Published: Sat, 03 Dec 2016 00:00:00 -0500
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Fri, 25 Nov 2016 12:00:00 -0500Even as the mighty Statue of Liberty beckons the world's "poor and huddled masses" to America's shores, Americans themselves have been ambivalent, to put it mildly, about how many newcomers ought to be welcomed and from where. To the extent that a pro-immigration consensus has existed, it was always an uneasy one. But Donald Trump's meteoric political rise after embracing an extreme restrictionist agenda has shattered that fragile status quo, dividing pundits and public, academics and analysts throughout the 2016 election season. There's an absence of good polling data to shine a light on how immigrants themselves feel about this issue, but it's clear that even they don't all agree. George J. Borjas is a celebrated Harvard University economist who emigrated from Cuba to the United States with his mother at the age of 12, three years after Fidel Castro's regime took over the country and confiscated his father's garment factory. He has made vital contributions to many fields of economics, especially immigration, and has a new book, We Wanted Workers: Unraveling the Immigration Narrative, out this month. In it, he challenges the notion that immigration is "universally beneficial." Shikha Dalmia is a Reason Foundation analyst and a native of New Delhi, India, who came to America 31 years ago as an idealistic student looking to escape the corruption of a socialistic mixed economy. She writes extensively about immigration and firmly believes America shuts the door on outsiders at its economic and spiritual peril. What follows is a spirited exchange between the two on the empirical claims and proposed policy prescriptions in We Wanted Workers. Dear Professor Borjas:Let me congratulate you on a book that is a model of clarity. We Wanted Workers systematically walks readers through the immigration literature. Along the way, it offers a sense of the immensely knotty methodological problems that bedevil the dismal science. Also, I agree completely that the "overreliance on economic modeling and statistical findings" on this subject is a regrettable development that fosters the notion that "purely technocratic determinations of public policy" are possible. In fact, the scientific hubris underlying such efforts prevents a full airing of the normative and ideological commitments that ultimately do—and perhaps should—guide policy. That said, the more I read, the more despondent I got. The publisher's teaser promises that the book "takes a fresh and thought-provoking new look" that parses the claims on the "two extreme poles" of those calling for "tougher laws…in a racially tinged discourse" on one end and those pushing for "more open policies" on the other. But the book focused almost exclusively on the second target while largely ignoring the first, even when its own facts warranted a smackdown. You point out that the pro-immigration camp's claims that America is a magnet for the "best and brightest" are overblown because which foreigners—high-skilled or low-skilled—make a beeline for America depends on how well their skills are rewarded in their own country. Highly egalitarian countries such as Denmark lose their highly skilled workers because, relative to less-skilled counterparts, their labor is rewarded less well, whereas the reverse is the case in highly inegalitarian countries such as Mexico. That's an interesting thesis, but it doesn't explain India, my native country, which has extreme inequality and is among the biggest "donors" of high-skilled talent. It was odd that you shoehorned India into the same category as Canada and Australia as a country with "less inequality." But America's genius is not that it draws the best people but that it draws out the best from people, which is why even the world's "wretched" manage to make something of themselves here. Indeed, the essential thing for "success" is not a college degree but drive, which those with the cojones to uproot themselves and make the difficult schlep to a foreign land have in spades. This process of self-selection has served America—and immigrants—so we[...]
Thu, 27 Oct 2016 15:15:00 -0400The folks over at Wired invited President Barack Obama to guest edit the November issue of the magazine. The theme is Frontiers. I finally got around to reading the president's introduction to the issue, "Now Is the Greatest Time to Be Alive." I entirely agree with the president. In his essay, the president writes: Let's start with the big picture. By almost every measure, this country is better, and the world is better, than it was 50 years ago, 30 years ago, or even eight years ago. Leave aside the sepia tones of the 1950s, a time when women, minorities, and people with disabilities were shut out of huge parts of American life. Just since 1983, when I finished college, things like crime rates, teen pregnancy rates, and poverty rates are all down. Life expectancy is up. The share of Americans with a college education is up too. Tens of millions of Americans recently gained the security of health insurance. Blacks and Latinos have risen up the ranks to lead our businesses and communities. Women are a larger part of our workforce and are earning more money. Once-quiet factories are alive again, with assembly lines churning out the components of a clean-energy age. And just as America has gotten better, so has the world. More countries know democracy. More kids are going to school. A smaller share of humans know chronic hunger or live in extreme poverty. In nearly two dozen countries—including our own—people now have the freedom to marry whomever they love. And last year the nations of the world joined together to forge the most comprehensive agreement to battle climate change in human history. I reported on all of those positive trends and more in my book, The End of Doom. As a politician, President Obama will naturally hype policies like climate change regulation as part of his legacy. But setting that aside, all of his other claims about improvements in the human prospects are true. But where the president disappoints is when he tries to explain how all of this truly marvelous progress occurred. Consider: This kind of progress hasn't happened on its own. It happened because people organized and voted for better prospects; because leaders enacted smart, forward-looking policies; because people's perspectives opened up, and with them, societies did too. But this progress also happened because we scienced the heck out of our challenges. Science is how we were able to combat acid rain and the AIDS epidemic. Technology is what allowed us to communicate across oceans and empathize with one another when a wall came down in Berlin or a TV personality came out. Without Norman Borlaug's wheat, we could not feed the world's hungry. Without Grace Hopper's code, we might still be analyzing data with pencil and paper.... Because the truth is, while we've made great progress, there's no shortage of challenges ahead: Climate change. Economic inequality. Cybersecurity. Terrorism and gun violence. Cancer, Alzheimer's, and antibiotic-resistant superbugs. Just as in the past, to clear these hurdles we're going to need everyone—policy makers and community leaders, teachers and workers and grassroots activists, presidents and soon-to-be-former presidents. And to accelerate that change, we need science. We need researchers and academics and engineers; programmers, surgeons, and botanists. And most important, we need not only the folks at MIT or Stanford or the NIH but also the mom in West Virginia tinkering with a 3-D printer, the girl on the South Side of Chicago learning to code, the dreamer in San Antonio seeking investors for his new app, the dad in North Dakota learning new skills so he can help lead the green revolution. That's how we will overcome the challenges we face: by unleashing the power of all of us for all of us. Not just for those of us who are fortunate, but for everybody. All of these sentiments are surely worthy, but the President has entirely missed the main motive forces behind rising global prosperity and health. They are the advance and expansion of the institutions o[...]
Wed, 26 Oct 2016 09:30:00 -0400If man-made global warming produced by rising concentrations of carbon dioxide in the atmosphere from burning fossil fuels poses a significant problem, then most economists think that a revenue-neutral carbon tax imposed at the minehead and the well-head is the cheapest and most efficient solution. So too should most environmental activists who are concerned about climate change. However, many environmentalist groups are surprisingly opposed to just such a proposal in Washington State. Ballot Initiative 732 (I-732) would establish a tax on carbon emissions at $15 per metric ton of emissions in July 2017, $25 in July 2018, and then 3.5 percent plus inflation each year until the tax reaches $100 per metric ton. The tax would be phased in more slowly for farmers and nonprofit transportation providers. If adopted, I-732 could cut the state sales tax by one full percentage point from from 6.5 to 5.5 percent. It would fund the Working Families Rebate to provide up to $1,500 a year for 400,000 low-income working households to counter their increased energy expenditures. And it would essentially eliminate the Business and Occupation Tax for manufacturers, thus encouraging them to remain in the state. I-732 aims to neither increase nor decrease state revenues; the new carbon tax would offset other taxes and there would be no additional revenue left over for Washington State politicians and bureaucrats to spend. The goal of the tax is to lower greenhouse gas emissions by incentivizing people to switch to low- and no-carbon based fuels. One would think that environmentalists would cheer and be urging Washington State residents to support I-732. However, a remarkably interesting article, "The left v. a carbon tax," over at Vox explains how many Washington State environmentalist and progressive groups came to oppose I-732. One huge reason for their opposition is that the left-leaning groups against I-732 are against to revenue neutrality; they want to use climate policy as a way to increase tax revenues in order to "invest" in clean energy and to support "climate justice" redistribution programs. Consequently, as Ramez Naam, who has worked with the group CarbonWA to get I-732 on ballot, emailed me that its progressive opponents are essentially arguing, "Let's make the perfect the enemy of the really extremely good." He added, "On its merits, I-732 would be the strongest climate policy in North America, extremely market based, and the most progressive change to the tax code in Washington State (and possibly the biggest anti-poverty initiative here) in 40 years." Actually, it is highly debatable that the revenue increasing proposals that Washington State's soi-disant climate progressives would prefer to enact are in any sense more "perfect" than I-732. Jerry Taylor, the president of the Niskanen Center libertarian policy shop, favors a revenue-neutral carbon tax as a way to address concerns about climate change. When asked what he thought of I-732 Taylor responded in an email: I-732 gets it right for the state of Washington. The initiative make polluters pay for the risks and damages they are imposing on the rest of us...and then turns around and gives that money (in the form of a sales tax cut) to those they are putting at risk. Even if corporations passed all of the tax on to consumers, a majority of the citizens of Washington would gain more in tax reduction than they would pay in higher energy prices. It is not a perfect model for federal action in that existing regulatory authority to address greenhouse gas emissions would continue to exist, but it is nonetheless a very good start. Unfortunately, the opposition to I-732 by progressives is proving the salience of Cato Institute senior fellow Patrick Michaels' tart observation: "Do you really think $3 trillion will walk down K Street unmolested? That's what's required for a 'revenue neutral' tax." K Street is the notorious address for many of DC's more prominent lobbyists. On the other hand, if I-732 does succeed that will pro[...]
Sun, 18 Sep 2016 08:00:00 -0400Democratic politics makes savvy people stupid, at least when they act politically. This has long been demonstrated, and it applies both to voters and policymakers. Several things account for it: the impotence of one vote, the consequent futility and hence wastefulness of acquiring information, the dispersal of the costs of government, and the resulting theatrical mood-setting farces called election campaigns. Outside politics life is rather different. Our actions have a reasonable chance of making a difference to ourselves and those we care about; the costs of our actions fall largely on ourselves; and acquiring information in order to act more intelligently is thus worthwhile. As a result, those who try to sell us goods and services have an incentive to behave responsively and responsibly, unlike candidates for political office. That's why, by and large, people act smarter in the personal realm than they do in political realm. To see the difference, think about the saving of labor. Normally we see this as a good thing. We buy electric toothbrushes, power lawnmowers, dishwashers, clothes washers and dryers, and self-cleaning ovens, among many other things, precisely to save labor. Why? Obviously because labor is work—exertion. Most of what we think of as work we would not do if we could have the expected fruits without it. (Of course we sometimes are paid to do things we'd do anyway, but then it is something more than mere work.) Saving labor through technology not only relieves us of particular exertion; it also frees us to obtain other things we want but would otherwise have to do without—including leisure. Thus labor-saving enables us to have more stuff for less exertion. Time and energy are scarce, but our ends are infinite. That's why no one in private life fails to see labor-saving as good. Frederic Bastiat captured this in a fable about Robinson Crusoe. Crusoe had a two-week project planned: making a plank. This would require many days of labor, cutting down a tree, trimming the trunk, and fashioning the plank just so. Next he would re-sharpen his tools and then replenish the provisions he would consume during the project. As he prepared to start the job, Friday excitedly delivered the news that a piece of wood, well suited as a plank, had just washed up on their island. Terrible news, Crusoe said. Friday didn't understand, so Crusoe explained: obtaining the plank without effort—that is, for free—would cost him weeks of labor. He said: Now, labor is wealth. It is clear that I shall only be hurting my own interests if I go down to the beach to pick up that piece of driftwood. It is vital for me to protect my personal labor, and, now that I think of it, I can even create additional labor for myself by going down and kicking that plank right back into the sea! The genius of Bastiat's fable is that people will readily spot Crusoe's foolishness. But it is equally certain that few will apply the lesson to the "national economy," which is nothing more than a lot of people, arbitrarily grouped into a "nation," who produce and trade, when permitted, with other people arbitrarily grouped into other "nations." When Bastiat's interlocutor calls Crusoe's reasoning "absurd," Bastiat replies: That may be. It is nonetheless the same line of reasoning that is adopted by every nation that protects itself by interdicting the entry of foreign goods. It kicks back the plank that is offered it in exchange for a little labor, in order to give itself more labor. There is no labor, even including that of the customs official, in which it does not see some profit. It is represented by the pains Robinson Crusoe took to return to the sea the present it was offering him. Consider the nation as a collective entity, and you will not find an iota of difference between its line of reasoning and that of Robinson Crusoe. People can easily see that the free "imported" plank gives Crusoe time to make something else or to relax, but they don't see that imports de[...]
Fri, 16 Sep 2016 14:50:00 -0400
(image) What is the attraction of socialism? The Cato Institute held a policy forum Wednesday to consider that question, featuring talks from the moral psychologist Jonathan Haidt and the evolutionary psychologists Leda Cosmides and John Tooby. Cosmides pointed out that human beings evolved to handle the social challenges encountered in small bands of 50 to 200 people. Globe-spanning market economies strain our brains. The chief problem, Tooby suggested, is that many people are beguiled by "romantic socialism"—that is, they imagine what their personal lives would be like if everyone shared and treated one another like family. Left-leaning people, observed Haidt, endorse a story he calls "Capitalism is Exploitation"; "Capitalism is Liberation" is the story told by many conservatives and most libertarians. Ultimately, Cosmides argued, those of us who want to preserve liberty and prosperity need to understand how human psychology has evolved and understand why evolved attitudes are so hostile to modern free market societies.
Mon, 05 Sep 2016 16:00:00 -0400America can return to prosperity and robust economic growth by looking to the Kennedy-Reagan model of income tax cuts and a strong, stable dollar, a new book argues. JFK and the Reagan Revolution: A Secret History of American Prosperity, by Lawrence Kudlow and Brian Domitrovic, will be published this week by Penguin Random House's Portfolio imprint. It tells the story of how the tax and monetary policies of Presidents Kennedy and Reagan triggered impressive economic growth. As Kudlow and Domitrovic describe it in their introduction, "the combination of a strong and stable dollar with big, permanent, across-the-board tax rate cuts" can lead to a near-utopia. "Budget deficits, the retirement crisis, student loans, unaffordable health care, poor schools, [problems of] inner cities—all these things will fade away as lasting economic growth takes hold." Kudlow couldn't have been more gracious three years ago when my own book JFK, Conservative was published, and part of what I want to do here is repay the kindness. My own suggestions that the Kennedy tax cuts might be a useful model today have been met consistently and predictably by liberal objections that today's top income tax rates are considerably lower than the 91 percent top federal rate that obtained before Kennedy won a reduction to 70 percent. There's less room to cut now, the argument goes, and the effects on incentives and growth would be concomitantly less powerful. What's more, neither the Democratic presidential candidate, Hillary Clinton, nor the Republican one, Donald Trump, has been campaigning on a Kennedy-Reagan-Kudlow-Domitrovic platform. Clinton, while talking some about both economic growth and tax simplification, has also been calling for increased taxes on top earners and on some capital gains. Trump, while proposing some substantial income tax rate reductions, has also threatened to increase tariffs on imports. If that is more than just a negotiating threat, it would create a sharp contrast with Kennedy, who, Kudlow and Domitrovic write, "spurred the biggest round of tariff reductions of modern times." So are the Kennedy and Reagan examples irrelevant? Not quite. JFK and the Reagan Revolution doesn't really get into it, but it's worth mentioning that both presidents also spent heavily on arms buildups, pursuing a peace-through-strength approach to national security. They were fighting a Cold War against the Soviet Union, but some might argue that a similar strategy is in order now against the Islamic State or other manifestations of militant Islam. As for the argument that marginal rates today are lower than the ones that either Reagan or Kennedy began paring, I'd argue that there's still plenty of room to cut. State and local income taxes piled atop the federal ones mean marginal top rates for Californians or New York City residents are more than 50 percent. That means various governments take more than half of every additional dollar earned. At lower levels, phase-outs of benefits and subsidies create even steeper effective marginal rates. At 39.6 percent, the top federal rate is considerably higher than the 28 percent rate that Reagan left it at. Remember, too, the Sixteenth Amendment that gave the government the power to levy a federal income tax was only ratified in 1913, well more than a century after the country was founded. One useful contribution of JFK and the Reagan Revolution is to remind readers that Kennedy and Reagan didn't necessarily start off as tax-cutters, either. Reagan raised taxes as governor of California. When he ran for president in 1976, he insisted that tax cuts needed to be offset by spending cuts. As a congressman, Kennedy voted against tax cuts championed by Senator Robert Taft of Ohio. Kudlow and Domitrovic remind us, too, that even the Wall Street Journal editorial page, under the leadership of Vermont Royster and then Robert Bartley, was initially skeptical of tax cuts in the absen[...]
Mon, 29 Aug 2016 00:01:00 -0400For the past year, the Republican Party has behaved as though it is determined to abandon its best principles and alienate voters for years to come. The derailment has been so spectacular that it's easy to miss that Democrats are also veering in a direction that is ominous for both themselves and the country. Though Bernie Sanders lost the presidential nomination to Hillary Clinton, her victory came through capitulation. On issue after issue, she did her best to defuse his appeal by embracing his ideas and his rhetoric. That strategy worked in the primaries and, thanks to the self-destructiveness of Donald Trump, probably won't keep her from winning in November. But it promises to be a burden on her presidency and her party's future. It also neglects the lessons taught by another Clinton, Bill. Partly because his administration was so successful, Democrats have won the popular vote in four of the five presidential elections since his 1996 re-election. The thriving economy of his era created nearly 23 million jobs, cut the unemployment rate below 4 percent, kept inflation low, rescued 6.3 million Americans from poverty and set a record for the longest peacetime expansion in U.S. history. Clinton knew that a booming economy is the closest thing to a cure-all. He pursued it with a combination of fiscal discipline, free trade and a light regulatory hand. Jimmy Carter, a Democratic president synonymous with economic chaos, had proved the folly of federal interference in wages and prices. A big part of Clinton's wisdom lay in what he didn't do. But Hillary Clinton, pushed leftward by Sanders, has forgotten what fueled that prosperity. Her husband signed NAFTA, reached free trade agreements with Israel and Jordan, induced Beijing to submit to the rules of the World Trade Organization, and rebuffed demands for new import restrictions. Hillary opposes the trans-Pacific free trade deal—but it was Bill who originated the idea, over objections from the leftists of his day. He thought global integration would foster global growth, and he was right. During his first term, Clinton resisted demands to increase the minimum wage. In 1996, he acceded to an increase of 21 percent—but when Democrats led by Sen. Edward Kennedy, D-Mass., proposed another 40 percent increase, the president helped scotch it. He feared that even with the economy humming, a boost of that size would destroy jobs. Hillary Clinton, however, is willing to sign a bill raising the minimum wage to $15, more than double the current $7.25—at a time when the economy is less robust than when her husband balked. She also shows no inclination to restore the balanced budget that Bill did so much to attain. It was an achievement that had not been realized in nearly three decades—and has not been duplicated since. Although her fiscal plans are much more restrained than her opponent's, she would raise the total federal debt by 50 percent over the next decade, according to the bipartisan Committee for a Responsible Federal Budget. (Trump would more than double it.) It's not just her specific policies that would hobble growth; it's also her broad approach and her eagerness to indulge the Sanderistas. The Progressive Policy Institute, a centrist Democratic think tank once known as "Bill Clinton's idea mill," has warned of the dangers of depicting "working Americans as pitiful victims of stock villains like Wall Street, giant corporations, China or illegal aliens." In a report published in March, PPI urged Democrats to "reject magical thinking," as well as European-style fixes. "A progressive government's job is not to direct the private economy or shield people from market competition—from which mass prosperity arises—but to equip them to manage economic change," it argued, in terms that echo Bill Clinton. This is a sound approach as economic policy. It's also good politics in a country that is dominated by Rep[...]
Thu, 25 Aug 2016 16:05:00 -0400Washington, D.C., is getting a real life lesson in economics as the city moves closer to implementing a $15 per hour minimum wage. During the first six months of 2016, restaurants in D.C. shed 1,400 jobs. That's a 2.7 percent decline in food service jobs in just six months, the largest drop seen in that sector in more than 15 years. Even during the 2008 recession, restaurant jobs barely dipped before continuing a steady, decades-long rise in Washington. Mark Perry, an economist and scholar for the American Enterprise Institute, says restaurant jobs are often "ground zero" for consequences of minimum wage increases. The minimum wage in D.C. increased to $10.50 an hour in July 2015 and climbed to $11.50 an hour on July 1, 2016, with further increases planned in coming years until the goal of $15 per hour is achieved It's telling that the decline in restaurant jobs appears to have struck only within the borders of the capital city, while restaurants in the Maryland and Virginia suburbs added 2,900 jobs during the first six months of this year. "While it might take several more years to assess the full impact, the preliminiery evidence so far suggests that D.C.'s minimum wage law is having a negative effect on staffing levels at the city's restaurants," Perry wrote on his blog this week. For the visual learners in the audience, here's how food industry job growth in Washington, D.C., compares to the city's nearby suburbs over the past decade: This shouldn't come as much of a surprise to anyone with a rudimentary understanding of economics. Making it more expensive to employ people will cause businesses to employ fewer people, particularly in industries like food service where margins are already tight. Supporters of higher minimum wages will claim there is little actual evidence of job losses when one state raises mandatory wages and nearby states do not. Almost always they will point to a single study looking at Pennsylvania and New Jersey that found no negative economic consequences for workers after the latter state increased the minimum wage by a few cents in 1992. That study has been debunked, but even if you buy the premise that small adjustments in minimum wages might not have catastrophic affects, there's another problem: progressive policymakers are no longer pushing for small increases in the minimum wage. As a result, we're getting a real life economics experiment on a grand scale. In addition to Washington, D.C., local officials in Seattle, Los Angeles and New York have approved laws mandating $15 per hour. Whole states are following suit, with measures already passed in California, New York and Oregon. It's no secret what will happen after these laws take effect. "Economically, minimum wages may not make sense," admitted California Gov. Jerry Brown just moments before putting his name on a bill that could cause disastrous economic consequences for the already-impoverished rural parts of his state. Cities are more likely to be able to absorb higher wage mandates, but the restaurant data from D.C. shows that even robust job markets are not exempt from taking a hit. "Despite what we hear from unions, the Fight For 15 crowd and other minimum wage advocates, the evidence from D.C.'s restaurant industry—an industry often considered as 'ground zero' for minimum wage effects—demonstrates that demand curves for low-skilled workers actually do slope downward," Perry says, referring to the basic law of economics that says demand for a product or service will decrease as the cost increases. In other words, making it more expensive to employ someone—as high minimum wages do—will cause fewer people to be employed. It's really that simple.[...]
Tue, 23 Aug 2016 13:04:00 -0400Time and again, cigarettes have served as a spontaneous currency behind bars. But they aren't the only good to have played that role. As my colleague Elizabeth Nolan Brown reported here yesterday, a new sociological study has revealed that ramen noodles are now the currency of choice in at least one prison. While the ramen standard takes hold in that institution, other commodity currencies have emerged in other parts of the world, sometimes as stopgap substitutes for the government's money and sometimes as something more long-term. Here are a few of the examples we've covered in Reason over the years: The T-Shirt Standard: Haiti has an extensive trade in second-hand clothes; it also has an official currency that isn't always stable. And so Haitians have sometimes used the former in the place of the latter. "When the paper or coin currency of a nation is unstable and in short supply, it is not uncommon for a good (and often a relatively plentiful good) to take the place of currency—via a kind of generalized barter," one of the filmmakers behind the documentary Secondhand (Pepe) explains. The Minute Standard: Kenya fell into chaos after the corrupt elections of 2007, and the stores that ordinarily sold prepaid phone minutes shut down amid the violence. Phone credits quickly became more valuable than the government's money, and many people found it relatively convenient to use those units of talk time as a substitute currency. While this was a quick-fix response to a crisis, mobile phone credits had already been used as an alternative currency in more stable times. As the cell phone economy took off, many Africans living abroad discovered that the safest, cheapest way to send remittances home was simply to buy phone minutes for their families. It was an easy step from there to just trading the minutes. The Fish Standard: Ramen isn't the only food to replace cigarettes as a prison currency. Packs of mackerel and cans of tuna have done the same. One difference: While ramen's popularity as money is linked to its popularity as a meal, most prisoners don't like the mackerel enough to actually want to eat it. No doubt this makes it easier to accumulate savings. The Opium Standard: Just as ramen isn't the only food to become a money, tobacco isn't the only drug to play that role. Seven years ago, an AP dispatch from Afghanistan described a town where the "common currency was what grew in everyone's backyard—opium." The scene sounded like a Norman Rockwell/Thomas De Quincey mash-up: "When children felt like buying candy, they ran into their father's fields and returned with a few grams of opium folded inside a leaf. Their mothers collected it in plastic bags, trading 18 grams for a meter of fabric or two liters of cooking oil. Even a visit to the barbershop could be settled in opium." Alas, "the economy of this village sputtered to a halt last year when the government began aggressively enforcing a ban on opium production." You didn't realize the war on drugs could double as a deflationary monetary policy. The Cocaine Standard: In Colombia, on the other hand, a government crackdown inadvertantly encouraged the use of coca leaves as a medium of exchange. "No money has reached Guerima for months," the Telegraph reported in 2008, "and transactions are conducted in coca, with one gram enough to buy a soft drink." Possibly a coca-cola. The Pee Standard: When I blogged that cocaine story eight years ago, I also linked to an article that claimed prisoners were using yet another valuable commodity as money: drug-free urine. (Talk about liquid assets!) I'd call this one the gold standard, but I guess that name is already taken. Unlike that other gold standard, this one seems especially susceptible to inflation.[...]
Thu, 18 Aug 2016 15:38:00 -0400
(image) On this week's episode of The Fifth Column, regular co-host Michael C. Moynihan was "on assignment for Vice News," so the fast-talking Russian-born anarchist Michael Malice slotted in to spread his unlikely but intriguing vision for why a Hillary Clinton presidency would be good for liberty (short answer: she would be roundly hated, and soon driven out of office).
Other topics of discussion:
* Peter Thiel's unconvincing justification for driving Gawker to extinction, and what that tells us about how disturbingly easy it is for people to suppress speech they don't like via the legal system.
* Whether (as Malice contends) the Libertarian Party is selling out its philosophy by getting into pragmatic politics.
* Whether the media is in the tank for Hillary Clinton, or whether it is driving that tank at stragglers who refuse to march in Hillary Clinton's parades.
* How bad on a scale from bad to worse is Trump's Putin connections and selective bellicosity compared to Clinton's Saudi connections and selective bellicosity.
* The unreconstructed awfulness of New York Gov. Andrew Cuomo.
Listen to the whole show right here:
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Wed, 17 Aug 2016 14:53:00 -0400One of the great constants in an otherwise uncertain 21st century is spending on the U.S. military. Despite increasing debt and reduced war operations, the Pentagon knows how to keep both sides of its bread slathered in butter. "The total request for next year's Pentagon budget is a robust $583 billion," write Ryan Alexander and William Ruger in Stars & Stripes, "more than half the federal discretionary budget." And if military hawks at places such as The Heritage Foundation and American Enterprise Institute get their way, we'd be shelling out a minimum of 4 percent of GDP for defense ("4% for Peace!"), which would goose spending by another $120 billion a year. Here's the amazing thing about the Pentagon: It manages to do fine regardless of which party is in power. "The United States," write Alexander and Ruger, "has averaged higher levels of defense spending under President Barack Obama compared to the George W. Bush administration, even when adjusted for inflation. Indeed, defense spending in 2010 and 2011 exceeded any year since World War II." It's easy to see why. Conservatives love the military and though they will tell you that the government is incompetent and wasteful in whatever it does, they turn a blind eye to defense spending and accountability (David Stockman, Ronald Reagan's first budget director, has suggested that his boss was the initiator of this dynamic). As can be seen by the way in which the GOP leadership fought to save the useless Export-Import Bank, conservatives also love cronyism as long as they're favored vendors are getting taxpayer funding. On the liberal side, the calculus is a little bit different. There are plenty of Democratic hawks—Hillary Clinton certainly counts as one, despite recent attempts to cast her as something else—but as important, there are many Democratic Keynesians who believe government spending buoys the economy. Military contractors are smart, too, to site their various manufacturing contracts in as many congressional districts as possible. Cronyism is so entrenched in the defense bureaucracy that even when the Pentagon tries to cut a wasteful program, parochial interests decry the potential loss of jobs. This is pure military Keynesian economics, often advanced by supposed conservative champions of free markets. Increased military expenditures, they argue, will be a cushion against economic downturn. But the military is not a jobs program. Special interests have long treated the massive Pentagon budget as a dumping ground for programs that don't make us safer. For instance, until last year, Congress required the Pentagon to ship coal from Pennsylvania to Germany to heat U.S. military installations. Why? Because in the 1960s, some Pennsylvania congressmen wanted to prop up the declining fortunes of the anthracite coal industry in their state. Last year, the House voted 252-179 to strip the requirement and it was stopped. But like a legislative zombie, it was resurrected this year. The House spoke again, rejecting the provision with an even bigger majority. Hopefully that was its death knell. That's a rare victory over stupid, wasteful spending, write Alexander and Ruger. When it comes to projects like the F-35 fighter, which will likely be obsolete by the time it is fully operational (really), there just seems to be no stopping the pork. Read the whole piece here. Does military spending increase overall economic activity? Those of us who took intro economics classes through the mid-1980s or so may remember being taught that America's massive, government-financed buildup for World War II was what finally pulled the country out of The Great Depression. But a closer look at empirical results of deficit-financed military spending and, as important, cuts in military spending tell a very different stor[...]
Wed, 17 Aug 2016 12:21:00 -0400A couple of nights back, while watching the Olympics, I saw these two expensive-to-air commercials in rapid succession. The first is the brainchild of New York Gov. Andrew Cuomo, the second is a campaign ad for presidential nominee Hillary Clinton. This is your Democratic Party on economics: src="https://www.youtube.com/embed/uC7WVvmHUTE" allowfullscreen="allowfullscreen" width="560" height="340" frameborder="0"> Making our economy work for everyone starts by making sure those at the top pay their fair share in taxes.https://t.co/uDdkrzKL9O Making our economy work for everyone starts by making sure those at the top pay their fair share in taxes.https://t.co/uDdkrzKL9O — Hillary Clinton (@HillaryClinton) August 3, 2016 I can think of no better snapshot of major-party economics as practiced in 2016. We need incentives to reward companies for moving in, and penalties to punish them for moving away! Let's waive taxes for a decade on one politically acceptable category of businesses, while raising taxes permanently on a disfavored class right next door! And no matter what, it is government that will help your business grow, and create millions of new jobs. At least Clinton's intelligence-insulting ad was paid for by her own campaign. Cuomo, on the other hand, has poured more than $200 million of taxpayer money into promoting New York like this since 2012, including north of $50 million for Start-Up NY, a program that the governor promised would "supercharge" the Empire State economy. So how many jobs has Start-Up NY produced, in exchange for all this advertising, and an estimated $100 million in waived taxes? Uh, 408. Cuomo, meanwhile, insists that the many critics of the ad campaign's desultory return on investment are "wrong," because the advertising is generic. "Come to New York," and "We will help your business grow if you come to New York," and "New York is not the frightful place that you thought it was," "We're not a high-tax state — we'll eliminate taxes." So that's what the advertising did. We had a very anti-business reputation, and if you asked any company, we actually did — you ask companies around the country, "Would you ever move to New York?" They'd say, "Oh no no no — New York is anti-business. It's very high tax, it's very high regulations." So we had a bad reputation that we had to correct to even be considered. And the quote-unquote Start-Up ads are really generic. Start-Up means, "Come to New York and we will help you start up your business—no taxes, but usually we'll also give you a loan, we'll give you an incentive, we'll invest in your business and take an equity participation." But if a state wants to be competitive now, it's going to take more than just no taxes. That's sort of the opening bid. But most often you're going to have to put an additional investment package on the table to be competitive with what the other states are offering. What a godawful mess. And as for why New York has a bad enough business/regulatory reputation that it needs to spend eight figures counteracting that impression, look no further than Cuomo's own speech at the recent Democratic National Convention: [O]ur progressive government is working in New York. We raised the minimum wage to $15, the highest in the nation because we insist on economic justice! We enacted paid family leave because all workers deserve dignity! We are rebuilding our middle class and we're working hand in hand with organized labor because the middle class is the backbone of this society! We are protecting the environment by banning fracking because this is the only planet we have. There is a better way, one that both 19th-century political parties have long since abandoned. And that is this: Make the rules—including tax levels—few, si[...]
Wed, 17 Aug 2016 00:01:00 -0400Donald Trump talks about cutting taxes and regulation. Hillary Clinton, not so much. But their economic visions, laid out in dueling speeches last week, reflect a strikingly similar fear of what happens when people are free to engage in peaceful, consensual transactions without government interference. Those transactions would not happen if they were not mutually beneficial, and the same truism applies when the two parties happen to be on different sides of a political border. But Trump and Clinton fear the unpredictable consequences of free (or relatively free) markets, which reward consumers and businesses that serve them well while punishing those that can't compete. "All of our policies should be geared towards keeping jobs and wealth inside the United States," Trump says. Clinton promises to "stop any trade deal that kills jobs or holds down wages." Both candidates claim to appreciate the benefits of international trade. But those benefits come from specialization that generates the greatest value at the lowest cost, which cannot happen without shifts in employment. If you oppose trade that "kills jobs" or that fails to keep them within the United States, you oppose trade, period. "Let's go out and build the future!" Clinton exclaims. Trump says Clinton is "the candidate of the past," while "ours is the campaign of the future." The future they have in mind looks a lot like the past. If American prosperity was once based on manufacturing, they say, it must always be so. Trump, who thinks a reduction in manufacturing jobs is ipso facto evidence of economic decline, promises to "put our coal miners and steelworkers back to work" and "put new American metal into the spine of this nation." Clinton emphasizes "how important it is [to] build things," saying, "We are builders and we need to get back to building!" This manufacturing fetish is no more reasonable than pining for the days when most Americans were farmers. The share of the U.S. labor force employed in agriculture fell from nearly 80 percent in 1800 to 1.5 percent in 2012, mainly because of dramatic improvements in productivity. That trend involved a lot of "lost jobs," so according to Trump and Clinton it was a disaster. Two major causes of the decline in manufacturing's share of employment are rising productivity and competition from more-efficient producers in other countries, both of which are a boon to consumers—i.e., all of us. The government cannot prevent or reverse the loss of those jobs without sacrificing those gains. Trump recognizes that regulations represent "a hidden tax on American consumers," who pay more for products made by companies subject to the government's costly mandates. But he refuses to admit the same is true of restrictions on trade, which by design protect domestic producers from lower-cost foreign competitors. Clinton and Trump both want to punish American companies that take advantage of lower production costs in other countries to offer their customers more value for their money. Trump complains that such companies "ship products into the U.S. tax-free," while Clinton promises a "more patriotic tax code that puts American jobs first," including "a new exit tax" for companies that "move their headquarters overseas." As a businessman, Trump understands why making products in America does not always make sense. As Clinton points out, "He's made Trump ties in China and Trump suits in Mexico." Clinton's campaign created a web page listing U.S.-based alternatives to the foreign manufacturers of various Trump-branded products. It says these companies are "ready and able to produce the goods he makes overseas"—at a higher cost, of course. Clinton never mentions that part, because she does not want to admit that a[...]
Mon, 15 Aug 2016 13:48:00 -0400Via the Cato Institute comes the latest iteration of William P. Ruger and Jason Sorens' ranking of "Freedom in the 50 States," which seeks to quantify "personal and economic freedom" throughout the country. For more about the project, which was first published in 2009 by the Mercatus Center, go here. It's an admirable and invaluable effort. Ruger, who works at the Charles Koch Institute, and Sorens, who teaches at Dartmouth and inspired the Free State Project, do an excellent job of not only calculating degrees of freedom in areas such as land-use regulation, victimless crimes, and occupational licensing, but in providing high-level reform ideas for each state. Here's part of the entry for Arkansas, which finishes in the middle of the pack as the 29th most-free state: Like many other southern states, Arkansas does well on land-use and labor policies and somewhat poorly on cronyist entry and price controls. However, it does better than most other southern states, and indeed the national average, on its civil liability regime. It has also started to deregulate telecommunications and in 2013 enacted statewide video franchising. The extent of occupational licensing, according to two different measures, is more than a standard deviation worse than the national average. Hospital construction requires a certificate of need, and there is an anti-price-gouging law and also a general law against "unfair pricing" or sales below cost. Arkansas does better than most of its neighbors on criminal justice policies. Victimless crime arrests are below average, and the crime-adjusted incarceration rate is not much above average. On the other hand, the state does a bit worse than one might expect on gun rights, with heavy training requirements and significant limitations on the right to carry concealed. Marijuana laws are unreformed. In personal freedom categories other than these and the aforementioned marriage laws, Arkansas deviates little from the average. School choice particularly looks like an opportunity for improvement, given the state's fiscal centralization (so there's not much choice among public schools), its generally conservative ideological orientation, and its minority student populations.... Policy Recommendations Fiscal: Cut the state sales and use tax, which is high. Let local governments vary property taxes to meet local needs and desires, reducing state aid for education and other purposes. Regulatory:Roll back occupational licensing. Some occupations that could be deregulated include sanitarians, title abstractors, interpreters, dietitians and nutritionists, pharmacy technicians, veterinary technologists, opticians, athletic trainers, occupational therapist assistants, massage therapists, private detectives, security guards, landscaping contractors, tree trimmers (locally), funeral apprentices, collection agents, 911 dispatchers, tree injectors, construction contractors, security alarm installers, well drillers, mobile home installers, and boiler operators. Personal: Enact a generous tax credit for contributions to private scholarships for K–12 education. So what states are the absolute worst? Numbers 50, 49, and 47 are New York, California, and Hawaii; New Jersey and Maryland round out the bottom five. And which states are the most free? New Hampshire, Alaska, Oklahoma, Indiana, and South Dakota take top honors—and also suggest the limits of freedom per se as a lure to Americans. Those states might be the most free in all sorts of ways, yet very few people are banging down doors to enter them. New Hampshire and North Dakota have seen growth in "net migration" or the number of people moving in from other states between 2000 and 2014, according to Ruger and Soren[...]
Mon, 15 Aug 2016 12:00:00 -0400Virginia Gov. Terry McAuliffe recently said he was in "very serious negotiations" with the Washington Redskins about building a stadium in Virginia. In plain English, the literal translation of that statement is: "Hide your wallet." When it comes to taking money from the poor and giving it to the rich, McAuliffe is like his predecessors, only more so. Since 2010 Virginia has ladled out nearly $700 million worth of economic incentives trying to lure businesses to the commonwealth. Such handouts have nearly tripled in the past decade. In his first year alone McAuliffe handed out more than $68 million—then went to the General Assembly and asked for more. Those efforts have not always gone well. In one instance, the commonwealth shelled out $1.4 million to help a Chinese subsidiary ramp up operations in Appomattox. The project—which McAuliffe had lauded as "transformational"—turned out to be vaporware, and 300-plus jobs that had been promised never materialized. In another instance, the state paid Norfolk Southern $2 million to shift jobs from Roanoke to Norfolk, in defiance of a state law prohibiting the use of incentives for relocation projects. Lately the governor has been offering subsidies to companies like Dollar Tree ($9 million) and Motley Fool ($350,000). But such figures are chump change compared to the funds shelled out for sports teams, which routinely fleece the public out of huge sums for fancy new arenas. Over the past two decades, taxpayers have been forced to fork over more than $7 billion to build or renovate NFL stadiums. In some cases, taxpayers are still paying off the bonds for stadiums that have since been abandoned. Civic boosters routinely claim that new stadiums will generate all sorts of ancillary economic benefits. But multiple studies have debunked that talking point. A survey of the literature, by scholars at the Brookings Institute, found "no discernible positive relationship between sports facility construction and economic development." Most evidence suggests that sports subsidies cannot be justified on the grounds of local economic development, income growth, or job-creation. In fact, after 20 years of academic research on the topic, "peer reviewed economics journals contain almost no evidence that sports stadiums or franchises measurably improve local economies." This seems to be Richmond's experience. Some of the city's schools are crumbling, to the point that a ceiling tile fell and hit a student on the head—not once but twice. Yet four years ago the city took money from schools to build a new $10-million practice field for the Redskins training camp. Republican Gov. Bob McDonnell kicked in another $4 million. The city's Economic Development Authority agreed to guarantee the Redskins another $500,000 per year. But fan attendance is down and much of the spin-off economic activity that was supposed to materialize has not. As one Arby's owner near the training camp told The Times-Dispatch last year, "We thought we'd get a bigger impact with all those people right across the street." (Things do seem to be going a bit better this year.) Small wonder, then, that last week a survey showed three-fourths of respondents think the city's investment in the training camp has not paid off, and it should stop forking over a half-million dollars a year to the team. That's true even of Redskins fans who have attended a training session—72 percent of whom also think the annual fee is a lousy deal. And really, can you blame them? According to Forbes, in 2015 the Redskins were worth $2.85 billion, and the year before enjoyed revenue of $439 million. The average value of an NFL team rose 38 percent last year, thanks in part[...]