But I suppose these methods aren't quite as trendy as vaccines and spending tax dollars. After all, the government has to look like it's "doing something."

Advice for the President

2005-11-03T23:21:00.000-05:00

CNN posted a selection of emails from readers giving advice to President Bush.

I'm glad that the President is not likely to take their suggestions.

Take this one, for example, "Stop and listen, Mr. Bush! We've been trying to tell you what's important to us ... who is it you think you serve again? It's adequate health care, a sound economy, right to quality of life ..."

It's not that people want to give up their own rights, but they are always eager to give up someone else's rights if it serves their own agenda. There is no "right to quality of life" -- you make your own quality of life through your own hard work. There is no right to health care -- you choose how much health care you want and you pay for it.

Or this one, "What about the millions of people here that spend their days wishing, hoping that something, someone could change their life? Bring them food, or a job, or a safe place to live."

It's always nice to propose free lunches with someone else's money, isn't it?

Then there are people who don't know their history and the lessons we've learned from the benefits of moving industries towards deregulation and the negative effects of price controls. They make recommendations like this one: "push legislation to regulate oil companies as public utilities -- just like electric, natural gas and telephone companies. This would require that companies obtain regulatory approval before raising gas prices."

There are people who don't understand opportunity cost and make statements such as this: "The best thing Bush could do is revive the military draft. This war is something we should all share in and not just the bottom 25 percent of high school graduates."

My advice for President Bush will have to wait until another post.

Fighting the Flu

2005-11-01T23:45:00.000-05:00

First our government was fighting terror, now it's fighting the flu.

People tend to fear the unknown and unlikely, often neglecting to prepare for the known and likely threats. Unfortunately, politicians have done just that in deciding, with my money and yours, that we need to prepare for the event of a flu pandemic.

How likely it is to occur? Were I the manufacturer of a flu remedy, I'd be the first to know. You can bet that I'd be putting my energy into research & development if I believed a flu pandemic was on the horizon. For the producer, providing flu remedies during a pandemic translates to profits. For the consumer, living in a free market where producers are not discouraged by high taxes and regulations ensures that flu remedies are available when they are most needed. The higher the likelihood and severity of the threat, the more the producers will spend preparing for it. I, as the consumer, don't have to do anything. I can sit at home and type out a new post for my blog. I don't have to worry at all.

But government's recent involvement gives me reason to worry. Perhaps one part of my worry stems from the mixed signals. Take these quotes, from the same article, "There is no evidence that a human pandemic, of H5N1 or any other super-strain, is about to start, Bush said repeatedly," followed by, "'Our country has been given fair warning of this danger to our homeland, and time to prepare,' Bush said."

This "danger," of which there is "no evidence" is reason to take $7.1 billion from your wallets. However, even and especially when the danger is evident, severe and likely, there is no reason for the government to delve deeper into your pockets. As long as the government sticks to its job, the free market and profit seeking firms will find those threats and combat them -- all in the name of making money. Those firms bear the risk when the threats do not occur and when they do. Our wallets only become involved when we decide to purchase their products or invest in their stock.

With the $7.1 billion plan, taxpayers are forced to bear the risk but earn no profit. To be sure, if the government is in charge of flu remedies, they will not be rationed on price, but on a first-come, first-serve basis or on government's assessment of 'need.' If government is providing subsidies for manufacturers, we can be sure that more of the flu remedies will be produced than the intitial expected return warranted.

The flu, even avian flu, is not a new phenomenon. It has existed for centuries at minimum. To suddenly deem it a major threat and claim that companies need the government's help in preparing for an outbreak should cause suspicion.

Postponing Posting

2005-10-29T12:45:00.000-04:00

You may have noticed that my posts have been a bit more irregular recently.

I've been preoccupied with my new pets (see picture).

They hatched last week and have been following me around the house ever since. They are called Seramas -- the world's smallest chicken -- and generally weigh less than 1/2 pound when full grown. Sadly, the one on the left died last night.

I generally reserve my blog for topics of a less personal nature; however, some readers who noted that I generally post daily expressed concern over the tardiness of my posting and I felt a proper explanation was in order.

Cheap Oil

2005-10-28T14:13:00.000-04:00

Oil companies reported high third quarter profits, coinciding with the quarter in which powerful hurricanes caused damage in the southeastern region of the U.S. Now a panel is investigating whether their recent profits were due to “gouging.”

In a fairy tale world, we’d love to blame increases in price on some evil person. We’d love to be able to make a law that allows us to purchase exactly what we want at exactly what we want to pay. But what do we want to pay? The price that I would always like to pay is zero. I would like to get what I want without having to give up anything.

The world simply doesn’t work that way. Prices are merely a reflection of the fact that there are not infinite resources and infinite simultaneous opportunities. When I choose to go sailing, I am choosing not to go biking. When I chose my profession, I gave up the opportunity to go into other professions at the same time. Regardless of the monetary cost, every decision we make has a cost.

Therefore, we make decisions as to what will serve our goals best. We choose what brings us the highest value at the least cost.

Politicians want to blame the stockholder-owned oil companies for charging too much. Call it greed, but oil companies exist to make money. This is truly a wonderful phenomenon. I personally would not enjoy walking to work in the rain. It would be quite inconvenient for me to have to discover, refine and store my own oil. Luckily, millions of people have worked out a great deal with oil companies – we pay them, and they supply oil and gasoline for us! I, for one, am quite happy with this arrangement. Judging from the profits that oil companies make, I’d say there are quite a few others who are too. What a good deal!

In the aftermath of recent hurricanes, the oil companies simply did what they set out to do from the start: provide oil and earn profits. We demanded oil, and they supplied it. It was not out of their generosity, but out of their desire for profit, that we benefited from having oil when we needed it most. Yet politicians threaten our mutually beneficial deal with the oil companies and would rather we place our faith in the generosity of oil companies instead of their desire for profit. It is much more reliable to place our faith in profit-seeking than in generosity.

Private Donations

2005-10-27T00:46:00.000-04:00

The title of an article today, "In Hurricane Tax Package, a Boon for Wealthy Donors ," is misleading. It suggests that provisions that allow greater tax deductions for charitable donations are good primarily for the wealthy.

The recipients of charitable donations should be even more happy about the provision. It serves to encourage donations on a much larger scale. For example, "Mr. Wilson said that he and his siblings gave away several million dollars a year and that the amount could double this year because of the provision," according to the article.

Noting the generosity of Americans, some are looking at the reduction in tax "revenues" as a problem associated with the provision. "Robert F. Sharpe Jr., a fund-raising consultant whose clients include the American Heart Association and the University of California, Los Angeles, estimated that the provision would spur $4 billion to $10 billion in additional giving this year; 2005 giving was already expected to exceed last year's total of $248 billion.

Mr. Sharpe said the additional giving would result in $1 billion to $3.5 billion in lost revenue for the Treasury, more than the $819 million Congress anticipated."

Let's see - $4-10 billion voluntarily given versus $1-3.5 billion surrendered under the threat of force. Which is the better deal? It seems that both the wealthy and not-so-wealthy benefit from this arrangement. If this is the case, why change the tax provision only because of the recent natural disasters? If people will voluntarily give more than the government can pry from their wallets, why should we involve the government in charity at all?

The rest of the language of the article merely praised Congress for its benevolence. Since we've been good and given to charity, "Congress was willing to give up some revenue" as our reward. Or, more properly stated, Congress will temporarily be stealing less of our pay if we donate it to charity. Nice to know that Congress is willing to give up some of my money, provided I choose not to keep it and instead donate it to an approved charity.

Saving One Life, Losing Three

2005-10-25T22:22:00.000-04:00

With regard to the conversion from analog television transmissions to digital and the following proposals for subsidies for digital television (for those left behind in the conversion process), I posed the question, "Will this legislation save lives?"

I promised to post the best response to my inquiry. Of the responses I received, this one written by Vic best addressed my question and the tradeoff that the politicians sponsoring the subsidies did not consider.

Here is his answer:

"As with any decision, there is a tradeoff with this legislation—it is between spending that three billion on this digital conversion project and spending it elsewhere or nowhere at all (perhaps lawmakers could refund it as part of an overall reduction in government spending). The measurement by which we must judge this tradeoff is the number of lives saved, since the lawmakers claim that their legislation will “save lives”.

That claim means, then, that currently, lives are or will be ended prematurely by the inability of emergency personnel to communicate on an adequate number of frequencies, which would mean that there is or will be a shortage of frequencies. However, we know that that is not the case, because the whole proposed project is intended to shift the many millions of analog television viewers into the digital spectrum to make room for emergency users on the analog spectrum; that means that there are available frequencies on the digital spectrum right now.

It is unclear why emergency personnel instead cannot convert to the available digital frequencies if indeed they have already or soon will run out of analog ones. The answer must be either that digital frequencies will not save as many lives as analog frequencies will, which as absurd, or that the marginal (or total, depending on how the lawmakers would legislate it) conversion of emergency users to digital frequencies as demand for frequencies increases would cost more money, time, lives, etc. than converting all of the non-emergency users. If that is true, then that means that the three billion that supposedly would be sufficient for converting the non-emergency users would be insufficient for converting the emergency users.

In short, each of the following conditions by itself is necessary (but not sufficient) in order to save lives in emergency situations: analog frequencies have or will run out; the shortage hinders or will hinder, at the cost of human lives, the ability of emergency personnel to communicate; the legislation would eliminate the shortage and, therefore, the human cost; and it is more costly in money, time, lives, etc. to convert the emergency users than it is to convert the millions of television viewers, etc.

Lives are not at stake only in emergency situations, however. Even if, and only if, all of the conditions in the previous paragraph are met, the number of saved lives must be greater than the number of lives lost in non-emergency (and perhaps, still, some other emergency) situations. Those saved lives not only must outnumber any that were lost at the margin as a result of the very taxation of the three billion in the first place, but also they must outnumber the lives that could have been saved by putting that three billion to different use, if there is any other use that would outnumber the human cost of the original taxation.

I think it is virtually impossible to meet all of the conditions listed in the previous two paragraphs, which is necessary to do, in order to have a net increase in the number of lives saved. Therefore, the short answer to the first part of Capital Freedom’s question is 'no.' This legislation will not save lives."

Theft in Disguise

2005-10-23T20:27:00.000-04:00

Free handouts get more votes than free markets.

Politicians who don't succumb to special interests, who don't endorse transfer programs, don't get elected. Even while those politicians may make life better for everyone, they always get fewer votes. The recent election in Poland is yet another example of this phenomenon.

Are people so naive that they think government provides them with the best deal for their retirement, for their terms of employment, for their safety and security? Do people truly believe that a stranger with legislative ability truly cares for them, knows what they need, and is capable of providing it for them?

"Free handouts" -- often paid for by those who receive their purported benefits -- make a nation that would be prosperous a nation of theives. But this nation of theives doesn't have the courage to steal themselves. Instead, they make it legal for their elected officials to steal on their behalf and encourage them to do so. They coat their theivery in flowery language, claiming that they are merely enforcing the duty of the wealthy to "give back to the community."

Irresponsible people are afraid of free markets. They don't want the responsibility of working hard and providing for their families. They want their government to make someone else provide for them. Handouts don't make an "equal playing field." Instead, they make the irresponsible even more irresponsible. Handouts don't create opportunities. Instead, they destroy the ambition and work ethic that creates opportunities.

Taxes Down the Tube

2005-10-22T17:10:00.000-04:00

As though enough of your earnings didn't go to subsidies, transfer programs, protecting government sponsored monopolies, and creating more regulations to make your life more difficult and expensive, Congress has decided yet another way to spend your money.

But don't worry -- those politicians, with their omniscience and your tax dollars, have decided it is in your best interest.

"Committee Chairman Ted Stevens, R-Alaska, said Congress needs to do something ..." [1]

In order to free up radio spectrum for use in emergencies, they have drafted a bill that will end analog transmissions and switch to digital by April 2009. It's all in the name of "saving lives."

"Digital television promises sharper pictures and better sound than analog TV. But millions of Americans with older TV sets rely solely on free, over the-air-television, and they'll need some type of a converter box to keep receiving their television service." There's always a catch, isn't there?

Not to fear -- Congress is always happy to pat itself on the back for fixing problems it creates. Chairman Stevens is going to help consumers pay for those converter boxes. "'If we're mandating this (digital) conversion, we cannot leave people behind because they can't afford' digital television sets, he said." They estimated that 21 million households have analog television sets. Converters cost $50 and Stevens' hopes to create a $40 subsidy for each one. He is proposing to allocate $3 billion for the subsidy.

I did the math. Twenty one million households times one converter at $40 = $840 million, not $3 billion. If each household has three analog televisions, the cost for the subsidy is $2.5 billion. Apparently, Congress is feeling very generous with my money. Good thing that politicians' priority is with saving lives. I'm sure the two additional converters per underprivileged household will help them accomplish their goal.

Senator John McCain was even more thoughtful than Stevens. He just couldn't wait to make the picture on my television clearer and tried to speed up the process by two years to April 2007. "'There's only one thing more important than money - and that's lives,' he told the committee before his amendment to speed up the conversion was defeated."

Here's the question for you: Are they really saving lives? Why or why not?

Answers may be provided in the comments section or via email. If I receive a thoughtful answer, I'll post it next week.

Hussein on Trial

2005-10-21T20:06:00.000-04:00

This was on the front page of the Washington Times yesterday:

"Dressed in a white open-necked shirt and dark suit, Koran in hand, Saddam displayed all the disdain that he had as Iraq's dictator, standing steady and keeping his voice even as he challenged the Kurdish judge.

'I won't answer to this so-called 'court,' Saddam said.

'Who are you? What are you?' he demanded. "I retain my constitutional rights as the president of Iraq.'"

Sometimes no witty remark is needed.

Lobbying Against Lawsuits

2005-10-20T23:54:00.000-04:00

I rarely have good things to say about new laws, but here's an exception.

Today, Congress passed a bill which states that victims of crime may not sue gun manufacturers. Politicians who oppose the bill claim that it is simply a product of the powerful influence of the gun lobby and the NRA. Perhaps that is what we can attribute the passage of the bill to; however, are the gun manufacturers wrong in asking for such protection? Is it ever the responsibility of the manufacturer if someone uses its product unlawfully?

"Our laws should punish criminals who use guns to commit crimes, not law-abiding manufacturers of lawful products," Bush was quoted as saying.

He's right. But I'll take it one step further.

Government exists to protect rights and its job is not to prevent people from having the potential to violate someone else's rights; it is only to punish those who act in a way which violates someone else's rights.

A person can only be responsible for his actions. If his actions are just, and in accordance with the law (which we often presume to be just), then the indirect results of his actions, whether we deem them positive or negative, do not reflect poorly on his own actions.

A gun manufacturer makes guns. Guns are tools that, when properly used, can save lives. Like household cleaners and automobiles, when improperly used, they can be a tool to injure or kill. There is nothing innate in the metal, wood, or synthetic materials that causes harm. There is nothing innate in the construction itself that violates someone's rights. The only thing that can possibly violate the rights of another are the unjust and unlawful actions of another human.

Gun manufacturers aren't asking for much. They're not demanding subsidies or protection from competition. They are not asking for protection from product liability suits or any suits that directly address their products. They are simply demanding that they only be held responsible for their actions, and not the actions of others.

Hospitals v. Health

2005-10-19T23:45:00.000-04:00

Today's Washington Times contained an ad that covered most of page A7. Sponsored by the American Hospital Association, AAMC, Federation of American Hospitals and others, the ad read,

"When Natural Disasters Hit, America's Hospitals Are There.
When Fears Rise About a Flu Pandemic, America's Hospitals Are There.
When the World is an Ever More Dangerous Place, America's Hospitals Are There.
So why do some in Washington want to cut hospital funding?
Pressure to cut the budget has caused some legislators to think about cuts that would hurt hospitals. But why in a dangerous and uncertain world would anyone cut the front lines of America's health care?
America's Hospitals. First in hope. First in care. Always there."

Certainly emergency care is nice to have. But it doesn't have to involve government or tax dollars. In fact, cutting hospital funding might actually save lives.

The old adage, "prevention is the best medicine" rings true. Why is prevention the best medicine? Compared to treating a serious illness, prevention is usually less expensive and less risky. With finite resources, we want to maximize health, not necessarily hospitals. Prevention, being the cheaper means of maximizing health, should be preferred over hospitals and other, more expensive methods of increasing health.

Let's allocate $1000 to be divided between two categories: wages and hospital funding. In the first scenario, the government takes $100 of your wages to pay for hospitals. Your net income is then $900. Suppose that you require $500 to pay for food and shelter. Given the $900 wage, you have $400 remaining which you can spend on prevention. Prevention may come in the form of taking off work when you start to feel ill, of purchasing a safer vehicle or eating better food. Hospitals might not have as many amenities, but your health overall may be better than if more of your money was allocated to hospitals.

Now suppose the government believes it is its job to ensure that Americans all have adequate access to hospital services by taking more of your paycheck and giving it to hospitals. Now, the government takes $400 of your wage to pay for hospitals. Your net income is then $600. Assuming that your cost of food and shelter is fixed at $500, you have only $100 to allocate towards preventing illness or injury. Prevention, in this scenario, will cost you a higher percentage of your disposable income. Maybe you'll stick to the older vehicle without all the new safety features. Maybe you'll go to work even though you feel ill. You won't make the same investments in your health that you would have previously. Instead, you'll take chances with your health and the health of your coworkers.

Before we assert that cutting hospital funding is bad, perhaps we might examine the unintended consequences of taking other people's money that might have been allocated towards health measures and putting it to a less productive use, e.g. sacrificing preventative measures for expensive hospital visits. Increase hospital funding and you will continually need more hospitals.

Preferences & Costs

2005-10-18T23:38:00.000-04:00

Given the choice between platinum and silver, which would you choose? Naturally, everyone’s first response would be platinum. It is more valuable, more rare and of higher quality than silver. Can we therefore expect that most people wear platinum jewelry rather than silver? On the contrary, we observe more people purchasing silver than platinum, even though silver is less desirable.

The same is true for workers. People might prefer an attractive employee than an unattractive one. People might prefer someone of their own race than of another race. People might prefer to hire only those who have obtained a Ph.D. However, these people do not express their preferences without incurring some cost.

Minimum wage laws reduce that cost. Employers can express their preferences for one race over another, for some physical attributes over others, and higher levels of skill over lower levels. Prior to the imposition of a price floor on wages, the worker who did not have the preferred level of education, was not of the preferred race, or did not possess the most attractive features could have the job that he desired. He merely had to lower his price enough. Prior to the imposition of minimum wage laws, he also had the freedom to do so.

People do not purchase more silver than platinum because they believe silver is the better material. They purchase more silver because it is cheaper. It provides a good substitute for platinum at a much lower cost. If the price of silver increases and the price of platinum is held constant, we should not believe this to be good for sellers of silver. Rather, we would find that it would benefit sellers of platinum because the relative cost of platinum is lower when the price of silver increases. When the price of silver goes up, more people will buy platinum. Likewise, minimum wage laws benefit those who are earning above minimum wage. When the price of the less desirable workers increases, more of the desirable workers will be hired.

Increasing the minimum wage will only magnify levels of discrimination on non-price bases. Employers face a downward sloping demand curve, just as everyone else. When their preferences become cheaper, they will indulge more of them. Minimum wage laws only serve to harm their purported beneficiaries by encouraging employers to more frequently express their preferences for a particular race, for higher skill levels or attractiveness.

Minimum Wage & Substitutes

2005-10-17T23:12:00.000-04:00

Al Eisenberg believes that “Virginia's poorest workers need a raise.” Eisenberg, a Democrat representing Arlington in the Virginia House of Delegates, believes it is his job to make employers pay them a higher hourly wage.

Citing economists from Princeton and MIT, he states that an increase in the minimum wage will have “little or no effect on employment” and will not cost jobs. First, he needs to make up his mind: will the laws have little effect or will they have no effect on employment? Certainly if the increase is small enough, the effect will be small as well. But the effect is still there. This is why no one calls for making the minimum wage $50/hour. Suppose we did make the minimum wage $50/hour. Many attorneys, doctors, and actors would still be employed, but how many teenagers would be able to obtain a job at a nearby store? How many people who have not had the benefit of higher education would remain employed? If we make the assumption, as Eisenberg and others do, that the increase will have no effect on employment, how much do you expect to pay for your groceries when the cashiers are all earning $50/hour?

By removing the freedom to determine wages through voluntary exchange and negotiation, you are removing all bargaining power that the less desirable workers have.

It is an inescapable reality that we live in a world of scarcity and therefore look for the least cost method of obtaining the things we want. When one method of acquiring our wants becomes more expensive, we seek alternative, cheaper methods. No amount of legislation or minimum wage increases can change this fact.

When I was younger, there were no self-checkout lines at the grocery store. You didn’t scan your own credit card or bag your own groceries. Most offices had receptionists instead of recorded messages. All of these automations are substitutes for human labor. Increasing the cost of labor will only increase the profitability of substitutes. Eisenberg and the economists he references forget that elasticity changes over time. While we might not see an immediate response (manifesting itself in the decrease in quantity of labor demanded), we will see the response over time as companies develop cheaper ways of conducting business. If Al Eisenberg thinks he is helping the poorest workers in the long run, he is sorely mistaken.

Automation is not the only substitute for cheap labor. Skilled labor is another. Unions, even though their members earn well above the minimum wage, consistently support minimum wage laws. Why? Because unions care about all workers equally? No! Raising the minimum wage is purely a way to price their competition, i.e. the less skilled workers, out of a job. If minimum wage laws truly had “little or no effect” on employment, why do unions continue to spend resources supporting them?

Quoting the Economic Policy Institute, Al Eisenberg also states that, “if Virginians earning the minimum wage got an increase, not just the workers but also businesses, the economy and the society in general would benefit.” This statement alone should cast some light on the fallacy of his argument. If raising the minimum wage is clearly good for everyone, and good for “society in general,” why do we need a law that forces businesses to adopt a higher wage?

* Hat tip to Tim at the Arlington County Taxpayers' Association
** My apologies for the lack of posting over the past few days. I was not well for the last few days and appreciate the notes of concern.

Introducing ... A New Bureaucracy

2005-10-13T23:59:00.000-04:00

With a name that sounds more like it came straight out of an Austin Powers movie, the National Clandestine Service will be a new thread on the intelligence web, and purportedly the thread that will hold the web together.

One of their goals is to "'standardize tactics, techniques, training and procedures' throughout the intelligence community." On the surface, it sounds reasonable. But how do you standardize intelligence without compromising its usefulness? If there were a simple handbook that stated all techniques and procedures, would intelligence retain its value?

At the same time, the average person is not supposed to have access to the information that they are paying the CIA and now the NCS to discover. Yet we foot the bill for the new agency. We can accurately judge other agencies' competence and efficiency, but how do we judge whether we are paying too much for intelligence? If we can't know when the would-be evildoers are thwarted by the work of intelligence agencies, if we can't measure how many attacks might be avoided for every dollar we spend, how can we possibly say whether it is beneficial to create yet another organization?

I'd suspect the problem is not undersupply of tax dollars, as the call for an additional 50% increase in intelligence staffing might suggest. Perhaps it is the proverbial "too many cooks spoiling the broth," where too many people are involved and tasks are continually passed from one person to the next.

Politicians know that taxpayers cannot verify whether their money is being spent properly with regard to intelligence. They don't see the reports and they can't verify where the money is being spent, even if they tried. It would therefore make sense that politicians overemphasize the danger of terrorist attacks, creating color codes to emphasize alert levels that supposedly state the risk of a terrorist attack at any given time. Oddly enough, it has never been at or near zero, even though there are many days in which no terrorist attacks occur on U.S. soil. Underestimating the need for additional funding is not an attribute typically held by politicians.

Is there a dire need for a National Clandestine Service? Without addressing whether the gathering of intelligence is a legitimate function of government, I'd say no. The need for additional intelligence is overemphasized, not underemphasized, and given little monetary constraint, politicians will overspend, particularly when they know their spending cannot be evaluated.

Federal Emergency Mismanagement

2005-10-12T19:05:00.000-04:00

At the risk of sounding terribly redundant, once again FEMA's incompetence has emerged in its handling of Hurricane Katrina. The only thing that we may rely on them to do without fail is squander resources and waste taxpayer dollars. It didn't end with letting former director Michael Brown go. The news just seems to get worse.

Today, "More than 9,000 mobile homes and campers meant for the victims of Hurricane Katrina are sitting unused at government staging areas while displaced families continue to live out of tents and shelters." FEMA attributes this to the difficulty in distributing the trailers due to the effects of Katrina. Let's not fall for their attempts to pin this on the effects of a natural disaster; this one is purely manmade.

James McIntyre, spokesman for FEMA, made a few telling remarks paraphrased in today's article.

1) "The mobile homes require more space than the campers, plus permits from local officials, and that takes time." Permits from local officials, last I checked, were not a side effect of Hurricane Katrina.

2) Prior to receiving a camper or trailer, "an inspector must determine if the proposed property is cleared enough for a trailer, and electricity must run to the site." If all that stood in the way of receiving a shelter were a few trees, people who wanted a trailer would be quite happy to clear the property themselves. Of course, they might need a permit for that too ...

3) "Officials at FEMA don't know how many people have signed up for the homes," yet FEMA should have all of this information, since "victims can call a toll-free number, use the Web or go to a relief center to register." If FEMA has taken the responsibility of providing an adequate number of homes and managing all requests for campers and trailers, shouldn't it know how many are needed? How quickly are they processing these requests if they don't even know how many there are?

It is no wonder that the author found no shortage of people still waiting for FEMA to deliver. "Raymond and Andra White of Gulfport, Miss., requested a trailer about a week after the storm and they're still living out of a tent on their property. The agency has yet to send an inspector to determine if their property is suitable."

I have little patience for incompetence, especially when I am paying for it. If we don't get rid of the failed Federal Emergency Management Agency completely, we should at least call it what it is: the Federal Emergency Mismanagement Agency.

Conservation

2005-10-11T23:10:00.000-04:00

I happened to be listening to the radio on my way to Ft. Belvoir this evening and overheard a commercial sponsored by Chevron. It encouraged listeners to conserve fuel by driving 55 mph instead of 65, and asked them to "do their part" in conservation.

What makes me conserve fuel? It certainly isn't radio commercials. The high prices I pay to fill up my car are encouragement enough to conserve. I don't take long drives without a compelling reason. I've even started carpooling to work on some occasions. None of these actions were brought about by environmentalists, politicians, and Chevron encouraging me to conserve. All were brought about by my utility maximization. If before I had to give up only 3/4 of an hour of my time to fill up my car with gasoline and now I have to give up a full hour of my time to pay for a tank of gas, I am not going to use as much. I'm not going to frequent the restaurants that are thirty miles away; instead, I'll go to the restaurants that are within five miles.

Prices are driven by scarcity, and human action is driven by prices. We all seek to spend as little as possible to attain our desired end. When prices rise, we find other ways of accomplishing those ends -- ways that cost less. We can thank the market for motivating our 'conservation efforts.'

My Oh Miers

2005-10-10T18:04:00.000-04:00

As more information becomes available about Harriet Miers, she seems to become more of an enigma. What does she stand for?

From the start, there was talk of her contributing to Al Gore's campaign many years ago. According to WorldNetDaily, her law firm's PAC also contributed $1000 to Hillary Clinton in 2000. If we are looking for consistency, we won't find it here.

Yet President Bush expects us to trust him when he says she is a good pick and claims that, "senators of both parties will find that Harriet Miers' talent, experience and judicial philosophy make her a superb choice to safeguard the constitutional liberties and equality of all Americans. Harriet Miers will strictly interpret our Constitution and laws. She will not legislate from the bench." How can he be sure? Is his information more reliable than the information regarding WMDs in Iraq? Demanding for the American people to trust him on his nomination is too much for any elected official to ask.

More importantly, Bush is engaging in pure favoritism, selecting a nominee from his home state who worked for him personally, while turning a blind eye to much more highly qualified candidates.

It is the duty of the Senate to reject such nominations, in the spirit of Federalist #76 which reads, "the necessity of [requiring the Senate's] concurrence would have a powerful, though, in general, a silent operation. It would be an excellent check upon a spirit of favoritism in the President, and would tend greatly to prevent the appointment of unfit characters from State prejudice, from family connection, from personal attachment, or from a view to popularity."

Costs of Taxation

2005-10-09T21:25:00.000-04:00

The Adam Smith Institute blog had an entry this past week entitled, "Adam Smith and Taxes." The author made a good observation, noting that, "When work is taxed, people work less. They take fewer risks, because the risk/reward balance deteriorates – which means less innovation for the society. And they learn less, because we learn by doing things, so society's knowledge advances more slowly too."

People often forget that taxation discourages work and innovation. Of course people will still be productive to some extent; however, it will not be to the same extent that they would have been otherwise.

I generally consider myself a 'risk-neutral' person. I take risks when I feel my expected return (the return that takes into account risk) is greater than it would be in comparison to my available alternatives. Let's suppose I have an invention which I believe may benefit mankind immensely, and benefit my bank account immensely as well. Without taxes, I estimate my return at $100 million. With taxes, I might estimate my return to be $70 million. However, my risk has not changed from the $100 million estimate to the $70 million estimate. Although my invention may benefit mankind, I am less likely to undertake it when the expected return is lower. I may choose to enjoy my leisure time or to invest elsewhere instead of deciding to develop my great invention.

Taxation may pay for services that we consider to be in our interest, but they do so at the expense of goods and services that might have existed in their absence. These costs remain unseen to both the politician and the taxpayer.

Semper Paratus

2005-10-08T20:30:00.000-04:00

"Always prepared"

Politicians would have you believe that it is their duty to prepare for everything, regardless of the cost and regardless of whether their preparations are likely to be needed in the future. They consistently emphasize how bad things could be if they don't act now and take more of your earnings. Yet as much as they take dollar after dollar from my paycheck and yours, they never seem to be very prepared for events that do occur.

Now politicians feel it is their duty to plan for an avian flu epidemic. Avian flu is certainly a danger, and it has proven to be fatal when contracted. The strain of avian flu in 1918 killed 675,000 people in the U.S. Shouldn't we be worried?

Not all doctors think so. According to a recent article, "The fear 'is very much overdone, in my opinion,' said Dr. Edwin Kilbourne, an emeritus professor of immunology at New York Medical College, who has treated flu patients since the 1957 pandemic and has studied the 1918 flu. The bird flu, he said, is distantly related to earlier flus, and humans have already been exposed to them, providing some resistance. Scientists also say that the death rate may not be as high as it appears, because there may be some milder cases that have gone unreported."

Additionally, a number of things have changed since 1918. We simply don't die from as many diseases as people did back then. Penicillin wasn't available in 1918 and wasn't widely used until the second World War. There was no cure or vaccine for poliomyelitis, generally shortened to polio, which continued to kill and paralyze people in the U.S. until the 1950s.

If the government truly believes that avian flu poses immediate danger, it would allow people to research and produce vaccines and treatments without imposing a lengthy and costly FDA approval process that serves to discourage new inventions in medicine. We don't have to look far to recognize that the market consistently outperforms government when it comes to anticipating and preparing for real danger.

Freedom of Speech

2005-10-07T00:30:00.000-04:00

In the news today, a woman named Lorrie Heasley, with the assistance of the ACLU, is suing Southwest Airlines for violating her civil rights.

According to the article, "A woman was booted off a Southwest Airlines flight for wearing a T- shirt that bore an expletive and images of President Bush, Vice President Dick Cheney and Secretary of State Condoleezza Rice." It continues with a quote from Ms. Heasley herself, "I have cousins in Iraq and other relatives going to war ... Here we are trying to free another country and I have to get off an airplane ... over a T-shirt. That's not freedom."

Well, Ms. Heasley, it is freedom. It is the freedom of Southwest Airlines to set terms and conditions on your use of its property (the airplane), and the freedom that you exercised when you agreed to purchase a ticket along with the terms and conditions that accompanied it. It is the freedom of Southwest Airlines to remove you from its property for violating those terms and conditions, particularly when they were agreed upon.

You can have all the freedom of speech the Constitution guarantees -- but not on someone else's property. The property owner has the right to exclude you from his property. Suppose I invite someone to my home who enjoys talking about video games. I do not enjoy listening to people talk about video games. While it may not be the best way to keep a friend, I have the right to tell my friend to leave if he does not cease to talk about video games. Could my friend sue me for any costs he incurred upon being told to leave my home? Suppose the timing of my request for him to leave coincides with rush hour traffic. Could he claim that I owe him for the additional time and gas he spent driving home? Of course not. Yet Ms. Heasley is demanding reimbursement for the costs she incurred for the remainder of the trip home. As the property owner, I choose whom I will allow to occupy my property at any given time. Why should it be any different for a business, such as Southwest Airlines?

Freedom of speech means that I can use my property to publish my ideas and I can speak freely on my property, even speaking out against the government. I exercise my freedom of speech within the bounds of my property rights. For example, I use my own laptop to write posts on this weblog. I do not enter your home, declaring my right to free speech, and proceed to preach the merits of capitalism and property rights to you. To do so would violate your property rights.

"Freedom" is not the ability to do anything you want, regardless of other people's rights. Freedom is the obligation of the government to refrain from interfering with your speech or actions unless you are violating another's property rights.

Fire FEMA Part II

2005-10-05T06:57:00.000-04:00

"The Federal Emergency Management Agency's conduct code prohibits urban search-and-rescue teams from having guns." (AP) Someone at some point thought this sounded like a great rule to have, and now FEMA is strictly following it. It's more than slightly ironic that the prohibition would be placed on those rescuing people -- i.e. saving lives -- a reasonable assessment would not be that they are more inclined to use their weapons for harm.

In another display of sheer incompetence, FEMA told the Phoenix Fire Department's Urban Search & Rescue team to go home. Why? The Phoenix Search & Rescue team had brought police with guns along with them for protection. According to the article, "Officials told the Phoenix team on Sept. 26 that their help was no longer needed after members of the group were seen embarking on a helicopter flight with a loaded shotgun while helping with the aftermath of Rita. " It's bad enough that they brought police with guns, but I suppose the one shotgun on the helicopter was the last straw.

As I've said before: every time there is an 'emergency,' people mention sacrificing some of their rights, yet government never offers to sacrifice even its most absurd regulations. We've sacrificed billions of dollars in taxes in the name of "hurricane relief." And for what? To pay for FEMA to send firefighters home and then claim it needs more money?

Another 'Stealth Justice'

2005-10-04T06:44:00.000-04:00

George W. Bush's record has been less than stellar lately. With outrageous spending and bad policy decisions, those on the left and right have grown to criticize him. His recent nominee for Supreme Court has become another point of criticism by those who probably voted for him in the past election.

President George W. Bush on Monday nominated a member of his inner circle, White House counsel Harriet Miers, for a Supreme Court vacancy, choosing a woman with plenty of legal experience but who is not a judge to replace the retiring Sandra Day O'Connor.
Miers, 60, a longtime ally of Bush's going back to his days as Texas governor, would be the third woman ever to serve on the Supreme Court. (Reuters)

I'm skeptical of appointing anyone to the Supreme Court who has never served as a judge. Everyone has to start somewhere -- but few start at the Supreme Court. However, lack of experience in that arena is not necessarily a disqualifying factor. Chief Justice Rehnquist was not a judge prior to his appointment, while Ruth Bader Ginsberg served as a judge for over a decade prior to her appointment. Understanding and properly interpreting the Constitution has little to do with how many years one has served as a judge.

While we don't know much about the new nominee, Bush does. With that said, I can't tell whether that is a good or bad thing. Is she a better choice than all of the potential Justices that he did not nominate? Who knows?

Judges, particularly those on the Supreme Court, are supposed to be free of political influence. Their decisions should be made solely to comply with the Constitution, and not to answer to politicians whose incentive is to manipulate the Constitution for their own purposes. Harriet Miers may be intelligent and may have good intentions, but as former White House counsel and a close ally of Bush, will her rulings be free of political influence and consistently in line with the Constitution? Again, who knows?

Harriet Miers might be stellar, and she might not. At this point, there's just no way to tell.

For a Limited Time Only

2005-10-03T06:50:00.000-04:00

Last week, a reader emailed me this article, published in Wednesday's edition of the Washington Post. My apologies for not writing about it sooner.

It's simply another example of government being overly generous with other people's money -- and still not providing the quality service that the private sector is able to provide. Why we continue to trust government with exorbitant amounts of our salaries is beyond me.

FEMA insists that the contract was necessary; however, many criticize it for its waste, noting that the contract was "a $236 million agreement with Carnival Cruise Lines for three ships that now bob more than half empty in the Mississippi River and Mobile Bay. The six-month contract -- staunchly defended by Carnival [naturally!] but castigated by politicians from both parties -- has come to exemplify the cost of haste that followed Katrina's strike and FEMA's lack of preparation." It's analogous to someone running into a car dealership and saying they must have a car by the end of the day. At that point, their negotiating ability has gone down and the car salesmen are seeing dollar signs.

However, FEMA received an offer from Greece for two free ships! FEMA spokesman, Butch Kinerney is quoted as saying "Our priority was to get the ships in place as quickly as possible." As quickly as possible and at any cost to the taxpayer. Is a few days worth $236 million?

Even those housed on the cruise ships are getting a bad deal. Rather than sit in a harbor, those temporarily residing on the ships could have received a nice cruise complete with meals and entertainment. "If the ships were at capacity, with 7,116 evacuees, for six months, the price per evacuee would total $1,275 a week ... A seven-day western Caribbean cruise out of Galveston can be had for $599 a person," noted Sen. Tom Coburn (R-Oklahoma). But the ships are not at capacity; they are only at half capacity. The average price per person must be twice as much -- the price of four nice cruises.

The government's record on spending should be reason enough to take away its box of endorsed blank checks with our account numbers.

China's 56 Years of Communist Rule

2005-10-02T19:40:00.000-04:00

Drudge linked to this article, noting that China had marked its 56th year of communist rule yesterday. People often criticize capitalism for creating unequal income "distribution," and creating a gap between rich and poor. However, in capitalist systems, the poor have the ability to afford items that the poor in other countries simply cannot. We don't see people starving to death in the U.S., even when we claim that their income is "below the poverty line." Many people in the U.S. who are in "poverty" have televisions. The televisions might not be the $5000 high definition flat screen television that they'd like, but it allows them to watch the same programs as anyone else.

Interestingly enough, the article stated that a problem facing China is, "Increasing numbers of poverty-stricken farmers are protesting against widespread graft, industrial pollution and seizures of land for development. Analysts have warned that widening income disparities between the cities and countryside and rising unemployment could threaten social stability ... while city residents are buying their first cars and taking their first overseas vacations, farmers in the vast countryside still labor as they have for centuries."

Progress exists in a capitalist society where all can enjoy the freedom to use their labor and knowledge to help others -- and can make, and keep, their profits from doing so.

Helping Big Business

2005-10-01T13:49:00.000-04:00

It's easy to point out the obvious case of government conducting charity, i.e. helping the 'underprivileged' at the expense of the 'privileged.' With as much self-righteous indignation as they can muster, politicians make their caring, charitable nature (with other people's money) as much of a public display as possible. It is also pretty easy to criticize this form of government intervention as a matter of principle, at the risk of appearing to be unsympathetic to the plight of the underprivileged.

However, it takes far more sophistication to decipher government intervention that helps the 'privileged' at the expense of the 'underprivileged.' Such intervention is far more subtle. Politicians do not engage in the same self-righteous public display of this behavior. Instead, they cloak their intentions in the titles "consumer advocacy," "protecting Americans," and making information available "for the public good."

The USDA's National Animal Identification System follows the usual consumer advocacy/protection defense, as I mentioned in yesterday's post. The USDA website touts it as, "a national program intended to identify specific animals in the United States and record their movement over their lifespans. It is being developed by the U.S. Department of Agriculture (USDA) and State agencies—in cooperation with industry—to enable 48-hour traceback of the movements of any diseased or exposed animal. This will help to ensure rapid disease containment and maximum protection of America's animals."

Note the phrase, "in cooperation with industry," contained in the above quote. Ironically, they present it as though 'industry' normally would not cooperate with such requirements. However, it is 'industry' that supports it the most! What better way to put your competition out of business than to raise its cost enough so that it goes into another business altogether?

Read this article at National Hog Farmer. To summarize the conclusion: because the NAIS would "boost consumer confidence" in meat quality, it should be adopted. But how much "consumer confidence" is enough? According to the article, consumer confidence (according to a survey, the reliability of which I discussed previously), would rise from 6.5 to 7.4 on a scale of 1-10. Sure it would -- but at what cost? We could raise consumer confidence by having veterinarians inspect each animal every day. We could house animals in immaculate facilities and feed them only certified organic vegetables. We could hire personal trainers for them so that each animal had the proper amount of exercise. I'd be pretty confident that the meat that was produced was completely healthy. I'm also pretty confident I wouldn't be able to afford to have my filet mignon quite so often either.

This is why industry must go to government to mandate higher quality. Consumers such as myself are not willing to pay for it. But government, on the other hand, can forcibly take consumers' money to pay for programs such as the NAIS.

The NAIS doesn't make me better off. It does not make the small farmers or the people who raise animals for themselves better off. Politicians, catering to the special interests of large industries, make 'industry' better off at our expense.

National ID System

2005-09-30T06:52:00.000-04:00

... for animals?

That's right. The U.S. Department of Agriculture is promoting a National Animal Identification System, (NAIS), stating that the "USDA’s ultimate goal is to create an effective, uniform national animal tracking system that will help maintain the health of U.S. herds and flocks."[1]

To aid in tracking what it considers to be "livestock" animals, the USDA hopes to make this program mandatory by 2008. It includes requiring owners of any livestock (cows, pigs, sheep, chickens, etc.), to report their location and receive a premises ID. The premises ID is a unique identifier for a property that houses any livestock. The federal government will enter all information about a property and the property owner that it believes is relevant to aid in tracking the property owner's animals. Additionally, "animals will be identified either individually with a unique Animal Identification Number (AIN) or, if they are managed and moved through the production chain as a group, with a Group/Lot Identification Number (GIN)."[2]

"There are essentially four pieces of information required to document an animal movement event. The [list] below shows the four pieces of information that will be stored in a national animal records repository:
1. National Animal Records Repository—Data Elements
2. Animal Identification Number, AIN, or Group/Lot Identification Number, GIN
3. Premises Identification Number, PIN, of the location where the event takes place
4. Date of the event
5. Event type (movement in, movement out, sighting of an animal at a location, termination of the animal, etc)"[3] The above list is by no means inclusive, as each of the five elements contain its own data requirements.

According to Mary Zanoni, Ph.D., J.D., Executive Director of Farm for Life, "Every animal will have to be assigned a 15-digit ID number, also to be kept in a giant federal database. The form of ID will most likely be a tag or microchip containing a Radio Frequency Identification Device, designed to be read from a distance. (Plan, p. 10; St., pp. 6, 12, 20, 27-28.) The plan may also include collecting the DNA of every animal and/or a retinal scan of every animal. (Plan, p.13.)The owner will be required to report: the birthdate of an animal, the application of every animal’s ID tag, every time an animal leaves or enters the property, every time an animal loses a tag, every time a tag is replaced, the slaughter or death of an animal, or if any animal is missing. Such events must be reported within 24 hours."[4]

Guess who is promoting the NAIS the most?

It's not those "small farmers" that politicians always proclaim they must protect. It is the big companies, including but not limited to, the National Pork Producers, Monsanto Company, and Cargill Meat. Why would they impose such restrictions on themselves? Quite simply, they want to drive out their competition through forcing the small farmer's cost of raising animals to rise. (For example of how this reasoning works, see my previous post, Think Like a Lobbyist).

Additional analysis to why this is a violation of property rights is to follow.

to be continued ...

[1] Premises ID Factsheet
[2] Animal ID
[3] Ibid.
[4] Mary Zanoni, Ph.D., J.D. Why You Should Oppose the USDA’s Mandatory Property and Animal Surveillance Program

Politicians & Money Don't Mix

2005-09-29T07:14:00.000-04:00

Skimming an article on House Majority Leader Tom DeLay's indictment this morning, I noted that the alleged violation was, "Texas law prohibits use of corporate contributions to advocate the election or defeat of candidates."

I suppose that it is legal to use those corporate contributions to create additional special interest programs at the expense of millions of Americans. When was a politician indicted for that?

Quite frankly, I believe that his recent statements are more of a crime than the alleged
violations in his recent indictment.

Via the Washington Times, Sept. 14, 2005:

House Majority Leader Tom DeLay said yesterday that Republicans have done so well in cutting spending that he declared an "ongoing victory," and said there is simply no fat left to cut in the federal budget ...
Asked if that meant the government was running at peak efficiency, Mr. DeLay said, "Yes, after 11 years of Republican majority we've pared it down pretty good."

And how about McCain's violation of the McCain Feingold law earlier this month?

Via the Orange County Register (hat tip to Club for Growth):

Sen. John McCain has made a reputation for campaign finance reform and for being an independent thinker. So it was no surprise that Marilyn Brewer parlayed his endorsement into her first TV commercial for the Oct. 4 special election.In the ad, McCain compares Brewer to both Ronald and Nancy Reagan. One thing the first airings of the ad did not include: Brewer does not state that she approved the ad. That’s now required by law. Specifically, the law co-sponsored by McCain himself.

All the campaign finance reform laws in the world don't make politicians more responsible with other people's money. But the real threat is not with the use of voluntarily contributed funds -- it is with the use (and misuse) of forcibly seized taxpayer dollars.

Finding Oil

2005-09-28T07:03:00.000-04:00

For some reason, people always seem surprised when they observe people responding to changes in price. According to an article I read this morning (found via Drudge):

Saudi Arabia, the biggest oil producer, and Exxon Mobil, the largest oil company, yesterday declared that the world had decades' worth of oil to come, in an attempt to calm fears about the record prices experienced in recent weeks.
Forming a powerful alliance, the Saudi oil minister Ali al-Naimi said, at an industry conference in Johannesburg, that the country would soon almost double its "proven" reserve base, while Exxon's president, Rex Tillerson, spoke of 3 trillion or more barrels of oil that are yet to be recovered.
Mr Naimi said that Saudi Arabia would "soon" add 200 billion barrels to its current reserves estimate of 264 billion barrels.

Did billions of barrels of oil just magically appear? Not quite.

As the price of oil rises, the costs of exploration and R&D have greater recoverability, translating to a higher expected return. When the price of a scarce good goes up, we can expect that people will try to produce or find more of that good to sell at the high prices.

Prior to a rise in oil prices, it may not have been a worthwhile investment to search for more oil or find alternative energy sources. Fortunately, I do not have to go to Saudi Arabia and tell people to start finding more oil for me to consume. The price signals that the market sends combined with the desire to make a profit are more than sufficient.

Pure Exploitation

2005-09-27T07:05:00.000-04:00

I'll admit it - I am quite addicted to eBay. Perhaps my fondness for eBay stems from my view of shopping as purely a transactions cost and eBay as a way to reduce the time I have to spend shopping. Perhaps it is because items in general are less expensive. Or perhaps it is because of the unique items that are available for sale. In perusing eBay this morning, I happened across this auction. I had to chuckle at the irony somewhat -- it is not often that you hear of people exploiting their own loss after a hurricane, amidst charges of "price gouging" and "taking advantage of other people's misfortune." At the same time, I had to marvel at the seller's entrepreneurial spirit.

A few years ago, I remember when Hurricane Isabel came through Virginia. It didn't cause significant damage, but there were power outages and many fallen trees. I was one of the first to take advantage of other people's misfortune. I drove around and found a neighborhood with a number of fallen trees and came across a house with a weeping willow that had fallen across the yard. I knocked on the door and asked the owner if he would like for me to remove the tree. I wasn't sure how much a tree removal service would cost, but I knew my price was less. I made the deal - for $100, I would cut down the tree for him and take all of the branches and logs away. The owner of the house was more than happy that I was making money from his misfortune. He had a heart condition and did not want to risk moving the tree himself. So I suppose not only was I taking advantage of the tree falling through his yard, but also taking advantage of his poor health! Yet, this transaction was mutually beneficial for both parties. What if I had not come along seeking to profit from the misfortune of others? Perhaps the man would have tried to move the tree himself, risking further injury. Or perhaps he would have paid a more expensive tree removal service. Lucky for him, I was competing with others who also wished to exploit the negative impact of Hurricane Isabel. Had there been a law stating that I could not take advantage of this man's misfortune and could not charge him to remove the tree from his yard, I would have just stayed home.

It is comforting to me that there are people with an entrepreneurial spirit who wish to take advantage of my misfortune. In fact, I wish there were more people who wanted to take advantage of my misfortune -- then I might pay less to have my misfortune corrected. For example, I currently have a nail in my car's front tire. I have neither the time nor the inclination to patch the tire myself, but it is certainly an inconvenience having to fill my tire with air a few times a week. Luckily for me, there are at least a dozen tire places within just a short distance, and all of them are competing for my business. They stand ready at a moment's notice to take advantage of my misfortune, so that I don't have to suffer misfortune for long.

Call it what you will: pure exploitation, taking advantage of others, profiting/benefiting from misfortune, etc. This profit-seeking behavior makes people better off than they otherwise would be.

Correction to 'Counting Costs'

2005-09-26T07:11:00.000-04:00

Yesterday I posted on the costs of homeschooling versus private school. However, my colleague at Law, Legislation and Lunacy aptly asked, "but what if you have thirty kids?"

I must concede - if you have thirty children, homeschooling is probably cheaper than private school. However, this observation explains another phenomenon. People generally associate homeschooling with very religious people, and certainly one can point to religious reasons that those people are distrustful of state education. One might also note that homeschooling families on average have more children. It was rare for me to know of an only child who was homeschooled, but I knew plenty of families with four or five children. However, in private school many of the other students did not have siblings. It's not just that religious families with many children have some inclination towards educating their children at home; it's that their relative cost per child is lower. With an increase in the number of children, the relative cost of homeschooling another child drops. However, the cost of sending the additional child to a private school remains constant. Suppose a parent would be earning $50,000 after taxes and has five children. Private school costs $11,000 per child per year, or $55,000, and homeschooling costs the parent's salary, $50,000. It is no surprise that we notice homeschooling families tend to have more children.

Counting Costs

2005-09-25T11:00:00.000-04:00

I attended public school, private school and was homeschooled during my elementary school to high school years. Having had exposure to all three environments, I feel somewhat qualified to correct statements such as this one, overheard earlier in the week: "Homeschooling is cheaper than private school."

Homeschooling is not cheaper than private school. In fact, it is far more expensive. One might argue that the benefits of homeschooling outweigh the benefits of private school and so it is a better deal, but that is irrelevant to the issue of cost. The cost of homeschooling is next best use for your time and money, i.e. your opportunity cost.

Both of my parents have college degrees in technical fields. However, in order to accommodate my wish to study at home, one of them (my mother) had to stay at home as well, giving up three years of her salary for the three years that I was homeschooled. She could have sent me to private school for all three years and given up less than one year of her salary. Or, if she valued her leisure time more than working, she could have enjoyed gardening and shopping instead of spending her day teaching me algebra, physics and trigonometry.

Representing cost as merely the dollar amount for tuition represents a fundamental fallacy in economic thinking. All costs are opportunity costs. Monetary costs make up only one part of the total cost.

Door-to-Door Confiscation

2005-09-24T13:50:00.000-04:00

In Stalin-esque fashion, officials in Louisiana have taken the view, "If the opposition disarms, well and good. If it refuses to disarm, we shall disarm it ourselves."[1] As I mentioned last Tuesday, the evening news presented a video of police entering a home in New Orleans, finding firearms, and confiscating them. Perhaps I should have been more clear. "Entering" meant breaking the glass on the front door and opening the door, using what appeared to be a crowbar. "Finding" meant, upon not finding survivors, rather than continuing to search for survivors elsewhere, they searched for weapons that might have remained in the home.

Officials have continued their weapons confiscation mission in New Orleans, going from door-to-door to take guns from their rightful owners. They have even seized a firearm from a man who had one in his boat for protection while he rescued people. Law enforcement is supposed to protect those who cannot protect themselves -- not create more people who cannot protect themselves. It is ironic that law enforcement is targeting gun owners and those gun owners are peacefully surrendering their weapons, rather than using them to defend their right to keep them. So much for the argument that owning a weapon means you are more likely to use violence to resolve conflict. Apparently the police would rather confront peaceful gun owners than unarmed looters. Those 'right-wing-extremist' gun owners are not nearly as extreme as the founders such as James Madison, who stated, "Americans need not fear the federal government because they enjoy the advantage of being armed, which you possess over the people of almost every other nation."

Two groups, along with individuals in Louisiana, are trying to stop this blatant violation of property rights. "The National Rifle Association (NRA) and the Second Amendment Foundation (SAF) filed a motion in the U.S. District Court for the Eastern District of Louisiana, seeking a temporary restraining order to halt the seizures of guns from law-abiding citizens. They described the confiscations as 'arbitrary,' 'without warrant or probable cause' and thus 'illegal.'" Read the whole article here.

The creation of law enforcement officers did not end the right to self defense. The existence of police does not nullify the need for private ownership of firearms. As Patrick Henry stated in a speech on June 9 1788, "Are we at last brought to such humiliating and debasing degradation, that we cannot be trusted with arms for our defense? Where is the difference between having our arms in possession and under our direction, and having them under the management of Congress? ... If our defense be the real object of having those arms, in whose hands can they be trusted with more propriety, or equal safety to us, as in our own hands?"

If we want to claim that racism is at work, or that government has no regard for people in low-income areas, this is the best case so far. As Thomas Sowell stated six years ago, "The biggest hypocrites on gun control are those who live in upscale developments with armed security guards -- and who want to keep other people from having guns to defend themselves. But what about lower-income people living in high-crime, inner city neighborhoods? Should such people be kept unarmed and helpless, so that limousine liberals can 'make a statement' by adding to the thousands of gun laws already on the books?"

"To disarm the people [is] the best and most effectual way to enslave them."[2] And how much easier it is to control slaves than those who may act freely.

[1] http://en.wikiquote.org/wiki/Stalin
[2] Mason, George. 3 Elliot, Debates at 380

A 'Forced' Choice

2005-09-23T06:56:00.000-04:00

This article caught my eye partly because one of the people mentioned in it lives in Northern Virginia. It is easy to sympathize with the woman in the article; she has been the victim of unfortunate health conditions. Noting that she is also living on disability pay and contributions, we might also postulate that her health conditions had a negative impact on her income.

The other reason this article caught my eye is its application of the word "forced" to a choice based on price changes and budget constraints.

For Pam Koren, the storm's impact has been more immediate - and more drastic. Suffering from low blood sugar, spasms of the esophagus and nerve damage, she exists now on disability pay and contributions from her daughter, who attends college and works as an assistant youth minister.
With gas and food prices rising after the storm, she says, she was forced to put her house in Burke, Va., on the market. She is considering east-central Pennsylvania, and a less expensive home.
"I'm a wreck because I'm not sure I'm making the right decision," she says. "I didn't want to have to do this, but things have become so tight I have not had a choice. I did not expect things were going to get this bad."

She was forced to put her house on the market? More accurately, she decided that given her income constraints and the value she placed on goods other than her house, she decided that it was in her interest to sell her home and use the proceeds for a less expensive house and the remaining proceeds to purchase other goods on which she placed a higher value. We make choices like this every day because we live in a world of scarcity and constraints. When I choose to sell my car to buy a new one, is it terrible that I was "forced" to sell my car? If I had infinite resources, I would have kept it and the new car. The presence of scarcity and constraints requires me to determine which option is the best out of all available options. Am I "forced" to buy clothing because it is cheaper than making it myself and there is some minimum level of clothing that I must have? We do not and should not attempt to guarantee rights against circumstances which make one choice cheaper or more feasible than another; to do so is impossible.

The woman in the article is also quoted as saying, "I didn't want to have to do this, but things have become so tight I have not had a choice." Had she been more accurate, she would have said that due to budget constraints and rising prices, her available options have been reduced. To maintain the minimum requirements of other goods, she must then cut back on goods such as housing. She will still have one house, but the desirability of her location may be lower, the house may be smaller, etc.

Life doesn't always give us the choices we want, but (as long as we are the ones assessing our own values and making decisions based on those values) we always have choices.

More Hurricanes = More Government?

2005-09-21T23:45:00.000-04:00

Hurricane Rita has been listed as a Category 5 hurricane of 898mb and sustained winds of 175mph. According to CNN, "President Bush declared states of emergency in Texas and Louisiana, allowing the Federal Emergency Management Agency to coordinate relief efforts."

Do we ever learn? Judging from FEMAs recent performance, I'd say people are better off without the government "coordinating" (read: hindering, micro-managing, delaying) relief efforts.

People -- individual people with no political power -- have done more to help relief than mayors, FEMA, the President, or state officials. Why? Could it be that central planning just doesn't work? For now, we can set aside the issue of taxation and government reaching outside of its scope by engaging in charity. Does government "charity" make disaster relief happen sooner?

Big, evil corporations -- WalMart and others -- have donated their own money to helping people. The same organizations that politicians like to demonize picked up the slack when government, even with billions of dollars of other people's money, didn't.

Rather than allowing FEMA to coordinate relief efforts, why don't we allow as many private citizens and companies to help people? Every day we trust that grocery stores will have groceries ready for us to purchase; yet in emergencies we cannot trust that government will provide us with effective disaster relief. Perhaps the problem is that government is already taking your money, while the grocery store must continue to earn it.

Think Like a Lobbyist

2005-09-21T07:01:00.000-04:00

In the news yesterday, "New York Times Co. (NYT) on Tuesday said it would cut about 4 percent of its work force, or 500 jobs, and warned that weaker newspaper advertising and rising costs could reduce earnings to less than half of Wall Street forecasts this quarter. Knight Ridder Inc. (KRI) also plans to cut staff as the newspaper industry struggles with a lackluster ad market, increased newsprint costs and circulation declines with readers turning more often to the Internet for news."

The New York Times and other newspapers have also turned to the Internet to generate additional revenue, but have still been unable to compete against other online sources -- particularly blogs which charge no monetary fee for their use. Could it be the quality of the news online? Or perhaps the lack of monetary costs associated with clicking on a link to a blog has something to do with this phenomenon. I decided to think like a lobbyist for the newspapers, ignoring any moral objections to manipulating law in my favor at the expense of others, and asking myself: what would a lobbyist write ... ?

------------------------------
SAVE THE NEWSPAPERS!!!
We must save these jobs! Newspapers are an integral part of history and we cannot let them disappear due to the rise of weblogs and other online news sources! Think of the days as a child, watching your father sit at the table with his newspaper and coffee. Remember clipping articles about your favorite athletes. Consumers are falsely led to believe that the Internet is a good substitute for newspapers. We must do something to save the newspaper industry!

If I were a lobbyist, I’d start proposing a “FAIRNESS IN JOURNALISM” law. Here are two options.

Option 1
Stated reasoning:
How do we know that the information presented in blogs is accurate and well researched? In the interest of protecting the public from misinformation, we should require the leader of each organization that produces articles which may be seen as news to take classes or obtain licenses to ensure that they understand and communicate the news. All they have to do is have one representative from their organization take a course and they can write all they want! It is such a simple step and will ensure that Americans are getting reliable information.

Hidden reasoning:
This law eliminates our competition by reducing the supply of competitors. Although it applies “equally” to everyone, it does not impact everyone equally. This is its intent. From the perspective of the NYT, this representative would be one of many – a small percentage of the workforce. (If 4% = 500 workers, their total workforce is approximately 12,500; therefore one person out of 12,500 accounts for only .008 percent of the NYT workforce). However, let’s suppose that one person from Capital Freedom were required to take the same class. One person accounts for 100% of the “Capital Freedom workforce,” and that workforce has much better things to do with her time. We can easily put Capital Freedom and other blogs out of business!
------------------

Option 2
Stated reasoning:
News organizations need to start "giving back to the community." As the NYT representative, I will be the first to support a law requiring all providers of information on current events to pay a flat $100 fee that will go to help the underprivileged in their community. Any news organization that refuses to pay the $100 is obviously doesn't care about helping the community and should no longer be allowed to serve as a source of news.

Hidden reasoning:
Let’s suppose we charge $100 flat fee to post any news. For the NYT, this is pocket change – especially compared to the profits that they can make as a result of the law. For a blogger like myself, $100 has to be greater than the psychological benefit I get from maintaining a weblog in order for me to continue it. We would therefore observe a law which disproportionately affects those news organizations designed to generate little or no revenue. A licensing fee has the same effect.
-------------------

Luckily no one is proposing these (at least, not yet and not to my knowledge). We would know that the effect of either option in the "FAIRNESS IN JOURNALISM" law would be to reduce the supply of bloggers and other online news sources, reduce competition and lower incentives to provide the best quality news. Sometimes we have to think like a lobbyist to understand the true motives behind lobbyists' "consumer advocacy."

One Car A Month

2005-09-20T06:35:00.000-04:00

For years, proponents of limiting the number of guns that can be purchased each month by an individual have stated, "who needs more than one gun anyway?" You can only accurately fire one (maybe two) at a time, and why would anyone need to buy more than one gun per month?

How right they are. A person probably does not need more than one gun. With that in mind, I'd like to propose another law that follows the same reasoning. We know that cars kill thousands of people each year. They are clearly designed to break the law and potentially cause harm to others, as evidenced by their ability to reach speeds that far exceed legal speed limits. Cars contain flammable substances and cause pollution; even when they are not driven, the gasoline they contain slowly evaporates into the air. What if a car were left unlocked and unattended -- think of the children! And, of course, you can only drive one car at a time. Why does anyone need more than one car?

People who may have had firearms ruined or lost to a natural disaster, fire, or theft (including government seizure), are subject to their state's one-gun-per-month restriction.* I include government seizure only after watching the evening news and seeing police enter a home in New Orleans, find firearms, and confiscate them. To the news anchors, it seemed to be a normal occurrence and nothing to cause alarm. (I suppose it's not looting if you're taking necessities such as food and water -- or if you are police loading someone else's firearms into your boat.) However, if you previously owned six firearms, it will take you at least five full months to replace them if you start buying them immediately at the maximum allowable rate. This unnecessarily increases the transactions costs associated with replacing lost firearms. Rather than replacing them all in one transaction, the individual must return to the dealer five additional times. This makes as much sense as going to the grocery store every day of the week when you could have purchased everything for the week in one trip.

One gun per month restrictions accomplish as much as "one car per month" restrictions would, and are equally, if not more, absurd.

*Not all states have a 'one-gun-a-month' restriction, but there has been vocal support for making this a federal law.

Owning Your Time

2005-09-19T06:48:00.000-04:00

A dusk-to-dawn curfew is in effect in New Orleans, in an attempt to make up for the law and order that government did not provide earlier.

It might seem like a minor issue on the surface, but instituting a curfew has some strong implications. If someone else has the ability to tell you how to spend your time (or how not to spend your time), your time is no longer yours.

When you go to work, you sell rights to restricted amounts of your time. Given that most employment is 'at will,' meaning it can be terminated by either party at any time for any reason, one has the right to end the ongoing sale of his time as well. If an employee enters a contract promising a year of service to his company, he has agreed to sell at least a year of his time. In exchange for your time, your employer gives you money at an agreed upon rate.

Curfews are not contracts. There is no compensation for the lost time, the time when your duty is to remain in your home when you may have assessed that a better use of your time existed elsewhere. Regardless of the reasoning, a curfew is simply a measure that steals your right to your time.

An Anniversary Worth Remembering

2005-09-18T09:10:00.000-04:00

Yesterday was the anniversary of the adoption of the U.S. Constitution (September 17th 1787) by a convention of states. Ratification was not complete until June of the following year. In the 200+ years of its existence, it has only been amended 18 times.

As much as the founders were able to anticipate abuses of power, and as carefully worded as the Constitution is, we've still departed from its original intent. To avoid any further misinterpretation of the Constitution, I have two small changes to propose:

Remove the phrase "promote the general Welfare" at the beginning. It has become popular to believe that government's purpose is to make laws promoting the "general welfare," rather than that the purpose of writing a constitution which limited central government was to promote the general welfare.
Remove the commerce clause, which allows the federal government "[t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes," or alter it so that its meaning is not so easily distorted. The commerce clause allows for the federal government to regulate interstate commerce (not intrastate commerce) - which was subsequently interpreted to allow federal government to place any regulations it desires on any activity that might affect interstate trade. Its purpose was to allow the federal government to prevent states from creating barriers to trade with other states (e.g. taxing goods that come from other states). It has been the justification for many rulings, including a recent case which upheld federal restrictions on medical marijuana, regardless of whether it was legal in individual states. It was misused in a 1942 Supreme Court ruling (Wickard v. Fillburn) which allowed for regulating a small farmer's harvest of wheat, which he did not sell but used only for himself and his household. The court ruled against Fillburn, reasoning that although Fillburn grew wheat only for himself and did not sell it to other states, his activity"may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce, and this irrespective of whether such effect is what might at some earlier time have been defined as 'direct' or 'indirect.'"

Note that my proposed "changes" are merely changes to the wording and not the original intent. The Constitution was intended to limit government, not to be used as a tool to manipulate law and expand federal power.

Pledging Allegiance

2005-09-17T14:15:00.000-04:00

I recited the pledge of allegiance on my first day at a public school, repeating the words mindlessly and putting my hand over my heart as the teacher had instructed. No one informed me that I had the right to not say the pledge, and certainly no one told me how ridiculous it was to pledge my allegiance, my loyalty, to government. Government is an institution that exists only to protect my rights to life, liberty and property. Shouldn't it be pledging its allegiance to me, and not the other way around?

Instead, we're quibbling over the phrase "under God," a phrase which provides an exit clause for many who believe in God: when the government is in conflict with God, their allegiance remains with God, not with government. Some religions prohibit any oath of loyalty to the state, regardless of whether they simultaneously state that their loyalty is dissolved when the state makes laws prohibiting their religious practice. Maybe politicians and judges should read the Declaration of Independence:

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the Powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation. We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness.
We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good People of these Colonies, solemnly publish and declare, That these United Colonies are, and of Right ought to be Free and Independent States; that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved. . . . And for the support of this Declaration, with a firm reliance on the Protection of Divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.

The Declaration, containing references to God, morality, Providence and principles, was about absolving people of allegiance to government. It was not intended to replace the British rule and demand allegiance to a new government.

Rather than arguing over the phrase, "under God," maybe we should be addressing the constitutionality of a pledge of allegiance to government. Establishing the worship of the state is no accomplishment.

Do We Really Want an Investigation?

2005-09-16T06:55:00.000-04:00

I keep hearing on the news and radio that people are demanding a full-scale investigation into why the government response to Hurricane Katrina was so poor. People should be held accountable for their actions, but my faith in government conducting a thorough investigation of government is a bit lacking. Combine that with the cost of an investigation and I'm pretty sure it's not such a great deal after all.

So why do we demand investigations?

Truth be told, I don't think we really do. When we voice our "demands" without taking into account the costs and benefits of those demands, we're only expressing wishes unconstrained by our willingness to pay.

For example, if I were asked whether I'd like a brand new Ferrari, I'd say yes. This is a wish that does not take into account the cost of the Ferrari. However, if I were at the dealership and they handed me a piece of paper to sign stating that I wanted the car, I'd say no. Why? Did I lie the first time when I said I wanted a Ferrari? There exists a price where I would be willing to purchase a Ferrari (e.g. my desire for a Ferrari can be valued at some amount), but at prices above that, I am not willing to make the tradeoff. When I choose to keep my money and not buy the Ferrari, I am effectively saying that I would rather keep my money to buy other things of more value to me.

Still, I'd rather see a brand new Ferrari in my driveway than a politician getting a slap on the wrist.

More Money?

2005-09-15T06:56:00.000-04:00

What a surprise. The federal government needs more money.

Much like the adolescent who aspires to buy a car, spends his allowance on movies with his friends, and later runs back to his parents saying he just doesn't have enough money. A parent should be wise enough to say, "If you want to buy a car, you'll just have to cut back on other expenditures. Maybe movies with your friends aren't worth the cost to you right now."

A taxpayer should be wise enough to say, "If you can't manage what I've already given you, why do you deserve more?" As I pointed out in an earlier post, FEMA had enough money to put at least 700 firefighters through an eight-hour course on sexual harassment and discrimination upon the firefighters' arrival in New Orleans. If it didn't use those resources wisely, how does unfettered access to your wallet give them a greater incentive to do so?

When the initial request was for 10.5 billion, I knew it wouldn't last long, especially considering that as of September 3rd, "FEMA ha[d] been spending $500 million a day on disaster relief," and today "emergency expenditures soar -- with new commitments as high as $2 billion a day." Had we continued with the $500 million per day, we would have finished spending that in 25 days.

Putting the expenditures in perspective, "Since Katrina struck, Congress has already spent $62.3 billion, dwarfing the inflation-adjusted $17.8 billion that Congress spent on hurricanes Andrew, Iniki and Omar, which struck in 1992, and the $15.2 billion emergency appropriation for the Northridge, Calif., earthquake of 1994. The entire Persian Gulf War of 1991 cost less than $83 billion in today's dollars."

Just keep giving them more and they will keep demanding more.

Three "Simple" Questions

2005-09-14T06:43:00.000-04:00

Here's a survey:
1) How would you rate the federal government's response to Katrina: good/very good, poor/very poor?

2) Do you approve of the way President Bush is handling the economy?

3) Do you believe the President is doing a good job of handling gas prices?

(Questions are from a CNN/USA Today/Gallup poll)

According to the report, "36 percent said 'good' or 'very good' while 63 percent said 'poor' or 'very poor'" with regard to the federal government's response to Katrina. But this information is useless for making any policy determination. My answer to the first question would be 'very poor' -- and I would be grouped with those who would have the federal government more involved and spending more than few billion per day than it already is. So if I answer 'very poor,' many people will think that I am saying the government should have done more, when in fact I wish the government had done less and stayed out of the way.

Question #2 is poorly phrased. How does a person "handle the economy?" What does this even mean? It implies that "handling the economy" is the job of a president.

The same issue arises with question #3. "Do you believe the President is doing a good job of handling gas prices?" How does a President "handle gas prices?" Price controls and anti-price-gouging laws? Eliminating the restrictions on building new refineries? Should the President even be involved in determining what the "fair price" is?

The questions are overly simplistic, but simple as they seem, make broad assumptions about the role of government. How could anyone look at the answers and make any meaningful determination of the opinions of those surveyed?

How would you answer a survey like this?

2005-09-13T06:54:00.000-04:00

"It was a broiling August afternoon in New Orleans, Louisiana, the Big Easy, the City That Care Forgot. Those who ventured outside moved as if they were swimming in tupelo honey. Those inside paid silent homage to the man who invented air-conditioning as they watched TV "storm teams" warn of a hurricane in the Gulf of Mexico. Nothing surprising there: Hurricanes in August are as much a part of life in this town as hangovers on Ash Wednesday.

But the next day the storm gathered steam and drew a bead on the city. As the whirling maelstrom approached the coast, more than a million people evacuated to higher ground. Some 200,000 remained, however—the car-less, the homeless, the aged and infirm, and those die-hard New Orleanians who look for any excuse to throw a party.

The storm hit Breton Sound with the fury of a nuclear warhead, pushing a deadly storm surge into Lake Pontchartrain. The water crept to the top of the massive berm that holds back the lake and then spilled over. Nearly 80 percent of New Orleans lies below sea level—more than eight feet below in places—so the water poured in. A liquid brown wall washed over the brick ranch homes of Gentilly, over the clapboard houses of the Ninth Ward, over the white-columned porches of the Garden District, until it raced through the bars and strip joints on Bourbon Street like the pale rider of the Apocalypse. As it reached 25 feet (eight meters) over parts of the city, people climbed onto roofs to escape it.

Thousands drowned in the murky brew that was soon contaminated by sewage and industrial waste. Thousands more who survived the flood later perished from dehydration and disease as they waited to be rescued ... It was the worst natural disaster in the history of the United States.

When did this calamity happen? It hasn't—yet. But the doomsday scenario is not far-fetched. The Federal Emergency Management Agency lists a hurricane strike on New Orleans as one of the most dire threats to the nation ..." from a National Geographic article in October 2004, almost a year prior to Hurricane Katrina.

It is nice to think that there is some big wonderful organization there to protect you from harm, just as it is nice believe that 'snake oil' can cure all your ailments. Both are myths. Like snake oil salesmen, politicians have offered countless benefits to their constituents, and like snake oil salesmen, they know better than to offer a guarantee.

The above photograph (from Dept. of Commerce) is not a black and white photo of New Orleans today, but one from 1927, when flooding was throughout New Orleans, Mississippi, Arkansas, Illinois and affected other states to the north and east. Over 700,000 people were displaced from the flooding. But we didn't see widespread looting or people relying heavily on government to save them. They weren't handed $2000 debit cards to get food and clean water. People were somewhat self-sufficient in spite of their adverse circumstances. Yet the billions of dollars government has already spent have failed to make people significantly better off had they not relied on government in the first place.

Blaming Red Herrings

2005-09-12T06:42:00.000-04:00

Kanye West, Rev. Jesse Jackson and others do not speak for all of the black community when they blame racism for the government's response. "The mayor failed in his duty to evacuate and protect the people of New Orleans. ... The truth is, black people died not because of President Bush or racism, they died because of their unhealthy dependence on the government and the incompetence of Mayor Ray Nagin and Governor Kathleen Blanco," Reverend Jesse Lee Peterson, founder and president of the Brotherhood Organization of a New Destiny, was quoted in a recent Washington Times article.

Throwing red herrings into the 'blame equation' is always a good tactic - for those who want to avoid blame, but deserve it. Rev. Peterson is right. People died because of their unhealthy dependence on a government that does not properly allocate resources and does not get things done quickly. It is undeniable that many people in government were counterproductive before, during and after Katrina. Yet government organizations that stood in the way of helping people have been given more tax dollars, and will continue to ask for more funding so they can "better respond to future tragic events." They will couple the tragedy in New Orleans with their obvious incompetence and claim that, if they had more money, they could do better next time.

When a private company fails to deliver a satisfactory product or service, they offer a refund. When government fails, it asks for more money.

The Power of Private Enterprise

2005-09-11T22:07:00.000-04:00

This is the best detail of the flooding in New Orleans that I have found ... and no surprise, it was compiled by a private entity.

Flood Map of New Orleans from CC Technologies, via WorldNetDaily.

Fire FEMA

2005-09-10T13:15:00.000-04:00

Here's a story you may not have heard. FEMA asked for firefighters from around the country, highly trained in search & rescue and tactical medicine and capable of living in austere conditions -- firefighters whose valuable skills could help rescue those still trapped in New Orleans. According to reports, at least 700 firefighters responded and went to New Orleans.

However, they didn't start a rescue mission right away. Their "first task was an eight-hour course on sexual harassment and equal opportunity employment procedures." In a society that condemns "discrimination" over incompetence and idiocy, when it was faced with conducting training to avoid potentially being accused of insensitivity, harassment, or racism, versus actually saving lives, FEMA opted for the first. Of course, they were only following the federal regulations brought to us by the EEOC that require strict compliance with all EEOC regulations? How ironic that in times of emergency we often talk about giving up some of our rights, yet the government never offers to give up any of its regulations. Instead of saving lives, approximately 700 firefighters were stuck in a room watching Power Point presentations like these.

That's not the end of the story. It gets worse.

Government, displaying its uncanny ability to put resources to their best and highest use (as it so claimed in Kelo v. New London), told firefighters of their assignment: distributing flyers. "'Our job was to advertise a phone number for FEMA,' said Portage Assistant Fire Chief Bill Lundy ... 'We're trained in tactical medicine,' Lundy said. 'We weren't being used for that. We were being used to hand out flyers.'"

In the understatement of the year, their boss, Portage Fire Chief Tim Sosby, said, "It seemed like an incredible misuse of valuable resources."

The firefighters went home.

Speculation & Volatility

2005-09-09T06:25:00.000-04:00

A common misperception is that speculation causes price volatility to increase; that is, spikes and drops in prices become more pronounced with increased speculation. It is true that we observe a positive correlation between increased speculation and price volatility. Usually speculation in futures markets and other derivatives precede the rise or fall in prices. However, the jump from correlation to causation is not to be made simply on the basis of which came first, thereby committing the post hoc ergo propter hoc (lit. "after this, therefore because of this") fallacy. If we use econometric analysis and run regressions that include both speculation and volatility as explanatory variables, we encounter the problem of multicollinearity* that prohibits us from drawing any statistical inference from the data; however, identifying the varying external causes of both speculation and volatility in order to test for correlation is also a challenge because many causes exist and causes may be different for each case. With the rising and falling gas prices, many people have blamed speculation and the existence of futures markets for creating this volatility. In doing so, they have ignored the fundamental causes of both speculation and market volatility. The prior knowledge or expectation of a significant rise or fall in prices (enough to cover transactions costs at minimum) is what causes speculation. That is, if I have reason to believe that the price of computers will increase twofold in the next week, I will approach a supplier of computers and ask if I may make a contract to purchase one thousand computers next week at a price higher than today's price, but lower than what I anticipate next week's price to be. I don't put a lot of money behind my bets unless I'm pretty sure they are right, so I'm not going to make this contract based on a pure guess. Instead, I might know that a report will come out stating that computers make children ten times smarter, thereby increasing parents' demand for computers. When the price of computers is high next week, am I to blame? Of course not. Assuming I hold the contract for delivery** rather than selling it earlier for a profit, I will have a thousand computers that I want to sell. If I charge the same price as everyone else, they might not sell as quickly as I'd like (I don't have room for a thousand computers in my house), so I charge less than my competitors. In doing so, I have actually decreased price volatility from where it would have been.

But suppose the scientists who originally drafted the report recognized that they had made a calculation error and what they meant to say was that computers cause children to lose focus on their homework and obtain poor grades in school. The existence of my futures contract didn't affect the price of computers, but the supplier with whom I made the contract is happy. I have acted as an insurance and reduced his loss on computers by my contract to purchase them at a higher price than he would have received otherwise.

Based on the nature of speculation, it is more likely that speculation reduces volatility from what it would have been had no speculation occurred. Speculation mitigates the volatility caused by other factors, such as hurricanes and reports that computers make your child smarter/less studious.

* Multicollinearity results when two explanatory variables are related and occurs in varying degrees; perfect collinearity (generally theoretical), and near-perfect or high multicollinearity distort the regression analysis.
**Forward or futures contracts are rarely held in order to acquire the good; rather they are held to close a position or hedge another investment.

The Problem with Polls

2005-09-08T06:45:00.000-04:00

CNN published a poll in which it says that,

"Fifty-six percent of 609 adults polled by telephone September 5-6 said they believe the hurricane devastated the city beyond repair. And 93 percent of poll respondents said they believe Katrina is the worst natural disaster to strike the United States in their lifetime.
But a majority of respondents -- 63 percent -- said they believe the city should rebuild. And 66 percent said they believe all New Orleans residents should evacuate the city.
Opinions varied widely, however, on the response of federal, state and local officials regarding Katrina. Forty-two percent of respondents characterized President Bush's response to the disaster as "bad" or "terrible," while 35 percent said it was "good" or "great."
Federal government agencies' response was described as "bad" or "terrible" by 42 percent, and "good" or "great" by 35 percent. State and local officials' response was described as "bad" or "terrible" by 35 percent and "good" or "great" by 37 percent.
Respondents also disagreed widely on who is to blame for the problems in the city following the hurricane -- 13 percent said Bush, 18 percent said federal agencies, 25 percent blamed state or local officials and 38 percent said no one is to blame. And 63 percent said they do not believe anyone at federal agencies responsible for handling emergencies should be fired as a result."

These are some of the most inconsistent statements I've seen. If 56% believe that New Orleans is "beyond repair," meaning that it cannot be repaired, how can 63% be in favor of rebuilding it? Perhaps the definition of "beyond repair" is a little vague. Suppose that "beyond repair" means that it would cost more than it is worth to rebuild. In that definition we have also negated reason to rebuild, so we should not expect more than 44% to be in favor of rebuilding. How can we explain the 19% difference? Or by "beyond repair" are we simply differentiating between repairing and replacing? If that were the case, it would seem fairly obvious that many homes would be more costly to repair than to replace; were that the universally accepted definition of "beyond repair" I would have expected more than 56% of respondents to have answered yes.

Maybe more than 63% are in favor of New Orleans being rebuilt -- but which parts of the city and by whom? The article said that the question was phrased, "should the city rebuild?" By "city" do they mean the government? individuals who resided in New Orleans? private companies? charities? A different set of answers might have been obtained had the question been more specific.

The conclusions are virtually meaningless without background on why the respondents chose the responses they did and what they meant by their responses. We can neither explain nor understand the responses to polls like this one without also knowing the reasoning that holds the responses together.

"Law Gouging"

2005-09-07T06:55:00.000-04:00

It should seem pretty obvious to most people, but oil companies sell oil. Oil companies are not non-profit institutions or charities. Their only goal is to obtain the highest profit possible.

But some politicians believe that oil companies have a different job and make statements similar to the following:

"There are growing concerns that oil companies are making too much in profits at the expense of consumers," said Sen. Pete Domenici, R-N.M. (CNN article)

I'm glad that they are. It means the oil companies are doing their job -- nothing more, nothing less.

The problem that politicians fail to answer is what profit is not at the "expense of the consumer" and how much is "too much" profit? Oil companies are not able to charge any price they want. They are constrained by demand. It doesn't matter if oil companies are a single monopoly, an oligopoly, a price taker or price seeker; they will only charge what people are willing to pay. If they decide to raise their price too much, they will notice a drop in profit and will lower the price to increase revenue. When politicians allege "price gouging," they ignore a few fundamental economic principles and principles of property rights. 1) No company has to be in business. For whatever reason, a company always has the right to close its doors and stop selling its goods or services. 2) Companies are in business to make as much money as possible. They are not in the charity business and their only "social responsibility" is to make profit. Any charity a business conducts is of its choosing, and not out of obligation. 3) Companies always operate as profit maximizers. When we observe a change in price in a profit-maximizing firm, it is a reflection of a change in demand. It doesn't mean that the company cared about consumers before, but has now become greedy. The company always wanted the consumers' money and as much as it could get. 4) Consumers do not have to buy _________ (fill in the blank, because any good fits). For example, consumers do not have to buy gasoline for their cars, but do so because it is cheaper than walking or moving closer to their office. Any transaction between companies and consumers is voluntary.

Here's the irony: the same politicians that criticize oil companies for profiting from voluntary transactions don't make the same harsh judgments about farm subsidies. Why don't we hear them say, "There are growing concerns that farmers are making too much in profits at the expense of taxpayers" -- the taxpayers who did not want their money taken and given to farmers and who received no goods in exchange? Yet in the same article from which the first quote was taken,

"Grassley, R-Iowa, said he favors loan relief for farmers whose grain harvest may not reach market on schedule because of difficulties at the New Orleans port. Sen. Max Baucus, D-Mont., called for help with Medicaid costs in states that take in storm victims. Sen. Ted Stevens, R-Alaska, said he favors tax relief for airlines hard hit by a spike in fuel costs.

In the House, DeLay said the GOP leadership hoped to have legislation on the floor this week dealing with Pell grants, reducing red tape for the newly unemployed and making it easier for FEMA to transfer money to private organizations."

Price gouging? Maybe we should be talking about law gouging. It sounds like oil companies aren't the only ones taking advantage of the recent disaster in New Orleans and Mississippi, as politicians seek more and more tax dollars and new policies. Rather than fearing profits made by oil companies, maybe there should be "growing concerns that politicians are making too many laws at the expense of consumers and taxpayers."

Racist?

2005-09-06T09:20:00.000-04:00

People have alleged that the lack of adequate response in New Orleans is because of racism, citing that a substantial percentage of people in New Orleans are black and low-income. In contrast, they say, if the population was predominantly white, government response would have been much better. Kanye West claimed that, "George Bush doesn't care about black people!" We heard the usual cries of racism from Jesse Jackson, who "questioned why Bush has not named blacks to top positions in the federal response to the disaster, particularly when the majority of victims remaining stranded in New Orleans are black: 'How can blacks be locked out of the leadership, and trapped in the suffering?'"

I've been highly critical of government's response;however, I'm not so naive as to believe the response would have been better if the residents of New Orleans were mostly white. I'm first in line to criticize our President when he endorses unsound policy or makes statements of economic ignorance, but there's no evidence to suggest that he is racist and "doesn't care about black people."

President George W. Bush was the first and only President to appoint a black man, Colin Powell, to United States Secretary of State, who "became the highest ranking African American government official in the history of the United States."[1] He was the first and only to appoint a black woman, Condoleezza Rice to the same position as Powell's successor. "Doesn't care about black people" doesn't make sense.

It's easy to make charges of racism and ignore the real issues. Most of the problems with government response are because of inherent flaws in government itself. People who want to help out are prohibited by government regulations, FEMA has made unnecessary requirements that cause unnecessary delays, and somehow the Humane Society has permission to be in New Orleans, but the Red Cross does not. Politicians simply don't know how to get things done, but they insist on taking the responsibility away from those who are better equipped to handle the job. What we have seen is government doing what government does best - producing only regulations and delaying real progress.

People v. Animals

2005-09-05T00:45:00.000-04:00

I'm as much of an animal lover as anyone else, but this is sickening.

Animal Planet has started requesting donations to help those harmed by Hurricane Katrina ... but not for the hundreds of thousands of people, for the thousands of animals.

Thousands of animals have been killed by Hurricane Katrina, the most devastating storm to hit the United States in decades, while many others are in need of rescue, according to wildlife officials, animal shelters and humane organizations.

Wildlife officials in Louisiana, Mississippi and Alabama — the three U.S. states hit hardest by the hurricane — believe thousands of wild, farm and companion animals have perished due to storm surging and flooding from Katrina's heavy rains ...
The Louisiana Society for Prevention of Cruelty to Animals told WDSU NewsChannel that anyone caught abandoning their pets "could be charged with cruelty to animals." (emphasis added)
The Humane Society of the United States has been asking for donations to fund a "massive relief effort to rescue animals and assist their caregivers in the disaster areas," according to their Web site.

Those poor animals.

Aside from the one "casualty" pictured in the set of photos on the site (See How Katrina Has Affected Animals), the animals look to be pretty well taken care of to me. The dolphin has his own swimming pool, the cat has more shelter than many of the people in New Orleans, and the dogs don't appear to be wading through the dirty water, unlike the people who are carrying them.

Dollars donated to help animals are dollars not going to help people.

Does the Louisiana Society for Prevention of Cruelty to Animals really believe a government that has been unable to maintain any semblance of law and order in New Orleans is somehow going to be able to prosecute cases of animal cruelty? Loot all you want, but don't leave your pets home alone!

Interestingly enough, The Humane Society of the United States, claims that its "highly trained Disaster Animal Response Teams are heading to Mississippi to begin a multi-state animal rescue and recovery effort" and "38-foot Disaster Response Unit and other rescue vehicles affiliated with our teams are fully stocked and on their way." I wonder if FEMA is giving them permission to provide aid, or if they too are being turned away.

**UPDATE **
**September 05, 2005 10:42 AM**

According to The Humane Society website, "Our highly trained Disaster Animal Response Teams are in Louisiana and Mississippi coordinating a multi-state animal rescue and recovery effort. We're now in New Orleans and have rescued hundreds of animals in the hardest hit areas of Mississippi since Friday." (emphasis added)

Meanwhile, the Red Cross, as pointed out by Don Boudreaux at Cafe Hayek, is not assisting in the human rescue effort in New Orleans under orders from the National Guard.

Chief Justice Rehnquist Dies

2005-09-04T11:37:00.000-04:00

This morning, I learned that Chief Justice Rehnquist passed away last night from cancer that he had battled for almost a year.

Chief Justice Rehnquist served on the court since 1972 and was appointed Chief Justice by Reagan in 1986. Rehnquist was known for his advocacy of state's rights, support of religious displays in public settings and his dissent in Roe v. Wade. He sided with the minority in upholding the mandatory death penalty for 1st degree murder in North Carolina as Consitutional in Woodson v. North Carolina (July 2, 1976). In May of the same year, Rehnquist again sided with the minority in Virginia State Board of Pharmacy v. Virginia Consumer Council, where he held that a ban on advertising prices for prescription drugs was not a violation of the first amendment. However, Rehnquist did not always uphold state's rights. In 1987, he sided with the majority and against state's rights in South Dakota v. Dole, in which he claimed that it was Constitutional for Congress to deny federal highway funding for states that did not adopt a uniform drinking age of 21 as a means of encouraging states to adopt a higher minimum drinking age. In 1989, he was in the minority (5-4), in Allegheny v. ACLU. The ACLU alleged that the two displays, one of a nativity scene and the other a menorah, violated the first amendment. Rehnquist disagreed with the court's decision that Allegheny had violated the first amendment because the nativity scene endorsed Christianity, but the display of the menorah was Constitutional.

In 2000, Rehnquist delivered an opinion in Boy Scouts of America v. Dale where a scoutmaster's membership was revoked after the organization learned that he was homosexual. Rehnquist upheld the Boy Scouts' decision as acting within the law, stating that requiring them to retain Dale as a scoutmaster would violate their right to expressive association under the first amendment, and would "force the organization to send a message, both to the young members and the world, that the Boy Scouts accepts homosexual conduct as a legitimate form of behavior." In another controversial case this year, Chief Rehnquist sided with Justices O'Connor, Scalia and Thomas, the minority in Kelo v. New London, advocating a strict definition of "public use" in application of eminent domain.

A Culture of Entitlement

2005-09-03T12:56:00.000-04:00

I am not entitled to your labor or your property because I am limited by your rights to both. Likewise, you are not entitled to my labor or property because I have rights to both. My rights limit your claim on my life, liberty and property. I may propose an exchange between my property and property of yours which I desire, or I may ask for you to give me your property. In either case, you have every right to refuse.

A proper government enforces rights, not morality. Just because you have the right to refuse does not mean it is moral to do so. These are two separate issues. If I were able to give water and food to someone who does not have property that I desire and who will die without water and food, would it be immoral to refuse? If I were starving and others had plenty of food and water, but I had nothing of value to offer in exchange, would it be moral for me to claim their food and water? I have no rights to their food and water unless they decide to transfer those rights to me. Is it ever moral to violate their rights in order to increase my chances of survival?

Government is not intended to conduct charity, even in the form of disaster relief. Equipped with tax dollars, government has assumed this responsibility, even though it does a poor job of delivering results. People whose earnings have been taken every year for government to provide charity to others understandably criticize government for not providing charity to them after natural disasters, e.g. "They're just not doing enough." Using this reasoning, it is easy to lay claim to other people's property. It breeds a culture that does not accept charity thankfully, but believes it is entitled to charity. The crisis in New Orleans is a clear representation of this. As presented on the evening news, only a few people were asking for help; instead, people demanded help.

When the concept of rights become so distorted as to denote morality and entitlements rather than limitations on actions, people believe that they are entitled to property regardless of whether it belongs to them. People believe that their "right to life" trumps another's right to property and rationalize stealing. In confusing rights and morality, people believe that their inability to provide for themselves constitutes an obligation for others to provide for them. This "culture of entitlement" is self-destructive. By placing the burden on others, it absolves people of any responsibility to care for themselves.

The Superdome Wasn't Safe?

2005-09-02T09:20:00.000-04:00

This isn't such shocking news when you've read my earlier post which predicted that there would be crime in the Superdome when officials prohibited individuals from bringing weapons. My prediction was right on target (pardon the pun), when I said that unattended weapons would be taken by looters. The houses that were not completely destroyed by Hurricane Katrina were completely ransacked by looters. In my earlier post, I predicted that a prohibition on weapons would cause a higher level of crime inside the Superdome. Even with military police there to ensure people were safe, many people in the Superdome faced a dangerous environment permeated with the threat of violence.

According to Dr. Charles Burnell who treated sick people inside the Superdome, "We had three murders last night. We had a total of six rapes last night. We had the day before, I think, there were three or four muders. There were half-a-dozen rapes that night. We had one suicide last night. We had one military policeman shot." Rather than remain in a dangerous environment, the doctor said, "Until I can insure that I'm not putting my life in any significantly dangerous situation as I was before - I will not be back in the Superdome."

We see violence frequently in areas where people are disarmed for the same reason that we see violence infrequently in hunting camps and gun stores. When we disarm people, we eliminate one of the more critical risk factors that a criminal considers prior to committing a crime: what is the likelihood that the person I decide to harm will kill me? An armed individual is in a unique and advantageous position to defend themselves from crime. Unlike an outsider observing what may appear to be an altercation in which the victim is not clearly identifiable, the victim knows with 100% certainty the distinction between herself and her attacker. The ability to operate a firearm requires no substantial physical strength, and often does not require marksmanship because the average distance between the victim and the attacker when a gun is used for self-defense is only around 7 feet.

The decision to disarm those seeking shelter in the Superdome likely harmed more than it helped. Irrational fears should never be substituted for rational ones.