Archive for June 2011

The Administration's War on Due Process

Obama's Department of Education has been issuing a series of new rules to colleges that accept government funds (ie pretty much all of them) that going forward, they will be required to

  • Expand the definition of sexual harassment, forcing it to include even Constitutionally-protected speech.  Sexual harassment will essentially be redefined as "somehow offending a female."
  • Eliminate traditional protections for those accused of sexual harassment under these new definitions.  The presumption of innocence, beyond a reasonable doubt guilt standards, the ability to face and cross-examine one's accuser, and the right of appeal are among centuries old common law traditions that the DOE is seeking to eliminate in colleges.

Unfortunately, this is a really hard threat to tackle.  Most of those concerned with civil rights protections outside our small libertarian community are on the left, and these same people are often fully vested in the modern feminist belief that all men are rapists.  It also puts libertarians in the position of defending crude and boorish speech, or at least defending the right to that speech.

But at the end of the day, the DOE needs to be forced to explain why drunk and stupid frat boys chanting crude slogans outside the women's center on campus should have fewer rights as accused than does a serial murder.

Michael Barone has more today in the Washington Times:

But more often they involve alleged offenses defined in vague terms and depending often on subjective factors. Lukianoff notes that campus definitions of sexual harassment include "humor and jokes about sex in general that make someone feel uncomfortable" (University of California at Berkeley), "unwelcome sexual flirtations and inappropriate put-downs of individual persons or classes of people" (Iowa State University) or "elevator eyes" (Murray State University in Kentucky).

All of which means that just about any student can be hauled before a disciplinary committee. Jokes about sex will almost always make someone uncomfortable, after all, and usually you can't be sure if flirting will be welcome except after the fact. And how do you define "elevator eyes"?

Given the prevailing attitudes among faculty and university administrators, it's not hard to guess who will be the target of most such proceedings. You only have to remember how rapidly and readily top administrators and dozens of faculty members were ready to castigate as guilty of rape the Duke lacrosse players who, as North Carolina Attorney General Roy Cooper concluded, were absolutely innocent.

What the seemingly misnamed Office of Civil Rights is doing here is demanding the setting up of kangaroo courts and the dispensing of what I would call marsupial justice against students who are disfavored by campus denizens because of their gender or race or political attitude. "Alice in Wonderland's" Red Queen would approve.

As Lukianoff points out, OCR had other options. The Supreme Court in a 1999 case defined sexual harassment as conduct "so severe, pervasive, and objectively offensive, and that so undermines and detracts from the victims' educational experience, that the victim-students are effectively denied equal access to an institution's resources and opportunities." In other words, more than a couple of tasteless jokes or a moment of elevator eyes.

Women'g groups all the time say things like "all men are rapists."  That's pretty hostile and degrading to men.  My guess is that somehow this kind of gender-hostile speech will not be what gets investigated by these kangaroo courts.

I wrote about related events at Yale here.

Light Ray Camera

This is pretty cool, if they can pull it off.  Though I am not sure getting focus right is really the issue with most photographers any more.  It would be interesting if you could change the depth of field, though.

Late Father's Day Gift

NSFW:  Big Book of Breasts, now in 3-D

Had to laugh when I saw that.  I was actually looking for this book on Case Study Houses.

Banality of Evil

I am afraid we are on a path to thoroughly eviscerating the Fourth Amendment simply because police forces find it too big of a hassle to comply.  Just look at almost every case of abuses of search and seizure rules or of missing search warrants and you almost never see a time-based urgency that is often used as an excuse to end-around the rules.   What you almost always see is just, well, laziness.

Here is yet another example (bold added):

Now comes the news that the FBI intends to grant to its 14,000 agents expansive additional powers that include relaxing restrictions on a low-level category of investigations termed “assessments.” This allows FBI agents to investigate individuals using highly intrusive monitoring techniques, including infiltrating suspect organizations with confidential informants and photographing and tailing suspect individuals, without having any factual basis for suspecting them of wrongdoing. (Incredibly, during the four-month period running from December 2008 to March 2009, the FBI initiated close to 12,000 assessments of individuals and organizations, and that was before the rules were further relaxed.)

This latest relaxing of the rules, justified as a way to cut down on cumbersome record-keeping, will allow the FBI significant new powers to search law enforcement and private databases, go through household trash, and deploy surveillance teams, with even fewerchecks against abuse. The point, of course, is that if agents aren’t required to maintain a paper trail documenting their activities, there can be no way to hold the government accountable for subsequent abuses.

Freedom dies because we couldn't be bothered with all the work to protect it.

PS-  why is it no one wants to address any of the paperwork hassles in starting construction or opening a restaurant or getting a liquor license or starting a taxi service or any number of other private enterprises, but the government jumps right on the task of streamlining the work it takes to spy on me.

Will We Ever See Another Constitutional Amendment?

My column this week in Forbes elaborates on a theme I discussed last week in this blog.

I am not a big fan of prohibition, or the income tax (16th Amendment) before it, but in some sense these come from a better time.  Instead of dealing with the Constitutional problems of these initiatives by having a series of judges stare at the Constitution with their eyes crossed until the problem disappears, they actually wrote and passed a Constitutional amendment.  The took the wording of the Constitution seriously.

Consider alcohol prohibition.  Today, would we even bother modifying the Constitution?  After all, we’ve driven a forty year war on drugs — with massive spending, highest in the world imprisonment rates, militarization of our police, and frequent slashes into the heart of the Fourth Amendment — with nary a hint of the need for a Constitutional Amendment.  In fact, in Raich, the Supreme Court ruled that medical marijuana legally (under state law) grown, sold, and consumed in California could still be prohibited by the Federal government under their Constitution powers to regulated interstate commerce.  It seems almost quaint today that we sought a Constitutional change for Prohibition.

A China Scare I Might Actually Entertain

I am not one for China-bashing (or Japan-bashing 20 years ago).  But it is interesting to consider just how sane and peaceful a country will be if it is dominated by 100 million men who can't get laid.

Understanding the Data One References

I am certain that I have made this mistake myself, but Kevin Drum is careless about using data just because it 1) is labeled in a way he thinks he understands and 2) it supports his pre-conceived notions.

He tries to use the above chart to make the point that Medicare is superior to private insurers because it is more "accurate."  Accuracy in claims seems like a good thing, but I started to wonder how it was defined in this study.

So I spent like 30 whole seconds clicking through to the study.  It turns out the data is based on surveys of doctors.  This chart is explained this way:

Description:  On what percentage of claim lines does the payer's allowed amount equal the physician practice's expected allowed amount?

So really, this chart is not a measure of insurance company accuracy, it is really a measure of doctor accuracy in estimating insurance company claims payment behavior, or perhaps of insurance company claims transparency.  Because Medicare pays fixed, published, below-market rates, and because they are so large, it is not at all surprising doctors are better at predicting what Medicare will pay on a claim.

In other words, doctors disagree with Aetna on claims more frequently than they disagree with Medicare?  Is this bad or good.  I have no idea.

But one could go further and say that another way of heading this chart, rather than "accuracy," would be "willingness of insurer to roll over and pay whatever the doctor asks for."

In the past, Drum and others on the Left have also bragged that Medicare's overhead is lower than private insurers.  These are all related issues.  Private insurers put more scrutiny on claims, which costs more in overhead and causes claims to get paid slower, but presumably results in lower claims payments and less fraud.

Medicare's approach may be net better (ie overhead savings could be larger than claims and fraud savings) or it could be worse, but this chart in isolation tells us nothing.

PS - this is not the first time I have found Drum running health care numbers that do not mean what he thinks they mean.

Forced to Goof Off

Kevin Drum seems upset that the US Government does not mandate paid time off for all US workers

The map below shows this starkly: the United States is virtually alone in not mandating any annual time off for employees, right along with such economic luminaries as Burma, Guyana, and Nepal. More charts on American overwork here.

I could take the same map and make this statement: "unlike such freedom-loving luminaries as Iran, Russia, Mali, and Chad, the United States government does not interfere in private decisions about vacation pay policies."

By the way, why is it for statists that the lack of a government mandate for something desirable is considered equivalent to the desirable policy being non-existent?  In fact, Kevin Drum himself says his employer has a good paid leave policy.  Wow, how could such a thing have happened without a government mandate?

19th Century FU

Here are a couple of mansions in San Francisco, on of which was built by Charles Crocker of the "big 4" (including Sanford, Huntington, and Hopkins) who built the western half of the transcontinental railroad  (don't be fooled -- the railroad itself, forced years ahead of its time by government policy, was a financial mess.  The big 4 made their real money in the construction company that built the railroad, and in real estate and ancillary businesses at the railroad's terminus).

Note the thing that looks like a four-story high wall in the back corner of the near mansion. What is that?  Its a four-story high wall.  Crocker was ticked off the last building owner on the block did not sell to him.  So he built a "spite wall" on his property on three sides of the building to block its views.  Abusive, I suppose, and used by some to talk about what the rich could get away with in that era.  But consider that in the current era, Crocker would just go to the government and get it to condemn the building and hand the property to him, in the Kelo logic that he would pay more taxes on the property.   Rich people have more power today to abuse their relationship with government for the simple fact that the government has a lot more power to be commanded.

As I tell people all the time, if you want to limit the special powers the rich wield by influencing politics, the only solution is to limit the power of the government.

From this cool 360 panorama of San Francisco

The Statist's Wet Dream

I find it absolutely unsurprising that Paul Krugman was enthralled by the vision of a science that can be used by a few people to control the actions and futures of all humanity.  He said “I want to be one of those guys!”  I was captivated by the vision in the book as well, but my thought was always "how do we avoid these guys?"  The second two books were about how government planners used mind control to deal with humanity whenever individuals had the gall to circumvent their plans.  Lovely.

If I remember right, Asimov wrote the Foundation after reading the Rise and Fall of the Roman Empire.  The notion of how much of history is inevitable due to large forces (e.g. economics) vs. how much is due to the actions of individuals and what historians now call contingency (e.g. luck) is an endlessly fascinating thing to debate, and I found the Foundation books to be interesting thought exercises along these lines.  But it certainly didn't inspire my life's goals, any more than Dune made me wish for a religious jihad.

I can see the secret Second Foundation scratching their heads now in their secret lair (which turns out to be in the New York Times building in the middle of New York City but that's a spoiler from the third book).  The equations show right here that a trillion dollar stimulus should have kept unemployment below 8%....

The Appeal of Coupons

Ages ago, I was an executive at Mercata, an Internet store whose strategy was to sell items whose price would go down as more people agreed to buy the item.  In theory, this creates an incentive for viral marketing, as anyone who buys has a financial incentive to get their friends to join in.

The company died for a variety of reasons, in part just because like many startups in that weird era of the late 90's, we just built up too many fixed costs too fast to reach breakeven in any reasonable amount of time.  We were also ahead of our time in some ways -- the model makes a ton more sense in the Facebook / social media age.

But we also failed, as did many Internet stores, because order fulfillment, product inventory, shipping, etc was and still is expensive.

Glenn Reynolds notices that a lot of folks (including Amazon in his link) are selling coupons.  This may be a blinding glimpse of the obvious to all of you, but the appeal of a retailer of selling coupons online is that they are virtually free to inventory, to fulfill, and to ship.   Think of it this way -- you want to compete online on price.  You can actually sell the physical stuff at a discount.  Or you can sell the coupon, which gives access to the customer access to the same discount but is much easier to fulfill.  It also lets you "sell" things you normally can't provide over the Internet, like a restaurant meal.

The model is not that compelling to me, because I shop online for the convenience rather than the price.  I buy some Groupon type coupons, but generally for things like restaurants rather than products.

You Get What You Pay For

When a loan company rewards delinquent customers with better rates and/or principle reductions, they get a lot more delinquency.

Greatest Bedtime Story Ever

As read by Samuel L Jackson (hat tip Radley Balko)  Warning:  R-rated language.

Hypocrisy on the Left

Folks on the Left are the first ones to point out that people are overly obsessed with money.  Money (they would argue)  is far less important than, say, self-improvement.

So why is it that it is impossible for progressives to understand that someone might be willing to work for something other than money?  For the skills, or the experience, or the resume fodder, or even, in this case, for ego?

I don't write for Huffington, but I do write for Forbes.com which appears to be pursuing a similar model (mix of paid and unpaid bloggers).  You know how much money I get paid?  Zero.  Any time I get tired of writing for zero dollars, I can quit.  But I have not because I get lots of things out of the relationship -- a new audience, experience trying to meet a regular deadline (that's not as easy as it seems from the outside), and an ego boost.  Heck, far from feeling exploited, all the folks who have learned of my relationship with Forbes have thought I was lucky to have the opportunity.  And I am.

People blog for free all the time -- I have done it for 7 years (gulp!) at this site.   The author at the link seems to feel that the fact Huffington or Forbes makes money from our writing somehow makes a difference.  Why?  My web host makes more money from my blog than I do, but should I care?

Besides, my understanding is that CPM's on news-related sites run in the $10 range, plus or minus.  At Forbes, there are 2 ads on the page and my posts get 1000-4000 viewers (with a few outliers).  So that's, what, $20-80 at most and probably less? The five or ten bucks a week I might extract from them for my work is trivial compared the the other benefits I enjoy.  And I can't believe the average Huffpo unpaid blogger is really contributing a lot more.  Ariana may be making millions, but the incremental contribution of the 419th unpaid blogger to that is trivial.

Postscript:  By the way, the linked writer also displays one of the more abusive mindsets of the labor movement.  He implies that other progressives are essentially crossing a picket line by writing for free at Huffpo and should be ashamed of themselves.

That's a crock.  One or two folks declaring they are on strike does not suddenly obligate hundreds of others who like the relationship they have with the Huffpo to stop writing.  The author is essentially demanding a heckler's veto.

Bland, Corporate Wares

Often, the dominance of markets by bland and uninteresting mass-market products is blamed on capitalism.  This makes no sense to most business people, since if there really was a pent up demand for variety and smaller-batch products, someone would try to make money doing so.  One only has to look at the explosion of craft beers over the last 30 years to see this effect, and its one that is only being reinforced by modern technologies that allow lower costs for smaller batch production.

If one wants to put the blame anywhere, one might look at the government, where there is an interesting clash brewing on the Left between those who like local, small-batch products and the regulatory state the Left built.  For example, via Overlawyered

Homa Dashtaki [a producer of small-batch yogurt] was eager to demonstrate that her yogurt was safe and healthful, but complying with California regulations turned out to be not so easy. In fact, authorities told her that she would face possible prosecution unless she established a “Grade A dairy facility” employing processes more commonly found in factories. A highlight: she’d have to install a pasteurizer even though she made her yogurt from milk that was already pasteurized. What’s more, California law makes it illegal to pasteurize milk twice, so there went any hope of continuing her straightforward way of obtaining milk, namely bringing it home from a fancy grocery store.

Ms Dashtaki is pondering whether to move to another state, one whose rules allow for artisanal products. She would not be the first entrepreneur to flee the Golden State.

This is sort of like the old Mad magazine Spy v. Spy, but relabeled Left vs. Left.  Exactly the same dynamics are at work in organic farming as well as hand-crafted artisan toys (which are affected substantially by the recent toy regulations passed after the Chinese lead panic).

Regulatory Accumulation

There are certain regulatory agencies where it is clear from the outset that most of the agency's activity is merely aimed at protecting their own jobs and power.

The one such agency I run up against are Alcoholic Beverage Commissions in various states, from whom one must obtain a liquor license.  In the type of small store we run, there are really only two things the state should care about, and even the second is a bit weak

  • That we don't sell alcohol to underage kids
  • That we don't allow alcohol consumption on the premises

But the liquor licensing process can be interminable.  In Arizona, for example, I have had my applications kicked back to me, which resulted in 2-month delays in the process, because I wrote an address as 1313 48th Pl.  rather than 1313 48th Place.  They spend incredible man-hours looking for nit-picky mistakes like this, and then kick it back so that the whole review process must begin again.  Many states and counties have a second layer of review, to make sure that your new competition is "needed" - after all, we wouldn't want to upset the position of incumbent businesses who are entitled to their market share and who make nice campaign contributions.

Each application has to have a drawing of the store layout and where one plans to put the beer.  If you want to move the beer at a later date, you have to get the state's approval.  (Bizarrely, the drawing in most states has to be by hand -- they will kick back an application with a CAD drawing or architect's drawing).  And don't get me started on the fact I have to be finger-printed by the FBI (so they can be sure I am not Al Capone) before a store I own can sell beer.

All this being said -- and I didn't mean to run on so long but liquor licensing just drives me nuts -- it is nothing to this example from the pharmaceutical manufacturing business. I won't repeat it all, but take this example:

a drug manufacturer must get approval for how much of a drug it plans to produce, as well as the timeframe. If a shortage develops (because, say, the FDA shuts down a competitor’s plant), a drug manufacturer cannot increase its output of that drug without another round of approvals. Nor can it alter its timetable production (producing a shortage drug earlier than planned) without FDA approval.

They have to get their production schedules approved?  What possible justification can there be for this?  But even more outlandish is the apparent drive to regulate drugs that have been on the market for over 70 years and have to date been relatively unregulated because they were on the market before the FDA got its current powers.   Why should a bureaucrat lose her job when there are still unregulated items out there?  Besides, some uneducated American might use these examples of safe, unregulated drugs to question the who regulatory mission!

Several drug shortages (e.g., concentrated morphine sulfate solution, levothyroxine injection) have been precipitated by actual or anticipated action by the FDA as part of the Unapproved Drugs Initiative, which is designed to increase enforcement against drugs that lack FDA approval to be marketed in the United States. (These drugs are commonly called pre-1938 drugs, referring to their availability prior to passage of the Food, Drug, and Cosmetic Act of that year.) Some participants noted that the cost and complexity of completing a New Drug Application (NDA) for those unapproved drugs is a disincentive for entering or maintaining a market presence.

I have heard several medical people joke that it would be tough to get aspirin through the FDA today if it were a new drug and not grandfathered.  Don't know if that is true, but it feels believable.

Things You Should Know About Student Loans in Advance

Every person considering student loans should make sure they understand what is in this post from Megan McArdle.  Americans are spoiled, to some extent, by non-recourse home loans (ie, unlike in the rest of the world, they can't come after assets to pay the loan beyond the house itself) and pretty generous terms for escaping credit card debt.  These cause us to forget that most other types of lenders out there are pretty hard-ass about actually, you know, getting paid back.

I never held any student debt, so I was not aware of many of the facts she provides, but my guess is that many people who do have student debts aren't that aware either.  Here is the most important part:

I don't know why Mystal thought I was only talking about federally guaranteed loans, or that I didn't understand that his debt had been sold to a collector, but there you are. If I had thought that he was talking only about federally guaranteed loans, I would simply have said "Mystal is dangerously deluded and needs to issue a correction immediately before someone gets a very harmful idea from his post."  Federal loans don't settle.  Period....

Private lenders have more incentive to settle, but not a great deal more. Most unsecured debt, like credit card balances, personal loans, and medical bills, can and will be settled for pennies on the dollar--as low as ten cents in some cases (though this usually means that they don't have any verification of the debt, so I wouldn't take a settlement this low.) It's not unheard of for a credit card collector to take 25 cents on the dollar on a valid debt, and 50 cents on the dollar is eminently achievable for many people.

But my understanding is that student loans are the great exception to this rule. Why? Student loans are not bankruptable, not even private ones. A collector for normal sorts of unsecured debt is always working with the threat of bankruptcy in the background; if you try to hold out for full repayment, the debtor can always file Chapter 7. In most cases, that means that unsecured creditors get nothing.

But that's not the case with student loans. There are only two ways to erase the debt: prove you're permanently disabled and will never again earn more than a pittance; or die

Oil Speculation

This is a bit old, but Powerline had a good analysis on oil speculation.  The short answer:  Think Progress confused, either accidentally or on purpose, the notion of a risk premium with speculation excess.

Perhaps My Only Defense of the Income Tax

The other day I was watching a show on extreme tax protesters, specifically those who believe the entire income tax system to be illegal and thus they actually owe no taxes.

While I am sympathetic to issues folks have with taxation, from a legal and Constitutional perspective the income tax actually comes from a better, almost more quaint time.  Why?  Because instead of dealing with the Constitutional problems with the income tax by having a series of judges stare at the Constitution with their eyes crossed until the problem disappears, they actually wrote and passed a freaking Constitutional amendment.  Granted that the amendment was passed under false pretexts (e.g. that the tax would never apply to more than the top 1% of earners or earners with less than $1 million in income).  But they sought an amendment.  The took the wording of the Constitution seriously.

In fact, the 18th Amendment (prohibition) and the 21st Amendment (its repeal) were the last times the Constitution has been amended to give or take away Federal powers (everything since has been related to voting and elections).  Ever since 1933, we have effectively added non-enumerated powers by essentially ignoring the Constitution, such amendment process being seen as too much of a hassle to stand in the way of critical regulations on seat belts or marijuana.

Everyone knows it took a Constitutional Amendment to get alcohol prohibition, but think about this in today's world.  Would we even bother?  No way!  Congress has taken on the power to regulate or prohibit just about anything it wants by stretching the commerce clause form its original meaning of preventing states from setting up barriers to interstate trade to an all-encompassing power of fiat to do anything Congress freaking wants.

My kids and I were watching 2081, the excellent short movie based on the Vonnegut short story "Harrison Bergerson."  That story posits a government department of handicapping that solves the inequality issue once and for all by handicapping the most able down to some lowest common denominator.

Anyway, the intro to the movie said it was based on something like the 280th amendment to the Constitution.   But I don't think we are ever going to get that high.  Certainly those who want more government power don't need any more amendments, as the Constitution is no longer constraining in the least and an increasing number of the Bill of Rights are either bad jokes (9,10) or are being gutted as we speak (2,4).

I don't expect another Amendment in my lifetime.  The only way I think we will see one is if we get some sort of libertarian revolution, and the only Amendment we would need would be the one saying "Look, we were't freaking kidding in the 10th amendment, go read it again."  OK, maybe some clarity on the commerce clause would be good as well.

I am not a big fan of the income tax, or of Prohibition, but it was a better world when we knew we had to at least amend the Constitution to do these things because we took the enumerated powers seriously.

Obamacare: Worse Every Time I Learn Something New About It

I am really sorry I read George Will's column this morning.  It is to depressing for words.   He discusses how Congress has, to my eye, un-Constitutionally delegated legislative power to the IPAB, an unaccountable organization that can basically write any law it wants regarding health care as long as it nominally can be justified as affecting costs (the only power Congress has is to vote such laws down, and it can only do so if it substitutes laws with equivalent cost savings).

Just to give one a flavor of just how undemocratic the folks were who crafted Obamacare, check this provision out:

Any resolution to abolish the IPAB must pass both houses of Congress. And no such resolution can be introduced before 2017 or after Feb. 1, 2017, and must be enacted by Aug. 15 of that year. And if passed, it cannot take effect until 2020. Defenders of all this audaciously call it a “fast track” process for considering termination of IPAB. It is, however, transparently designed to permanently entrench IPAB — never mind the principle that one Congress cannot by statute bind another Congress from altering that statute.

So, for the rest of eternity, there is theoretically only a single 31-day window six years hence when this board can be abolished.  Of course, I am not sure future Congresses can be bound in this way, but it shows you the heart of a dictator possessed by the folks who wrote this law.

By the way, not always a big fan of Justice Scalia, but there is little doubt he is smart and this dissent written 12 years ago certainly was prescient

“I anticipate that Congress will find delegation of its lawmaking powers much more attractive in the future. . . . I foresee all manner of ‘expert’ bodies, insulated from the political process, to which Congress will delegate various portions of its lawmaking responsibility. How tempting to create an expert Medical Commission . . . to dispose of such thorny, ‘no-win’ political issues as the withholding of life-support systems in federally funded hospitals.”

Postscript: Could the IPAB pass nanny-type rules under the justification they could reduce health care expenditures?  For example, what if the IPAB said that mandatory motorcycle helmets would reduce doctor spending, would that automatically become law?  How about limits on salt or fatty foods?  Many current dystopic novels begin with growth in government power, sometimes of one agency, due to security fears over terrorism (e.g, the movie V).  I bet I could write a good one with the core being the IPAB.

Nuclear Detonations

A time lapse youtube video of locations of nuclear detonations on Earth (all but a couple, of course, being tests).  There are far more than I would have guessed.  Had you given me an over-under of 2000, I would have surely taken the under.  And been wrong.

I can't vouch for the accuracy of this, of course.  May be they are counting a test differently than I would.

Labor and Capital Mobility, and the Recovery

I was thinking this weekend that one reason the US recovery may be slow is related to labor and capital mobility.

One substantial avenue to recovery in a recession has always been labor and capital mobility.  The fast labor and capital can be redeployed from losing industries to improving ones, the faster a recovery occurs.  One reasons Japan and certain European countries have had slower recoveries in the past than the US is that our mobility was higher and barriers to entrepreneurship lower.

But it strikes me that two things are going on in the US to endanger this advantage we have always enjoyed

  1. The government push for home ownership has turned out to be a trap.  Not only did it help create the bubble, whose bursting destroyed a lot of real and paper wealth, but it has greatly reduced labor mobility.  Home ownership makes labor mobility much harder even in a good housing market when one can sell his or her home easily.  In a bad market like today, very few feel they can pick up and move.  I might want to give up on the construction industry in Michigan and move to the oil patch of North Dakota, but how can I do that if I own a home that I can't sell?  A number of other actions, most notably the repeated extension of unemployment benefits, contributes to the lack of mobility.
  2. The government seems hell bent on doing everything it can to prevent, even reverse the tide, of capital mobility.  The government shifted tends of billions of capital into auto industry hands that had destroyed value for decades.  It continues to put the brakes on what should be an oil and gas exploration and production boom.  It kills health industries like light bulbs and shifts billions into useless politically powerful hands making ethanol.  The NLRB is preventing major American manufacturers from making factory investments in southern states.

In the late 1970's, the auto industry was in trouble but the oil patch was booming.  The Houston newspapers sold well in Michigan, popular for their help wanted ads.  From space, the Interstate highways between the Detroit and Texas probably looked orange from all the U-haul trailers.

The exact same dynamics could and should be occurring today.  Capital and labor should be shifting from, for example, the failing auto industry to the growing energy sector.  But the government today stands to block this reallocation. It is raising taxes on oil companies and placing barriers to their growth, while giving tax money to the auto industry and using every bit of power it can to sustain it.  Combine this type of barrier to capital flows (and auto/energy is but a couple of examples) with rising barriers to entrepreneurship, and it should be no surprise that growth is abysmal.

This is what happens in a corporate state.  Past winners retain huge amounts of power in the government long after their companies have become senescent in the marketplace.  Politicians argue for the power to pick winners and losers in the economy but generally use it only to protect current competitors and stand in the way of progress.

Outsourcing Hiring Decisions to Colleges

A while back I wrote this as part of a response saying that the only way to get into a top consultancy was to got to Harvard, Yale, Princeton or Stanford.  Having joined a top consulting firm from Princeton and Harvard, I thought some of their observations to be BS, but there is a certain core of truth.  As I wrote then:

There is some rationality in this approach – it is not all mindless snobbism.   Take Princeton.  It screens something like 25,000 already exceptional applicants down to just 1500, and then further carefully monitors their performance through intensive contact over a four year period.  This is WAY more work and resources than a private firm could ever apply to the hiring process.  In effect, by limiting their hiring to just a few top schools, they are outsourcing a lot of their performance evaluation work to those schools.

Matthew Shaffer, via Glen Reynolds, write something similar about all college degrees:

Those of us who question the price and value of higher education don’t disagree that people with B.A.s do much better in life, especially in employment. We disagree about the source of that advantage: The B.A. may mostlycorrelate with and signal for, rather than impart important qualities. (Really we all agree it’s some mix of the three factors — our differences are of emphasis.)...

We skeptics think this: Since employers can no longer measure job applicants’ IQs nor put them through long apprenticeships, graduating college is the way job-searchers signal an intelligence and diligence that college itself may have contributed little toward. Employers are (to use a little economic jargon) partially outsourcing their employee search to colleges. This is a good deal for employers, because college costs them nothing, and the social pressure to get a BA means they won’t miss too many good prospective recruits by limiting their search to college grads.

I think this has a lot of truth to it, but it can't entirely be true -- if it were, your degree would not matter but we know engineering and economics majors get hired more than poetry majors.  Though one could still stick with the strong skeptical position by arguing that degree choice is again merely a signal as to interests and outlook and a potentially even a proxy for other characteristics (to the latter point, what is your mental picture of an engineering major? a women's studies major? a politics major?  an econ major?)

The Elite Hatred of Buses

Several times in the past I have posited that folks in power simply hate buses.  How else to explain light rail and high speed rail projects that are both substantially more expensive and substantially less flexible than buses.  Some of the reasons for this include:

  • Politicians like rail better because it is sexier.  Period.   They are trying to spend taxpayer money to support their own re-election talking points.
  • Unions and city workers like rail because it is more expensive.  More money gets spent, either creating more union jobs or giving transit leaders bigger budgets which translate into higher salaries and more prestige for themselves.  And the lack of flexibility is good for them because it makes their job immune to budget cutting.  Just too many sunk costs.
  • Middle and upper-middle class folks in the public have a deep disdain for buses, which they associate with poverty and blue collar labor.  Riding buses hurts their self image, even if the service is no worse than trains.  Rail is the Louis Vuitton handbag of transit.

In Phoenix, light rail requires a subsidy of $3.82 center per mile (that is the government spending above and beyond the fare), which is nearly 10x what we spend on buses.  And light rail uses more energy per passenger mile here than driving.

Anyway, this story from Iowa seems to support my point -- the government is proposing to spend tens of millions of dollars to create a rail service that is slower and more costly than existing private bus service.

The latest in lunacy in high-speed rail lunacy: at Joel Kotkin’s newgeography.com Wendell Cox reports that the U.S. Transportation Department is dangling money before the government of Iowa seeking matching funds from the state for a high-speed rail line from Iowa City to Chicago. The “high-speed” trains would average 45 miles per hour and take five hours to reach Chicago from Iowa City. One might wonder how big the market for this service is, since Iowa City and Johnson County have only 130,882 people; add in adjoining Linn County (Cedar Rapids) and you’re only up to 342,108—not really enough, one would think, to supply enough riders to cover operating costs much less construction costs.

Oh, one other thing. Cox reports that there is already luxury bus service, with plus for laptops and wireless Internet, from Iowa City to Chicago. It’s part of a larger trend for private companies to offer convenient and inexpensive bus service. A one-way ticket on the bus costs $18, compared to a likely train fare of more than $50. And the bus takes only three hours and 50 minutes to get from Iowa City to Chicago. That’s one hour and 10 minutes faster than the “high-speed” train.

I'd Walk A Mile for a Camel

This has gotten a fair amount of play around the Internet, but it's crazy enough to re-link in case you have not seen it.  A proposal in Australia to earn carbon credits by shooting wild camels.  Because when living, breathing creatures are dead, the environment is protected.  Take that to its logical conclusion.  All that time those folks were clubbing harp seals, they were saving Mother Nature!