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Economic Impact of Gas Prices

Are gas prices high or low by historical standards?  That seems like a nutty question, with prices at the pump cracking $4.00 a gallon, but one can argue that in terms of household pain, gas prices are nowhere near their historical highs.

Economist Mark Perry, at his blog Carpe Diem, shows that gas prices are far from their highs as a percentage of household income:
Gas

I thought the analysis could be taken one step further.  Mr. Perry was generous enough to send me his data, and I added a fourth piece of data to the analysis:  the average passenger vehicle MPG by year, as reported at the BTS here.  The MPG data set is spotty, and required some interpolation.  Also, data since 2004 is missing, so I assumed 2004 MPG's for more recent years (this is conservative, since the long-term trend would indicate fleet MPG's probably improved since 2004). 

From this data I was able to create what I think is a slightly improved analysis.  The key for households is not how much it costs to buy 1000 gallons, but how much it costs to buy the gas required to drive their typical annual miles.  Using 15,000 as an average driving miles per year per person, we get this result:

Gas_prices_2

So, while I too think paying $4 for gas is not my favorite way to dispose of my income, in terms of average household pain created, gas prices are quite far from their historic highs.

Posted on June 30, 2008 at 02:52 PM | Permalink | Comments (18)

Dumbest Thing I Have Read Today

Apparently from the lips of Barrack Obama, via the WSJ and Tom Nelson:

"I want you to think about this," Barack Obama said in Las Vegas last week. "The oil companies have already been given 68 million acres of federal land, both onshore and offshore, to drill. They're allowed to drill it, and yet they haven't touched it – 68 million acres that have the potential to nearly double America's total oil production."

Wow.  I would not have thought it possible to blame government restrictions on drilling, which the oil companies have decried for years, on the oil companies themselves.  But apparently its possible. 

1.  Just because the Federal Government auctions an oil lease, it does not mean that there is oil there.  And if there is oil there, it does not mean the oil is recoverable economically or with current technology.  Does this even need to be said?

2.  The implication is that oil companies are intentionally not drilling available reserves (to raise prices or because they are just generally evil or whatever).  But if this is the case, then what is the problem with issuing new leases?  If oil companies aren't going to drill them, then the government gets a bunch of extra leasing money without any potential environmental issues.  Of course, nobody on the planet would argue Obama's real concern is that the new leases won't get drilled -- his concern is that they will get drilled and his environmental backers will get mad at him.

Posted on June 30, 2008 at 09:47 AM | Permalink | Comments (8)

Other Thoughts on Oil Prices and "Speculation"

As a followup to my point on oil prices, here are a selection of posts on oil prices and speculation that have caught my eye of late:

McQ writes about the charge of "inactive" oil leases, which Democrats attempted to use as an excuse for not opening up new lease areas for drilling

Tyler Cowen has a big roundup on the topic, with many links, and Alex Tabarrok has a follow-up.  Cowen discusses rising oil prices in the context of Julian Simon here.

Michael Giberson also addresses speculation, while observing that non-industrial buyers have not increased their position in the futures market as oil prices have risen

Finally, via Scrappleface:

When the U.S. Supreme Court reconvenes on the first Monday in October, the nine Justices may consider whether the Constitutional preamble clause “secure the Blessings of Liberty to ourselves and our Posterity” guarantees an individual right to drill for oil.

Now that the court, in a 5-4 ruling on the Heller case, has upheld the Second Amendment right of “the people,” not just state-run militias, to keep and bear arms, some scholars say the court may be willing to go the next logical step and recognize the peoples’ right to acquire their own fuel.

Posted on June 30, 2008 at 08:54 AM | Permalink | Comments (2)

Repairing Years of Protectionism

Often, government interventionism is like a wack-a-mole game, with one set of regulations that create unintended consequences that are the justification for more regulation, and so on.

On the bad-worse scale of government interventionism, this is probably one of the better ideas, the State of Florida's buyout of US Sugars cane growing operations around the Everglades  (via bird dog).

Not mentioned anywhere in the article is the fact that sugar-cane production in the US likely would not even exist at all were it not for the substantial import quotas and tariffs placed on foreign sugar.  The US government has had a policy of propping up US Sugar via enforced higher prices.  So after years of the government in effect paying US Sugar to grow cane around the Everglades, the Florida government is now paying it not to.

Posted on June 28, 2008 at 01:42 PM | Permalink | Comments (9)

Willing Suspension of Physics

I went to see the movie Wanted today, mainly because I am home alone and tried to pick the movie I was least likely to take my wife or kids to.

If you like non-stop action movies with computer game physics and lots of CGI close-ups of bullets drilling through people's skulls that were fired by a smoking-hot assassin babe played by Angelina Jolie who actually had to add tats rather than hide them for this role (and, really, who doesn't?), then you will probably enjoy the movie.  The lost opportunity in the film was the very beginning, which sortof tried to be Office Space without being nearly as good.  But there is certainly a big hint that Office Space was on the director's mind -  don't miss the red stapler, though it didn't look like a classic Swingline.

As an additional note, I see from the previews that someone has done a remake of Death Race 2000, though it seems to bear about the same resemblance to the original as the Running Man did to the original Steven King / Richard Bachman book.  The whole fight-against-the-dystopic-state thing seems to have been lost.  By the way, can't they find any actor other than Jason Statham to portray someone who drives cars fast?

As a final shout-out to SF geeks out there, trolling around on IMDB led me, via Morgan Freeman of all people, to this page which seems to imply a Rendezvous with Rama movie is in the works.

Postscript:  I will never be mistaken for a social conservative, but I did find it odd today that in a preview that was supposedly "approved for all audiences" there were numerous F-bombs dropped.  Update:  OK, I can't be sure that this particular preview was "all audiences."  All the ones that followed were, but it may be they have grittier versions of previews they show before R-rated features. 

Clarification:  Sorry if it was not clear, but I actually did enjoy the movie.  Sort of a guilty pleasure.  Fixed Jason Statham's name, thanks to commenter.

Posted on June 28, 2008 at 11:40 AM | Permalink | Comments (4)

A Gross Over-generalization Related to Gender

I try very hard not to fall into the trap of making generalizations related to ethnic or racial groups.  However, I must make a gender-related exception.  There seems to be something about how the average woman's brain is wired that the concept of source switching on a TV set is virtually impossible to comprehend.  I have just had yet another hopeless tech support conversation with a female friend/family member that got "stuck" with cable or DVD material on the TV screen when they wanted to view the other.  Adding to the fun, the female in question was attempting to use a universal remote control which also required mode-shifting to make sure one had the remote set to control the correct component  (another concept apparently particularly difficult for the fairer sex).  Making the tech support challenge harder in this case, the manufacturer of this TV apparently chose not to use the fairly ubiquitous "TV/Video" label for the source-switching functionality, obviating my usual strategy of yelling "TV/video button" over and over into the phone until I get a response.  Fortunately, my second guess of "input" seemed to match a label on the remote.

Yes, I know, all you women will now be rushing from Lawrence Summers' house to mine to set up protests.  I still think that with women dominating on things like relationship management and hygiene standards, and men leading mainly on understanding television source switching and programming remote controls, that women are probably still ahead on points.

Posted on June 26, 2008 at 05:34 PM | Permalink | Comments (12)

My View on Oil Markets

A number of readers have written me, the gist of the emails being "you have written that X or Y is NOT causing higher oil prices -- what do you think IS causing high oil prices?"  Well, OK, I will take my shot at answering that question.  Note that I have a pretty good understanding of economics but I am not a trained economist, so what follows relates to hard-core economics in the same way pseudo-code relates to C++.

My first thought, even before getting into oil, is that commodity prices can be volatile and go through boom-bust periods.  Here, for example, is a price chart of London copper since 1998:

Copper

While oil prices have gone up by a factor of about four since 1998, copper has gone up by a factor of about 15!  But the media seldom writes about it, because while individual consumers are affected by copper prices, they don't buy the commodity directly, and don't have stores on every street corner with the prices posted on the street.

For a number of years, it is my sense that oil demand has risen faster than supply capacity.  This demand has come from all over -- China gets a lot of the press, but even Europe has seen increases in gasoline use.  Throughout the world, we are on the cusp of something amazing happening - a billion or more people in Asia and South America are emerging from millennia of poverty.  This is good news, but wealthier people use more energy, and thus oil demand has increased.

On the supply side, my sense is that the market has handled demand growth up to a point because for years there was some excess capacity in the system.  The most visible is that OPEC often has been producing below their capacity, with Saudi Arabia as the historic swing producer.  But even in smaller fields in the US, there are always day to day decisions that can affect production and capacity on a micro scale.

One thing that needs to be understood - for any individual field, it is not always accurate to talk about its capacity or even its "reserves" as some fixed number.  How much oil that can be pumped out on any given day, and how much total oil can be pumped out over time, depend a LOT on prices.  For example, well production falls over time as conditions down in the bottom of the hole deteriorate  (think of it like a dredged river getting silted up, though this is a simplification).  Wells need to be reworked over time, or their production will fall.  Just the decision on the timing of this rework can affect capacity in the short term.  Then, of course, there are numerous investments that can be made to extend the life of the field, from water flood to CO2 flood to other more exotic things.  So new capacity can be added in small increments in existing fields.  A great example is the area around Casper, Wyoming, where fields were practically all shut-in in the 1990's with $20 oil but now is booming again.

At some point, though, this capacity is soaked up.  It is at this point that prices can shoot up very rapidly, particularly in a commodity where both supply and demand are relatively inelastic in the short term.

Let's hypothesize that gas prices were to double this afternoon at 3:00PM from $4 to $8.  What happens in the near and long-term to supply and demand?

In the near term, say in a matter of days, little will change on the demand side.  Everyone who drove to work yesterday will probably drive today in the same car -- they have not had time to shop for a new car or investigate bus schedules.  Every merchandise shipper will still be trucking their product as before - after all, there are orders and commitments in place.  People will still be flying - after all, they don't care about fuel prices, they locked their ticket price in months ago. 

However, people who argue that oil and gas demand is inelastic in the medium to long term are just flat wrong.  Already, we are seeing substantial reductions in driving miles in this country due to gas price increases.  Demand for energy saving investments, from Prius's to solar panels, is way up as well, demonstrating that prices are now high enough to drive not only changed behaviors but new investments in energy efficiency.  And while I don't have the data, I am positive that manufacturers around the world have energy efficiency investments prioritized much higher today in their capital budgets.

There are some things that slow this demand response.  Certain investments can just take a long time to play out.  For example, if one were to decide to move closer to work to cut down on driving miles, the process of selling a house and buying a new one is lengthy, and is complicated by softness in the housing markets.  There are also second tier capacity issues that come into play.  Suddenly, for example, lots more people want to buy a Prius, but Toyota only has so much Prius manufacturing capacity.  It will take time for this capacity to increase.  In the mean time, sales growth for these cars may be slower and prices may be higher.  Ditto solar panels. 

Also, there is an interesting issue that many consumers are not yet seeing the full price effects of higher oil and gas prices,and so do not yet have the price incentive to switch behavior.  One example is in air travel.  Airlines are hedged, at least this year, against much of the fuel price increase they have seen.  They are desperately trying not to drive people out of air travel (though DHS is doing its best) and so air fares have not fully reflected fuel price increases.  And since many people buy their tickets in advance, even a fare increase today would not affect flying volumes for a little while.

Another such example that is probably even more important are countries where consumers do not pay world market prices for gas and oil, with prices subsidized by the government (this is mostly true in oil producing countries, where the subsidy is not a cash subsidy but an opportunity cost in terms of lost revenue potential).  China is perhaps the most important example.  As we mentioned earlier, Chinese demand increases have been a large impact on world demand, as illustrated below:

Chinaautos

All of these new consumers, though, are not paying the world market price for gasoline:

While consumers in much of the world have been reeling from spiraling fuel costs, the Chinese government has kept the retail price of gasoline at about $2.60 a gallon, up just 9% from January 2007.

During that same period, average gas prices in the U.S. have surged nearly 80%, to about $4 a gallon. China's price control is great for people like Tang, who drives long distances in his gas-guzzling Great Wall sports utility vehicle.

But Tang and millions of other Chinese are bracing for a big jump in pump prices. The day of reckoning? Everybody believes it's coming right after the Summer Olympics in Beijing conclude in late August.

Demand, of course, is going to appear inelastic to price increases if a large number of consumers are not having to pay the price increases.

Similarly, there are factors on the supply side that make response to large price increases relatively slow.  We've already discussed that there are numerous relatively quick investments that can be made to increase oil production from a field, but my sense is that most of these easy things have been done.  Further increases require development of whole new fields or major tertiary recovery investments in existing fields that take time.  Further, we run up against second order capacity issues much like we discussed above with the Prius's.  Currently, just about every offshore rig that could be used for development and exploration is being used, with a backlog of demand.  To some extent, the exploration and development business has to wait for the rig manufacturing business to catch up and increase the total rig capacity.

There are also, of course, structural issues limiting increases in oil supply.  In the west, increases in oil supply are at the mercy of governments that are schizophrenic.  They know their constituents are screaming about high oil prices, but they have committed themselves to CO2 reductions.  They know that their CO2 plans actually require higher, not lower, gas prices, but they don't want the public to understand that.  So they demagogue oil companies for high gas prices, while at the same time restricting increases in oil supply.  As a result, huge oil reserves in the US are off-limits to development, and both the US and Canada are putting up roadblocks to the development of our vast reserves of shale oil.

Outside of the west, most of the oil is controlled by government oil companies that are dominated by incompetence and corruption.  For years, companies like Pemex have been under-investing in their reserves, diverting cash out of the oil fields into social programs to prop up their governments.  The result is capacity that has not been well-developed and institutions that have only limited capability to ramp up the development of their reserves.

One of the questions I get asked a lot is, "Isn't there a good reason for suppliers to hold oil off the market to sustain higher prices?"  Well, let's think about that.

Let's begin with an analogy.  Why wouldn't Wal-mart start to hold certain items off the market to get higher prices?  Because they would be slaughtered, of course.  Many others would step in and fill the void, happy to sell folks whatever they need and taking market share from Wal-mart in the process.  I think we understand this better because we know the players and their motivations better in retail than we do in oil.  But the fact is that Wal-mart arguably has more market power, and in the US, more market share than any individual oil producer has worldwide.  Oil producers have seen boom and bust cycles in oil prices for over a hundred years.  They know from experience that $130 oil today may be $60 oil a year from now.  And thus holding one's oil off the market to try to sustain prices only serves to miss the opportunity to get $130 for one's oil for a while.  People tend to assume that the selfish play is to hold oil off the market to increase prices, but in fact it is just the opposite.  The player who takes this strategy reduces his/her own profit in order to help everyone else. 

This is a classic prisoner's dilemma game.  Let's consider for a moment that we are a large producer with some ability to move prices with our actions but still a minority of the market.  Consider a game with two players, us and everyone else.  Each player can produce 80% of their capacity or 100%.  A grid showing reasonable oil price outcomes from these strategies is shown below:

P1_3

Reductions in our production from 100% to80% of capacity increases market prices, but not by as much as would reductions in production by other producers, who in total have more capacity than we.  Based on these prices, and assuming we have a million barrels a day of production capacity, the total revenue outcomes for us of these four combinations are shown below, in millions of dollars (in each case multiplying the price times 1 million barrels times the percent production of capacity, either 80 or 100%):

P2

We don't know how other producers will behave, but we do know that whatever strategy they take, it is better for us to produce at 100%.  If we really could believe that everyone else will toe the line, then everyone at 80% is better for us than everyone at 100% -- but players do not toe the line, because their individual incentive is always to go to 100% production.  For smaller players who do not have enough volume to move the market individually (but who make up, in total, a lot of the total production) the incentive is even more dramatically skewed to producing the maximum amount.

The net result of all this is that forces are at work to bring down demand and bring supply up, they just take time.  I do think that at some point oil prices will fall back out of the hundreds.  Might this reckoning be pushed backwards a bit by bubble-type speculation?  Sure.  People have an incredible ability to assume that current conditions will last forever.  When oil prices were at $20 for a decade or so, people began acting like they would stay low forever.  With prices rising rapidly, people begin acting like they will continue rising forever.  Its an odd human trait, but a potentially lucrative one for contrarians who have the resources and cojones to bet against the masses and stick with their bet despite the fact that bubbles sometimes keep going up before they come back down.   

I don't have the economic tools to say if such bubble speculation is going on, or what a clearing price for oil might be once demand and supply adjustments really kick in.  I do have history as an imperfect guide.  In 1972 and later in 1978 we had some serious price shocks in oil:

Oilprice1947

Depending on if you date the last run-up in prices from '72 or '78, it took 5-10 years for supply and demand to sort themselves out (including the change in some structural factors, like US pricing regulations) before prices started falling.  We are currently about 6 years into the current oil price run-up, so I think it is reasonable to expect a correction in the next 2-3 years of fairly substantial magnitude. 

Postscript:  I have left out any discussion of the dollar, which has to play into this strongly, because what I understand about monetary policy and currencies wouldn't fill a thimble.  Suffice it to say that a fall in value of the dollar will certainly raise the price, to the US, of oil, but at the same time rising prices of imported oil tends to make the dollar weaker.  I don't know enough to sort out the chicken from the egg here,

Posted on June 26, 2008 at 11:56 AM | Permalink | Comments (21)

Economic Morons in Europe, but is Congress Much Better?

Via Tim Worstall, Gawain Towler reports this bill in front of the European Supreme Soviet Parliament:

Written declaration on fixing fuel prices
The European Parliament,– having regard to Rule 116 of its Rules of Procedure,
A. Whereas we are witnessing an unprecedented rise in fuel prices, and this scandalous surge is having a devastating effect on economic activity in various sectors: transport and other services, industry, agriculture and fisheries,
B. Whereas in Portugal, the major oil companies in the first quarter of this year, vis-à-vis the first quarter of 2007, made net profits of 22.9% (GALP), and consolidated profits of 36.5% (REPSOL) and 63.4% (BP), which were fundamentally the result of practising speculative pricing, as a result of the speculative valuation of oil stocks
bought at lower prices,

1. Calls for the establishment of a tax, for each Member State, to be levied exclusively on these profits so as to bring them back into the coffers of the Member State. This tax should be paid within 60 days after the end of each quarter, with the value and scope of the levy depending on the readiness of the oil companies to reduce their speculative gains thanks to the 'stock effect';
2. The revenue generated by this tax should be returned on a proportional basis to the various economic sectors in each Member State;
3. Instructs its President to forward this declaration, together with the names of the signatories, to the Council, Commission, and Parliaments of the Member States.

"depending on the readiness of oil companies to reduce their speculative gains thanks to the 'stock effect'"??  What the *&#$@% does this mean?  What economic concept are they even trying to get at?

Further, I was amazed at the statement that BP made net profits of 63.4%.  It took me a while to figure out that this was the quarter over quarter profit growth, not the profit margin.  I can't tell if these guys are just ignorant or if this is a translation issue into English, so i will give them the benefit of the doubt.  In case you are wondering, BP's net profit margin in the first quarter of 2008 was 8.3% of revenues, which in the grand scheme of industry is actually below average.

One reason fuel prices are so high in Europe is because the government takes more than half of fuel revenues in taxes:

Fuel taxes are also the central issue for truckers in Europe, because they account for a large portion of the retail price of fuel. Unleadedgasoline sold for $8.65 per gallon and diesel for $9.62 per gallon Tuesday in Britain, which charges a flat $3.77 per gallon in fuel duty and imposes a 17.5 percent consumptiontax on the total price

So, 61% (44% from the $3.77 plus the 17.5%) goes to government and 8.3% goes to the BP shareholders.  So lets tax BP shareholders more to lower the price!

Posted on June 25, 2008 at 03:39 PM | Permalink | Comments (30)

So Where Are They Storing All the Oil?

I find the current political demagoguery that oil speculators are now the ones responsible for higher oil prices to be absolutely laughable.  I am willing to believe that oil supply and demand are perfectly inelastic over very short time periods, meaning that we might expect little change in supply or demand over a couple of days or weeks after a price change, allowing for a fairly free range of speculative excesses.  However, there is every evidence that oil is by no means perfectly price inelastic, and supply and consumption do change with price.  Already in the past few months we have seen, for example, substantial reductions in passenger car miles in this country. 

For any period of time longer than hours or days (or perhaps weeks), any cabal that is somehow manipulating oil prices well above the natural market clearing price is going to have to deal with a problem:  Extra oil.  Lots of it.  Even if the supply side is sticky due to shortages currently in drilling equipment, demand is not.  People are going to use less, and at the same time, every supplier is going to be trying to send every barrel to market as quick as they can  (oil producers know that prices that rise will eventually fall again -- that is the history of oil.  They are all programmed to move as much product as possible when prices are at all time highs).

A lot of dynamics, such as a short squeeze, can create a speculative bulge, but if speculators are somehow purposefully keeping oil prices high for long periods of time, they must be doing one of three things:

  1. Storing a lot of oil somewhere
  2. Creating an extensive system of production controls that keeps oil supply off the market.
  3. Have someone with deep pockets subsidize consumer demand for oil by selling excess oil off at below market prices.

One is just not possible, not in the quantities that would be required.  Two sort of happens in a haphazard and not very consistent way with OPEC, though it is hard to convince me that futures traders in Chicago have an active partnership with large state-run oil companies.  Three is actually happening, with the Chinese government continuing to sell gasoline and other petroleum products at below market prices, but there is evidence that there are limits to how much further they will take this.  Again, I think this is being done for reasons other than cooperation with mercantile exchange traders in the US.

To a large extent, this theory, if it is anything more than just populist capitalism-bashing, is a result of extreme ignorance.  There are an incredible number of people involved in the oil markets every day in numerous countries with numerous different incentives, such a large number that it is impossible to imagine a conspiracy.  There have been a couple of cases of proven petroleum commodity price manipulation in these trading markets - most of these have involved manipulation of prices at the end of the day on certain futures expiration and/or Platt's pricing windows.  The time frame for these manipulations have been on the order of 1-2 minutes.

But here is the best argument against this manipulation for higher prices, and it is amazing to me that no one ever thinks of it.  Sure, there are a bunch of really savvy people in the commodity trading business who are long on oil and want the price to be higher.  But for every seller, there is a buyer on the other side, someone who is at least as savvy and is desireous of lower prices.  Yes, I know it is a complicated concept, but for every trader selling there is one buying.  If there is an extended conspiracy to push up oil prices by speculators, do you really think the buyers are just going to sit on their hands and take it?  And do you really think the exchanges are going to be happy with this behavior, threatening the integrity of their trading system (really their only asset)?  Just ask the Hunt family, which attempted to corner the market and drive prices up in silver, only to have major buyers and the exchanges stop them cold, driving the Hunts in the process into bankrupcy. 

I wrote about this same topic previously here.

Posted on June 23, 2008 at 11:32 PM | Permalink | Comments (29)

Savonarola Is At NASA Now

Cross-Posted From Climate Skeptic. 

In 1497, Savonarola tried to end the Italian Renaissance in a massive pyre of books and artwork (the Bonfire of the Vanities).  The Renaissance was about inquiry and optimism, neither of which had much appeal to Savonarola, who thought he had all the answers he needed in his apocalyptic vision of man.  For him, how the world worked, and particularly the coming apocalypse, was "settled science" and any questioning of his world view was not only superfluous, it was evil.

Fortunately, while the enlightenment was perhaps delayed (as much by the French King and the Holy Roman Emperor as by Savonarola), it mans questing nature was not to be denied.

But now, the spirit of Savonarola has returned, in the guise of James Hansen, a man who incredibly calls himself a scientist.  Mr. Hansen has decided that he is the secular Savonarola, complete with apocalyptic predictions and a righteousness that allows no dissent:

“James Hansen, one of the world’s leading climate scientists, will today call for the chief executives of large fossil fuel companies to be put on trial for high crimes against humanity and nature, accusing them of actively spreading doubt about global warming in the same way that tobacco companies blurred the links between smoking and cancer.

Hansen will use the symbolically charged 20th anniversary of his groundbreaking speech to the US Congress - in which he was among the first to sound the alarm over the reality of global warming - to argue that radical steps need to be taken immediately if the “perfect storm” of irreversible climate change is not to become inevitable.

Speaking before Congress again, he will accuse the chief executive officers of companies such as ExxonMobil and Peabody Energy of being fully aware of the disinformation about climate change they are spreading.”

It will be interesting to see if any champions of free speech on the left can work up the energy to criticize Hansen here.  What we have is a government official threatening prosecution and jail time for Americans who exercise their free speech rights.  GWB, rightly, would never get a pass on this.  Why does Hansen?

Posted on June 23, 2008 at 08:12 AM | Permalink | Comments (19)

Who the Hell Cares?

Apparently another interest group is claiming that Arizona is "missing out" on jobs in some critical growth industry, and therefore (wait for it) that industry must be subsidized to come to Arizona.

Arizona is getting its "clock cleaned" in the competition among Western states to land solar-panel manufacturing companies within their borders, according to the economic-development group that is losing the fight.

At least nine companies that make solar equipment have passed up the Valley of the Sun in the last year in favor of neighboring states, according to the Greater Phoenix Economic Council.

From those nine projects alone, Arizona is missing out on more than 3,800 jobs, $2.3 billion in investment and $732 million in state and local revenues during the next decade, GPEC President and CEO Barry Broome said.

I am too tired to do my usual fact-checking on "incremental" state revenue numbers, but suffice it to say that $732 million in state and local tax revenues is a pipe dream.  There are three or four million people in Phoenix -- why is it we need the government to focus on someone employing 3,800 people?

The article's main "logic" is that our sunny climate should attract solar panel manufacturers.  Why?  I know they're customers may be here, but since most panels today come to Arizona from Japan or Germany, I don't think shipping costs are a big deal for panels.

The proposal is for a transferable income tax credit and property tax relief.  The author says the group is opposed to straight cash handouts, though.  Uh, OK.  And explain to me why a "transferable income tax credit" that the author says can be sold to other companies for cash is different than a cash handout?

I sometimes find it hard to identify the consistent element of what makes for a "desirable business"  (ie deserving of such subsidies) vs. one that is not so deserving.  The only consistent element I can find is that my business is always in the latter group, paying our taxes so that someone else's business and job can be subsidized.  It is for this reason that I generally barf when some group cries that they are not recieving equal proection (ala the 14th ammendment).  Take on tax and subsidy policy that takes from one group to fund another more politically connected group, and then talk to me about equal protection.

Postscript:  Here are the favored industries I can remember in the news of late in Arizona for getting special tax treatment:

Rock and Roll themed amusement park
Solar panel manufacturing
Neutriceutical production
New shopping mall parking lot
Spring training baseball parks

Readers are encouraged to add others in the comments.

Another Thought: I would dearly love to see a solar panel technology that can be rolled out of the factory cheaply in sheets like carpet out of Dalton, Georgia.  However, while I am increasingly convinced that someone is going to invent that technology soon, that technology will not be related to traditional silicon fabrication methods.  Therefore, nearly all of the plants that Arizona is desperately trying to subsidize to move here are likely using dead-end technologies, driven in part by bubble economics and subsidies that are not sustainable as the market grows (see ethanol).  Current silicon and germanium panels make no economic sense anywhere, and survive only due to massive (50% subsidies) and a desire to make a token green statement.

I am sure our local paper was cheerleading for ethanol plants in years past, and it is good we did not subsidize many here, because they are failing all over.  And I can't prove it, but I wouldn't be a bit surprised that one of the reasons our local semiconductor manufacturing operations have shrunk is because of this same effect, with subsidies attracting the least, not the most, viable enterprises.

Posted on June 22, 2008 at 11:29 PM | Permalink | Comments (12)

The Rail Transit Debacle

The Anti-Planner links an absolutely scathing article in the Miami Herald on the absolute disaster they have made of their mass transit system.  This is a great summary:

Miami is just one more example of the points the Antiplanner keeps making about rail transit:

1. Transit agencies might run excellent bus systems. But when they start building rail, they quickly get in over their heads by optimistic forecasts, unforeseen costs, and the sheer humongous expense of building dedicated transit lines.

2. Though all rail systems require periodic expensive maintenance, few transit agencies set aside any money for this because it is easier to spend the money now and let future managers worry about the future.

3. Though the rail systems are usually built to serve downtown white-collar workers, in the end it is the transit-dependent people who rely on buses who pay the cost.

4. There is only one thing rails can do that buses can’t do better, faster, and more flexibly, and that is spend a lot of your money.

I would like to observe one other thing at work in the Miami example that looks to be exactly what we are facing here in Phoenix in the next election.  Miami offered up a transit tax referendum for something like $800 million.  They promised a mix of highway improvements and rail.  In several cases, including the upcoming referendum in Phoenix, I have tried to warn people that the people who put these referendums together are rail-ophiles.  They have learned, however, that rail alone won't sell a bond issue or tax, so they throw in a bunch of highway improvement promises, which people really will pay for, as window dressing.  Often, however, these improvements never get done, as they are empty promises to sell the tax.  We see exactly this in Miami:

But five years and more than $800 million later, the county has spent more than half the new money on routine Transit operations and maintenance while adding 1,000 jobs to the payroll.

   There were initial achievements. The county added 11 million miles of bus service, gave free rides to seniors, and briefly experimented with 24-hour rail. It spent $40 million on hundreds of tiny public-works projects....

   For example, here is the cost estimate that was attached to the 44 road projects that county commissioners asked for: $0. The projects have since been estimated to cost $428.2 million.

   Nor was any money earmarked for an unspecified number of flyover intersections on the list of promised improvements. Such projects, which involve raising an existing road to pass over another, cost as much as $18 million apiece today. None have been built.

So this tax was sold in part as a highway improvement tax, but $0 was actually budgeted.  The highway piece was a lie to sell the tax.  Beware Phoenicians.

Posted on June 22, 2008 at 11:12 PM | Permalink | Comments (18)

I Warned You

Earlier, I predicted there was no way the Democrats would fulfill their promise to reign in the imperial presidency, since they hoped to have a President from their own party next term.  In practice, the party affiliation of the President seldom has much to do with their desire to increase executive power.  For example, while GWB and the Republicans rightly deserve a lot of blame for the worst parts of the Patriot Act, in fact most of that act was actually proposed by Bill Clinton circa 1995  (and, ironically, was defeated by Republicans led by John Ashcroft).  I am starting to believe that, like the expression there are no atheists in foxholes, we might equally well be able to say that there are no civil libertarians in the White House.

I told you so.  And here:

In the past 24 hours, specifically beginning with the moment Barack Obama announced that he now supports the Cheney/Rockefeller/Hoyer House bill, there have magically arisen -- in places where one would never have expected to find them -- all sorts of claims about why this FISA "compromise" isn't really so bad after all. People who spent the week railing against Steny Hoyer as an evil, craven enabler of the Bush administration -- or who spent the last several months identically railing against Jay Rockefeller -- suddenly changed their minds completely when Barack Obama announced that he would do the same thing as they did. What had been a vicious assault on our Constitution, and corrupt complicity to conceal Bush lawbreaking, magically and instantaneously transformed into a perfectly understandable position, even a shrewd and commendable decision, that we should not only accept, but be grateful for as undertaken by Obama for our Own Good.

Accompanying those claims are a whole array of factually false statements about the bill, deployed in service of defending Obama's indefensible -- and deeply unprincipled -- support for this "compromise."

Posted on June 22, 2008 at 11:02 PM | Permalink | Comments (3)

Those Short-Term, Quarterly Focused Corporations

Everyone has heard the knock on corporations -- they are supposedly short-term focused and incapable of making investments that don't pump up the current quarter.  We hear this in particular from government officials, right before they try to sell some egregious bit of pork-spending that is supposedly for "investment" in things these awful corporate guys won't invest in.

But of course the entire existence of the oil industry is proof-positive that this knock on large corporations can't be universally true, or else the oil industry would have gone out of business for lack of reserves some time in the late 19th century.  The oil industry routinely makes huge investments that take 10 years or more to even start to pay out (e.g. Alaska pipeline, shale oil, deep Gulf).  One major reason that supplies are currently tight is that most of the world's oil reserves are held by state companies (like Pemex) that are incapable of making the long-term investments their fields needs because there is so much pressure on the government to divert the oil profits into social programs rather than into renewing the reserve base.

And now look who is singing the same tune as Hugo Chavez and the other oil producing kleptocrats - Barrack Obama:

“Opening our coastlines to offshore drilling would take at least a decade to produce any oil at all, and the effect on gasoline prices would be negligible at best since America only has 3 percent of the world’s oil,” Obama said in a statement that did not explicitly distinguish between oil and gas drilling."

Of course, offshore drilling was approved 10 years ago, but was vetoed by Bill Clinton.  I don't believe for a second that this is his real reason for opposing drilling (in fact, I believe him to be in the pocket of radical environmentalists and perfectly happy to demagogue oil companies for high prices rather than take responsibility for past government action).  However, if we take him at his word, this is an absolutely unbelievable lack of long-term focus from a man people like to call "visionary."

Posted on June 22, 2008 at 10:56 PM | Permalink | Comments (5)

Today's Science Experiment

(Cross posted from Climate Skeptic)

Using this chart from the NOAA:

Marchmay2008conus

Explain how larger than average midwestern flooding in 2008 is due to global warming.  For those who wish to make the argument that global temperatures, not just US temperatures, matter because the world is one big interelated climate system, you may use this chart of global temperatures instead in your explanation:

Rss_may_08520

For extra credit, also blame 2008 spike in tornadoes on global warming.  Don't forget to explain how global warming caused the late onset of Spring this year and the especially heavy snowfalls over the winter.  Thanks for charts to Anthony Watt.

Posted on June 22, 2008 at 10:40 PM | Permalink | Comments (1)

A Different Kind of Trend

For about all of history, a large part of tax management has been in deferring recognition of income.  Everything being equal, its better to pay taxes further in the future, given the lower present value of deferred taxes.

This year is different.  As I talk to many other folks who run their own business, many are using every accounting trick in the book to pull income forward, into this year.  Why?  The reasoning is here.  Many folks are betting that their marginal tax rate will be going way up next year.  I know I will be drawing down every reserve and deferring every expense I can find to pull income into this year from next.

Posted on June 22, 2008 at 10:29 PM | Permalink | Comments (0)

Some Blu-Ray Advice

I am a bleeding edge guy when it comes to home theater, so I have had a Blu-Ray high-def disk player for over a year.  I am currently looking for a second player to replace the first, and I thought I might share a couple of thoughts.

The press has declared the high-def DVD format war over, with Toshiba pulling the plug on the HD-DVD format.  This makes it much easier to figure out what software to buy (though it is still really expensive -- some Blu-Ray disks are going for $40!)

However, the hardware issue is still a minefield.  This is related to how the Blu-ray standard is being run, which presents problems and opportunities.  Unlike your CD or DVD player, the Blu-ray standard continues to evolve.  A lot.  It is much more like a computer standard, and I suspect in fact that the computer guys (or at least the game console guys) are running the show here.  This means that new features continue to evolve and be added.  And these are not just add-on features, like additional hardware inputs, but software features that create compatibility issues between versions.   As a result, there are already at least 3 generations of players out there.  The original profile 1.0, and then profile 1.1, and now profile 2.0.  And even within these profiles, individual players may vary in their conformance to them.   Sometimes you can do a firmware upgrade to a newer spec, and sometimes you can't, but such upgrades are not a piece of cake, and involve burning a DVD from the Internet and running certain codes from the Blu-ray remote to make the firmware upload.

The net result is that the features on a certain disk may not work on your player, or the disk may not work in your player at all (Newer movies like Pirates of the Carib. III have multimedia title pages that won't load on my player, and when the title page won't load, there was no way to play the movie.)  My advice is if you have waited this long, hold out until this summer for the newer profile 2.0 machines.  Also, you should confirm the player supports HDMI 1.3, so it can take advantage of the wider color gamut of newer TV's.  Players of this spec will start showing up in the next months -- the Sony BDP-S350 will likely be a good choice available this summer.

By the way, good luck finding anything on the box or in a Best Buy store that says what profile the player conforms to.  Hardware makers have created a really compatibility mess with Blu-ray (its seems to be a very poorly run standard) but they want to hide this fact from consumers because the are only just now recovering from the format war with HD-DVD and don't want consumers to have another reason to wait to purchase.  So there is not way they are going to put the profile number on the box, I guess, so you need to do your research.

As a final thought, and maybe I am just old and out of step here, but I really find the insistence on multimedia content and bitchin-cool menu screens on Blu-ray disks to be tiresome.  I just want to watch the movie in beautiful high-resolution, and having my software not work right because the menu doesn't work is just stupid.  Further, the addition of all these features has caused most blu-ray players to have a boot up cycle longer than Windows.  It can take 45 seconds for a blu-ray player to boot up, and a similar amount of time to get the software to start playing.  Add in the time to plow through stupid menu screens, and it can take several minutes to get a movie started.

Tonight I watched Cloverfield on blu-ray and it was awesome.  I was surprised the reviews on Amazon were so bad for Cloverfield, because I really liked it.  Yea, its different, but unlike movies like Bourne Ultimatum, there is actually a explanable reason for the jerky (and sometimes nauseating, I will admit) camera work. I did not pay much attention to it when it came out in theaters -- is this one of those geek litmus-test videos that only a few of us hard-core nerds like (a la Serenity?)

Posted on June 22, 2008 at 10:04 PM | Permalink | Comments (7)

Some Blu-Ray Advice

I am a bleeding edge guy when it comes to home theater, so I have had a Blu-Ray high-def disk player for over a year.  I am currently looking for a second player to replace the first, and I thought I might share a couple of thoughts.

The press has declared the high-def DVD format war over, with Toshiba pulling the plug on the HD-DVD format.  This makes it much easier to figure out what software to buy (though it is still really expensive -- some Blu-Ray disks are going for $40!)

However, the hardware issue is still a minefield.  This is related to how the Blu-ray standard is being run, which presents problems and opportunities.  Unlike your CD or DVD player, the Blu-ray standard continues to evolve.  A lot.  It is much more like a computer standard, and I suspect in fact that the computer guys (or at least the game console guys) are running the show here.  This means that new features continue to evolve and be added.  And these are not just add-on features, like additional hardware inputs, but software features that create compatibility issues between versions.   As a result, there are already at least 3 generations of players out there.  The original profile 1.0, and then profile 1.1, and now profile 2.0.  And even within these profiles, individual players may vary in their conformance to them.   Sometimes you can do a firmware upgrade to a newer spec, and sometimes you can't, but such upgrades are not a piece of cake, and involve burning a DVD from the Internet and running certain codes from the Blu-ray remote to make the firmware upload.

The net result is that the features on a certain disk may not work on your player, or the disk may not work in your player at all (Newer movies like Pirates of the Carib. III have multimedia title pages that won't load on my player, and when the title page won't load, there was no way to play the movie.)  My advice is if you have waited this long, hold out until this summer for the newer profile 2.0 machines.  Also, you should confirm the player supports HDMI 1.3, so it can take advantage of the wider color gamut of newer TV's.  Players of this spec will start showing up in the next months -- the Sony BDP-S350 will likely be a good choice available this summer.

By the way, good luck finding anything on the box or in a Best Buy store that says what profile the player conforms to.  Hardware makers have created a really compatibility mess with Blu-ray (its seems to be a very poorly run standard) but they want to hide this fact from consumers because the are only just now recovering from the format war with HD-DVD and don't want consumers to have another reason to wait to purchase.  So there is not way they are going to put the profile number on the box, I guess, so you need to do your research.

As a final thought, and maybe I am just old and out of step here, but I really find the insistence on multimedia content and bitchin-cool menu screens on Blu-ray disks to be tiresome.  I just want to watch the movie in beautiful high-resolution, and having my software not work right because the menu doesn't work is just stupid.  Further, the addition of all these features has caused most blu-ray players to have a boot up cycle longer than Windows.  It can take 45 seconds for a blu-ray player to boot up, and a similar amount of time to get the software to start playing.  Add in the time to plow through stupid menu screens, and it can take several minutes to get a movie started.

Tonight I watched Cloverfield on blu-ray and it was awesome.  I was surprised the reviews on Amazon were so bad for Cloverfield, because I really liked it.  Yea, its different, but unlike movies like Bourne Ultimatum, there is actually a explanable reason for the jerky (and sometimes nauseating, I will admit) camera work. I did not pay much attention to it when it came out in theaters -- is this one of those geek litmus-test videos that only a few of us hard-core nerds like (a la Serenity?)

Posted on June 22, 2008 at 10:02 PM | Permalink | Comments (1)

Is That A Gun, Or Are Your Just Happy To See Me?

I say a sign the other day at the airport that full-body millimeter-wave imaging was coming soon to the Phoenix airport.  I guess this was pretty inevitable, and has certainly been predicted in many movies, including Total Recall:
Totalrecallxrayscene

I can't really decide if this is any more invasive and humiliating than what we already do, ie get undressed, put our medications and creams in clear plastic bags for all to inspect, and subject ourselves to full-body pat downs.  For my part, based on this and numerous other humiliations, I am working as hard as I can to minimize how often I fly.  JD Tuccille has more, and observes that body cavity searches aren't just for airplanes any more:

If you think that air travel is starting to resemble a very-expensive East Germany-nostalgia tour and you'd prefer a less-intrusive alternative, you might consider traveling by train. Well, except, not on Amtrak, which implemented random bag searches, armed guards and bomb-sniffing dogs earlier this year.

Even local travel is iffy, since New York City has been subjecting subway passengers to annoying searches for the past three years. Los Angeles's MetroLink implemented a similar policy this week, apparently just so officials there wouldn't feel left out. Metrolink spokeswoman Denise Tyrrell told the Los Angeles Times

As a postscript, I had a meeting the other day with the National Park Service in Denver.  To get inside - remember this is the park service, no other agency shares this building - I had to give up my driver's license, have all my bags searched, and go through an X-ray machine.  Does anyone think that maybe we have lost some perspective when I have to go through full-on invasive security to discuss merchandising at a gift shop?

Posted on June 22, 2008 at 08:45 AM | Permalink | Comments (8)

Great Supporters of Science over Faith, Except When They're Not

Democrats are great public supporters of science over faith (e.g. stem cell research, evolution) except when the science is economics and one's faith is in government.

Posted on June 20, 2008 at 12:03 PM | Permalink | Comments (5)

The US Erects Its Own Version of the Berlin Wall

Though I would not want to trade my income taxes with those paid by Europeans, there is at least one area where the US has the worst tax regime in the world.  The specific area is the double standard the US applied on eligibility of income when other countries are involved.  For citizens of other countries, the US applies the standard that taxation is based on where one earns their income, so citizens of, say, France that are working in the US must pay US taxes.  However, for citizens of the US, the government reverses its standard.  In this case, the US applies the standard that taxation is based on citizenship, so US citizens must pay taxes on their income, even if it is all earned living in a foreign country.  Since most countries of the world apply the first standard  (which is also the standard individual states in the US apply), US expats find their income double taxed between the US and the country they are living in.

But now, it is just getting worse:

Queues of frustrated foreigners crowd many an American consulate around the world hoping to get into the United States. Less noticed are the heavily taxed American expatriates wanting to get out — by renouncing their citizenship. In Hong Kong just now, they cannot. “Please note that this office cannot accept renunciation applications at this time,” the consulate’s website states. Apart from sounding like East Germany before the fall of the Berlin Wall, the closure is unfortunately timed. Because of pending legislation on President Bush’s desk that is expected to become law by June 16th, any American who wants to surrender his passport has only a few days to do so before facing an enormous penalty.

…Congress has turned on expats, especially those who, since new tax laws in 2006, have become increasingly eager to give up their citizenship to escape the taxman. Under the proposed legislation, expatriates surrendering their citizenship with a net worth of $2m or more, or a high income, will have to act as if they have sold all their worldwide assets at a fair market price.

…That expats want to leave at all is evidence of America’s odd tax system. Along with citizens of North Korea and a few other countries, Americans are taxed based on their citizenship, rather than where they live. So they usually pay twice — to their host country and the Internal Revenue Service. As this makes citizenship less palatable, Congress has erected large barriers to stop them jumping ship. …[I]t may have the opposite effect. Under the new structure, it would make financial sense for any young American working overseas with a promising career to renounce his citizenship as early as possible, before his assets accumulate.

This is simply awful, and is another example of fascism in the name of egalitarianism (the fear is that a few rich people will move to tax havens to avoid US taxes).  Add up your net worth - equity in your house, retirement savings, etc - and imagine having to pay 35% of that as a big bribe tax to the US government to let you leave the country. 

Posted on June 20, 2008 at 10:43 AM | Permalink | Comments (13)

Airplane Crash Lawsuit Dropped, but CEO Subsequently Stoned to Death For Having Female Flight Attendants

Apparently, Blackwater wants to be tried under Sharia law:

I learn that Blackwater has filed a motion in a lawsuit claiming that since the mishap they're being sued for (a plane crash) happened in Afghanistan, the lawsuit should be adjudicated via sharia law, not U.S. law. That's ironic enough on its own merits, but the explanation is even better:

In April, Blackwater asked a federal judge in Florida to apply Islamic law, commonly known as Shari'a, to the case. If the judge agreed, the lawsuit would be dismissed. Shari'a law does not hold a company responsible for the actions of employees performed within the course of their work.

LOL, my guess is that they really don't want the precedent set that Blackwater will henceforth be held to Sharia law in Afghanistan.  By the way, don't miss your chance to buy some gear or posters in the Blackwater company store.  I found it randomly checking out their site.  They actually have some really good looking posters, much better looking than the stuff sold in company stores where I have worked.

100338lg_2

100313lg_5

Posted on June 18, 2008 at 05:17 PM | Permalink | Comments (2)

Where? In Freaking Eloy?

JD Tuccille has a roundup on the state boondoggle that won't die, the proposed 3/4 of a Billion dollar state subsidy for an amusement park. 

Now, this seems like an awful lot for an amusement park, particularly considering that the Arizona desert has been the death of many theme parks.  The reason is that no one wants to be outside for extended periods of time in June-Sept in the Phoenix or Tucson areas.  Because it is freaking hot.  The average daily forecasts is generally for 108-112F for these summer months.  But theme parks live and die in the summer, when kids are out of school.  Even though they have milder weather and a large population base at Magic Mountain in LA, they still only open for weekends and holidays during the non-summer months.  My guess, from running a similar seasonal business, Magic Mountain loses money most of the year and make 100%+ of their profit in the summer.

So spending $750 million of taxpayer money on a theme park in the Arizona heat would be a bad idea if located in Phoenix.  But what happens when we put it in Eloy, Arizona?  Eloy is just as hot, but is in the middle of nowhere, as shown below at the point of the "A" balloon.

Eloy

People will come here, from where?  Tucson folks in the summer will want to go someplace even hotter than Tucson?  Phoenix folks will want to drive 2 hours to spend their time in the hot sun, when the same distance north puts them in the cool mountains?  And here is beautiful downtown Eloy, brimming with wealth enough to repay over a billion dollars of principal and interest.

Eloy2_2

This project is absolutely guanteed to fail, leaving the bill with taxpayers.  I mean, seriously.  Never have I seen such a lock.  I wish there was a way to short this.

This is only the most eggregious of a laundry list of proposed government pork being pushed under the banner of "job creation" at a time when the state budget is over a billion dollars in deficit.

Posted on June 18, 2008 at 05:03 PM | Permalink | Comments (7)

Blog Status

Well, I seemed to have chosen the exact moment Typepad started encountering general problems to try to make some changes to my blog.  Now I don't know if I screwed things up or Typepad.  I am going to let things settle down for a bit.  You may see an all-text home page for a while or even a reversion to an early layout.  If I can get through this mess, the goal is to get the RSS feed fixed once and for all, among a few other issues.

Posted on June 18, 2008 at 11:50 AM | Permalink | Comments (2)

Testing

I am again messing with the feeds to try to get my feed problem fixed.  This is just a test

Posted on June 18, 2008 at 11:21 AM | Permalink | Comments (2)

Here is Your Chance, Trolls

John Scalzi is running a contest --he wants your best hate mail, aimed at him.

Posted on June 18, 2008 at 10:18 AM | Permalink | Comments (0)

I'm Still Not Down with Vista

I have now tried out Windows Vista with its first service pack and I am still not clear what Vista adds over XP, except upgrade costs, an interface system that requires retraining employees and a lot of extra computer overhead, and compatibility problems.  XP is stable and great for us. 

As you may know, most XP OEM sales come to an end on June 30.  Dell has already announced they will still sell XP units under the downgrade options in the Vista license.  Good for them.  In fact, it looks like Dell expects that customers will be willing to pay additional money ($20-$50) for the older operating system.  LOL.

Anyway, this month I bought an additional 5 Windows XP OEM licenses from NewEgg.com to put on the shelf to cover future computer builds out past June 30 (I build many of the computers for myself and the company).

By the way, if you want a gauge on how Vista is doing, check out the right bar pn this page at Amazon.com.  On the top 10 bestsellers (on June 18, 2008), XP occupies slots 2,4,6,7,9 while Vista is in slots 3,8 & 10.  Note that is over 18 months after Vista was introduced to replace XP.

Posted on June 18, 2008 at 10:06 AM | Permalink | Comments (12)

Government Schools

I thought this was a very illuminating bit from Obama on education:

TAPPER: But…proponents of school choice say that the best way to change the status quo is to give parents, inner-city parents a choice. Why not?

OBAMA: Well, the problem is, is that, you know, although it might benefit some kids at the top, what you’re going to do is leave a lot of kids at the bottom. We don’t have enough slots for every child to go into a parochial school or a private school. And what you would see is a huge drain of resources out of the public schools.

So what I’ve said is let’s foster competition within the public school system. Let’s make sure that charter schools are up and running. Let’s make sure that kids who are in failing schools, in local school districts, have an option to go to schools that are doing well.

But what I don’t want to do is to see a diminished commitment to the public schools to the point where all we have are the hardest-to-teach kids with the least involved parents with the most disabilities in the public schools. That’s going to make things worse, and we’re going to lose the commitment to public schools that I think have been so important to building this country.

Some responses:

  • I love it when my opponents make my argument for me.  One strong argument for school choice is that public schools put a governor on 80% of the kids' educations, forcing them to learn at the pace of the slowest students.  But Obama basically says this.  He acknowledges in paragraph three that most of the kids would take the private option (and the only reason they would do so is that they perceive it to be better) leaving only the "hardest-to-teach kids with the least involved parents with the most disabilities in the public schools."  I'm sorry Mrs. Smith, I know you want more for your kids, but we've decided that they should not have a better education than that demanded by the least involved parents.
  • If his fear in  paragraph #3 comes true, isn't that consistent with a leftish market failure model?  And if so, why wouldn't it be entirely appropriate for the government to focus only on this small segment not served by private schools?  Isn't that what the government does in, say, housing or transportation, providing services only to a small percentage of the market?
  • Obama parrots the "there are not enough private schools" objection.  Duh.  Of course there is not currently 20 million student-slots of excess private school capacity just waiting for school choice.  But capacity will increase over time if school choice is in place.  Or, if the capacity does not appear, then what's the problem for Obama?  Everyone will just stay in government schools.
  • The class warfare here is both tiresome and misplaced.  Most school voucher plans have explicitly focused on the poorest families and worst schools as a starting point
  • The statement that kids leaving public schools with vouchers would be costly is just wrong, at least from a monetary point of view.  I don't know of any voucher program where students are offered a voucher as large as the average per-pupil spending of that school district.  So, in fact, each student leaving public schools is a new financial gain, subtracting a $6,000 voucher but removing at the same time an $8,000 cost.
  • Finally, note the political mastery here.  Take the question of how many kids would leave government schools for private schools under a full school competition system.  Obama wants to be on both sides of this assumption, sometimes assuming the number is small (when discussing benefits) and then assuming the number is large (when discussing costs).  Obama is a master because he makes this switch back and forth from sentence to sentence.  First, the  number leaving public schools is low, since choice would just benefit "some kids" (Bad old rich ones at that) and leave our "a lot of kids."  He again in the next sentence implies the number switching must be low, because there are not many private school spots.  One sentence later, though, the number switching is high, since it would be a "huge drain of resources."  And then, in the third paragraph, the number switching is very high, since all that are left in public schools are a small core of the "hardest-to-teach kids."

Also note what was strategically left out of his answer:

  • "Even if school choice worked, I could never support it because my party depends too much on the teachers unions in this election."
  • "Just when I have a good chance to be the leader of this government, do you really think I want to abandon the government monopoly on the indoctrination of children and the power that brings to the government?"

Posted on June 18, 2008 at 09:47 AM | Permalink | Comments (26)

What's Wrong with Economists

Justin Wolfers asks:

You probably recall Hillary Clinton turning anti-economist in the dying days of her campaign:

“Well I’ll tell you what, I’m not going to put my lot in with economists.”

And more recently John McCain has jumped aboard:

“I trust the people and not the so-called economists to give the American people a little relief.”

Honestly, I don’t get it.

There is a very simple answer here.  Economists are people who say that you can't have your cake and eat it too.  As this is the core of the politician's populist message, they don't want anyone calling their bluff.

More on not wanting to hear the science here.

Update: One other thought, vis a vis climate and economics.  Obama, I suppose, would be one to argue that the science of catastrophic global warming is "settled."  But does he really think it is more settled than, say, the science that free trade leads to general increases in prosperity?  The left is all for the sanctity of science, except in economics.

Posted on June 18, 2008 at 08:19 AM | Permalink | Comments (4)

The Problem with New Wide-Gamut LCD Panels

Warning:  I am a video snob.  I often lambaste electronics store managers for doing such a terrible job adjusting their display TV's.  TV store managers have decided that the way to sell a TV is to jack up its color temperature as far into the blue range that they can, jam the contrast setting all the way to the top, irrespective of any blooming effects they get, and over-saturate the colors.

Anyway, the newest LCD panels have a property that theoretically makes them better:  They can display a much wider color gamut.  That means that there are more colors that they can display.   They do this by creating panels where the base colors are truer to their theoretical values, and by pushing each color value deeper into its possible range.  This means that the bluest blues are even bluer, if that makes sense. 

But these extreme colors are ones one seldom sees, because they are over saturated.  If you were to see the most saturated red or blue in any large field on your TV or monitor, it would make your teeth ache.  These colors look like neon lights, for lack of a better comparison.

But a wider color palette is good in theory.  My guess is that adobe photoshop running on a well-calibrated monitor could take advantage of this feature to improve the resemblance between on-screen and printed material, a key concern of graphics designers. 

The problem is that most software and color choices on the internet and in movies are based on what, say, a level 256 blue used to be.  A level 256 blue is now more saturated in the current monitors, but most software (and monitor drivers) are not smart enough to take this into account.  That means that if you buy a new LCD monitor, you will likely be looking at colors that are more saturated and therefore that glow more than your eyes can really stand, and most graphics cards and monitors do not have a control for saturation (as I found today, having to take an LG 26" monitor back to the store because everything just glowed too much  (I replaced it with a Samsung 2693M, which is much better).

You will know that this may be a problem if the literature or sales person describes the monitor as having "more vibrant" colors.  This is a euphemism for saturation, and would be all fine and good if monitor colors have previously been under-saturated, but if anything they have been the opposite.  Sales people like this feature, though, because the colors look more dramatic in their fluorescent-lighted showrooms and tend to make the monitor look "better" when next to less saturated choices.  My advice is be very wary -- Videophiles tend to run away screaming when told that a TV has some gadget that makes the colors more vibrant.

Posted on June 17, 2008 at 05:58 PM | Permalink | Comments (5)

Great Moments in the Traditional Media

A decent sized newspaper is doing a story on one of our campgrounds for their paper, which is great news.  However, they want some photos.  I directed them to our web site with links to Flickr, where they could view the photos and actually download full resolution versions of the images.  However, after some back and forth, it seems that no one at the paper is able to accomplish this.  So I am now downloading the images they want off the Flickr page they are looking at and sending the images to them via CD / snail mail.  Sigh.

Posted on June 17, 2008 at 12:55 PM | Permalink | Comments (7)

My Marriage Seems to be OK

Gay marriage has been legal in California for over 12 hours now, and, despite fears from opponents that it would weaken the institution of marriage, every indication is that my own marriage is as strong as ever.   I don't see any reason to make life difficult for those whose preferences are not my own.  All the best, newlyweds.

Postscript: I thought John Scalzi had a funny line.  A commenter on the Daily Kos had asked if Scalzi was on their side, politically, presumably because they could not allow themselves to enjoy his writing if he had not met their political litmus tests.  Anyway, he offered a line a libertarian would love:

Well, I don’t want my political proclivities to be in doubt, so let me be absolutely crystal clear where I stand:

I support the right of same-sex married couples to carry concealed weapons.

I hope this explains everything.

 

Posted on June 17, 2008 at 08:45 AM | Permalink | Comments (19)

On Corporations and Public Service

I had occasion to think about the term "public service" at about 6AM this Sunday morning.  As I was driving my son to a way-too-early baseball game, I flipped around the FM dial trying to find some music.  There was none.  All I could find were a number of really dull programs on arcane topics presumably on the air to fulfill the radio broadcaster's "public service" requirements of the FCC regulatory regime.  Since almost no one gets excited about this programming except for the leftish public policy types that inhabit regulatory positions, the radio stations broadcast all this garbage on Sunday mornings when no one is listening anyway.  Ironically, in the name of "public service," stations must broadcast material no one in the public actually wants to listen to.

Which leads me to coyote's definition of corporate public service:  Make a product or service for which people, without use of force or fraud, are willing to pay the listed price.

Any freaking moron can (or at least should be able to) offer a product or service that people will be willing to use for free.  Is this a public service?  Well, maybe.  If you are out there helping to feed homeless people, power to you.  But is it really a public service that the Miami transit system offers free rides that it can only pay for with deficit spending?  Or $1.50 bus rides that cost taxpayers $30 each to provide?  And this is not to mention the free services, like public service radio broadcasts, that many people would be willing to pay not to receive. 

That's why I say that any moron can give stuff away.   But find me the person who can create enough value that people are willing to pay enough for his product to cover all the material, labor, and capital inputs it took to create it, with surplus left over for both buyer and seller, and that is the person performing a real public service.

And let me listen to some freaking classic rock on Sunday mornings.

Posted on June 16, 2008 at 01:16 PM | Permalink | Comments (25)

Follow-up on Habeas Corpus and Gitmo

I got a lot of email this weekend telling me why I was short-sighted in supporting the Supreme Court's decision on habeas corpus rights for detainees.   First, I will observe that I have great readers, because all of the email was respectful.  Second, I will say that I am open to being convinced that I am wrong here, but I have not been so convinced yet. 

I got a lot of email about past precedents and settled law on this.  What I don't seem to be communicating well is that I understand and agree with past precedent in the context of other conflicts, but that the concept of "combatant" as currently used by the GWB administration is so different than in the past as to defy precedent.  The folks sitting in Gitmo are not uniformed Wermacht officers captured in the Falais Gap.  They are combatants generally not because they were caught firing on our troops but because the Administration says they are combatants.  New situations often require new law, and as I said before, when in doubt, I will always side for protection of individual rights against the government.

I'm not going to get into an anecdotal battle over the nature of individual Gitmo detainees.  I can easily start rattling off folks who were detained for extended periods for no good reason, and I am sure one can rattle off names of hard core bad guys who none of us would be happy to have walking the streets.  The place where reasonable people disagree is what to do with this mixed bag.  Gitmo supporters argue that it is better to lock up a few good guys to make sure the really bad guys are off the street.  I would argue in turn that this is exactly NOT how our legal system works.  For good reasons, our system has always been tilted such that the greater harm is locking up the innocent rather than releasing the guilty.

It may be a faulty analogy, but I considered the other day what would have happened had the US government taken the same position with active communist part members in the 1950's.  Would it really have been that hard to have applied the same logic that has a number of Gitmo detainees locked away for years to "communist sympathizers?"

I think this Administration, time and time again, has exhibited a strong streak of laziness when it comes to following process.  It doesn't like bothering to go through channels to get warrants, even when those warrants are usually forthcoming.  And it doesn't want to bother facing a judge over why detainees are in captivity, something that every local DA and police officer have to deal with every day.

Update: More, from Cato and George Will, here.  There are certain people who I find it to be a sort of intellectual confirmation or confidence builder to find them on the other side of an issue from me.  John McCain is quickly falling into to this camp for me, at least vis a vis individual rights questions.

Posted on June 16, 2008 at 09:52 AM | Permalink | Comments (25)

Interesting Story on Housing and Crime

A reader sent me a link to what was a pretty interesting story on housing programs and crime in the most recent issue of the Atlantic.  In short, federal housing policy over the last 20-30 years has been to blow up central housing projects (fans of the Wire on HBO will have a good idea of this type of place) that tended to concentrate poverty in a few neighborhoods in favor of voucher programs that would spread the very poor around.  The idea was to get the poor into middle class neighborhoods, with the hope that middle class schools, support networks, and values might be infused in the poor.

Some now seem to be worried that exactly the opposite is happening.  As the article relates, city centers are being revitalized by sending the poor and associated criminal elements outwards.  But in turn, certain here-to-fore quiet suburbs are seeing crime spikes, and these crime waves seem to line up well with where the housing vouchers are being used.

A couple of thoughts:

  • [insert libertarian rant on government playing god with poor people's lives, drug prohibition, government schools, etc.]
  • The people of Houston would not be at all surprised by this, and might call it the Katrina effect.  It may well be that the dispersion of poor families will eventually result in reductions in total crime (say in the next generation or two), but hardened criminals of today don't stop being criminals just because they move to new neighborhoods -- certainly Houston has found this having inherited many criminals from New Orleans.
  • I still think that if we are going to give out subsidized housing, that this in the long-run is a better approach.  The authors of the article seem to fear that the poor, having been dispersed, lost their support networks.  But it strikes me that it was this same network that reinforced all the worst cultural aspects of the old projects, and long-term I think fewer new criminals and poorly motivated kids will exist in the next generation if we can break some of this critical mass up. 
  • The article is an interesting example of how new attitudes about race can get in the way of discussion as much as the old ones.  Stories about increasing crime in the suburbs after an influx of black poor is just too similar to the old integration fears held by whites in the 1960s and 1970s. 

Posted on June 16, 2008 at 09:26 AM | Permalink | Comments (5)

Homes are Becoming More Affordable; Minorities, Poor Hardest Hit

It is interesting that with home prices and gasoline prices going in opposite directions, the media can declare both trends to be disasters for Americans.  Via Scrappleface:

The U.S. housing crisis reached fever pitch this month, with potential foreclosures up 48 percent compared with May 2007.

The devastation of receiving foreclosure notices has now swept through a full 2/10ths of one percent of American homes. About 1/10th of one percent of owners may lose their homes. For some of those people, it’s actually their primary residence in jeopardy, rather than a second home, rental property or vacation condo.

 

To add insult to misery, mortgage rates skyrocketed this month to 6.32 percent, a shocking figure a full third of what it was during the Carter administration.

As a result of the flood of homes on the market, real estate agent commissions have dipped precariously, and home buyers increasingly wrestle with the guilt of paying bargain prices for excellent properties.

Market analysts say home prices could plummet as much as another 10 percent by the end of 2009, leaving first-time home buyers to face the specter of owning a more spacious residence. The additional square footage inequitably boosts the burden of cleaning, heating and air conditioning.

Posted on June 13, 2008 at 12:02 PM | Permalink | Comments (5)

If You Can't Do the Time, Don't, uh, Put off Mowing?

Here in the west, one can be rewarded as an environmentalist for keeping one's home landscaping natural, rather than trying to create a golf-course-like lawn.  In Canton, Ohio, you may be going to jail (via a reader):

CANTON City Council has unanimously approved toughening the city's high-grass and weeds law, making it possible for repeat violators to get jail time.

Council passed the legislation Monday night by a vote of 12-0. The amended law will take effect in 30 days. ...

The revised law makes a second high-grass violation a fourth-degree misdemeanor, which carries a fine of up to $250 and up to 30 days in jail. Existing law makes the first violation a minor misdemeanor, with a fine of up to $150 but no jail time. Violators initially are mailed a notice and given five days to mow the grass. ...

City officials say they are targeting the most egregious violators of the high-grass law, which applies to grass and weeds higher than 8 inches.

Posted on June 13, 2008 at 10:42 AM | Permalink | Comments (7)

Humans Have Rights, Not Just Americans

I am a bit late to this, having just gotten back in town, but this is extraordinarily good news:

In a stunning blow to the Bush Administration in its war-on-terrorism policies, the Supreme Court ruled Thursday that foreign nationals held at Guantanamo Bay have a right to pursue habeas challenges to their detention. The Court, dividing 5-4, ruled that Congress had not validly taken away habeas rights.  If Congress wishes to suspend habeas, it must do so only as the Constitution allows — when the country faces rebellion or invasion.

The Court stressed that it was not ruling that the detainees are entitled to be released — that is, entitled to have writs issued to end their confinement. That issue, it said, is left to the District Court judges who will be hearing the challenges. The Court also said that “we do not address whether the President has authority to detain” individuals during the war on terrorism, and hold them at the U.S. Naval base in Cuba; that, too, it said, is to be considered first by the District judges.

The Court also declared that detainees do not have to go through the special civilian court review process that Congress created in 2005, since that is not an adequate substitute for habeas rights.

During the17th and 18th century, as various western countries began to reign in autarchs, habeas corpus rights were high on their list of protections they demanded.  There is just too much potential for abuse to allow the Executive Branch to hold people (of any nationality) indefinitely without any kind of judicial due process.  I refuse to discuss the detentions in the context of their effectiveness in fighting terrorism just as I refuse to discuss immigration in terms of who will pick the lettuce.  If there are valid and legal reasons for these guys to be in detention, then the President must allow the judicial branch to confirm them or the legislative branch to amend them.

Update:  Powerline writes:

Justice Scalia characterizes the decision this way:

Today, for the first time in our Nation’s history, the Court confers a constitutional right to habeas corpus on alien enemies detained abroad by our military forces in the course of an ongoing war.

It strikes me as odd to confer such a right, but then I haven't read Justice Kennedy's opinion yet.

I don't have enough law background to know if this is truly unprecedented in this way, but what it if is?  One could easily argue that the nature of the "enemy" here, being that they don't have the courtesy to wear uniforms that indicate their combatant status and which side they are on, is fairly unprecedented as well.  As is the President's claim that he has unilateral power to declare that there is a war at all, who this war is against, and who is or is not a combatant.  I know from past posts on this topic that many of my readers disagree with me, but I think it is perfectly fine for the Supreme Court, encountering this new situation, sides with the individual over the government.

Update #2, via the Onion 9/11 issue:

Bush is acting with the full support of Congress, which on Sept. 14 authorized him to use any necessary force against the undetermined attackers. According to House Speaker Dennis Hastert (R-IL), the congressional move enables the president to declare war, "to the extent that war can realistically be declared on, like, maybe three or four Egyptian guys, an Algerian, and this other guy who kind of looks Lebanese but could be Syrian. Or whoever else it might have been. Because it might not have been them."...

U.S. Sen. John McCain (R-AZ), one of Congress' decorated war veterans, tried to steel the nation for the possibility of a long and confusing conflict.

"America faces a long road ahead," McCain said. "We do not yet know the nature of 21st-century warfare. We do not yet know how to fight this sort of fight. And I'll be damned if one of us has an inkling who we will be fighting against. With any luck, they've got uniforms of some sort."...

Secretary of Defense Donald Rumsfeld said the war against terrorism will be different from any previous model of modern warfare.

"We were lucky enough at Pearl Harbor to be the victim of a craven sneak attack from an aggressor with the decency to attack military targets, use their own damn planes, and clearly mark those planes with their national insignia so that we knew who they were," Rumsfeld said. "Since the 21st-century breed of coward is not affording us any such luxury, we are forced to fritter away time searching hither and yon for him in the manner of a global easter-egg hunt."

Posted on June 13, 2008 at 08:28 AM | Permalink | Comments (27)

Wherein Coyote is Thrilled to be Out of Step with Europe

After digging a First Amendment hole for itself in the Plame affair, the New York Times seems to still be hell-bent on narrowing the very First Amendment protections that probably kept its employees out of jail in the early 70's.  Specifically, the Times frets that the US is out of step with Europe in having a much broader view of freedom of speech:

Six years later, a state court judge in New York dismissed a libel case brought by several Puerto Rican groups against a business executive who had called food stamps “basically a Puerto Rican program.” The First Amendment, Justice Eve M. Preminger wrote, does not allow even false statements about racial or ethnic groups to be suppressed or punished just because they may increase “the general level of prejudice.”

Some prominent legal scholars say the United States should reconsider its position on hate speech.

“It is not clear to me that the Europeans are mistaken,” Jeremy Waldron, a legal philosopher, wrote in The New York Review of Books last month, “when they say that a liberal democracy must take affirmative responsibility for protecting the atmosphere of mutual respect against certain forms of vicious attack.”

In the 1970's, members of my family worked in the oil industry, and we received numerous death threats of varying believability, and several of our friends received letter bombs or had family members kidnapped.  Many of these attacks and threats were directly traceable to certain media shows that featured editorial attacks on the oil industry.  So is the Times suggesting that the media should hold off on its criticism of the oil industry because this criticism created an atmosphere of hate in which these attacks were conducted?

No freaking way, because these calls to limit criticism and "hate speech" always have an ideological filter.  There is never a suggestion that the speech bans be even-handed.  Criticism of African Americans is outlawed, but exactly parallel language about white folks is A-OK.  Criticising Islam is out, but Christianity is a fine target.  Death threats against Haitian activists must be avoided at all costs, but death threats against corporate executives are no reflection on free speech or the media.  The article is quite explicit that by their definition, hate speech only applies to "minorities," which you can translate to mean "groups the political class has decided to protect."  You may be assured that members of the political class will find a way to get themselves included in this definition, so they can be free of criticism,

Kudos to Harvey Silvergate, who even makes the exact same point I have made about Hitler a number of times:

“Free speech matters because it works,” Mr. Silverglate continued. Scrutiny and debate are more effective ways of combating hate speech than censorship, he said, and all the more so in the post-Sept. 11 era.

“The world didn’t suffer because too many people read ‘Mein Kampf,’ ” Mr. Silverglate said. “Sending Hitler on a speaking tour of the United States would have been quite a good idea.”

I will add that I am also happy to be out of step with Europe in terms of any number of other policies, including American libel law, or laws that make it ever so much easier to start a business, and European tolerance for a cozy business-political elite that, whatever their party, focuses on keeping their elite wealthy and powerful.

Posted on June 11, 2008 at 02:40 PM | Permalink | Comments (14)

Incentives Everywhere

After this post on incentives, where I observed that perhaps 99% of all government policy failed on incentives issues, I thought about going a whole week and discussing every story in the context of failed or mismatched incentives.  Then I thought about all the time I had spent building up my readership only to chase everyone away in just one week, so I will defer that idea.

BUT, can anyone tell me what incentives these people have to go work and support themselves?

What are people who receive FEMA assistance doing to help themselves? That's the question NBC 15's Andrea Ramey asked those who have been staying for free in hotel rooms after they moved out of FEMA supplied travel trailers. What she found out is there are some who are doing very little.

The scorching heat puts many at the Quality Inn poolside, but for Gwenester Malone, she chooses to beat the heat by setting her thermostat to sixty degrees. Malone's room for the past three months, along with three meals daily, have all been paid for by taxpayers.

"Do you work?" asked NBC 15's Andrea Ramey.

"No. I'm not working right now," said Malone.

Malone says she can't drive and it's too hot outside to find work within walking distance. "Since the storm, I haven't had any energy or pep to go get a job, but when push comes to shove, I will," said Malone.

Just a few blocks away, Kelley Christian also stays at a hotel for free. She says she's not taking advantage of her situation, but admits it's easy to do. "It's too easy. You know, once you're there, you don't have to pay rent," said Christian. "I kept putting it off and putting it off and now, I'm tired of putting it off."

Posted on June 10, 2008 at 08:11 PM | Permalink | Comments (16)

Canada on Free Speech Death Spiral

The list of topics banned from criticism is increasing in Canada.  First it was Islam, and then it was homosexuality.  Now, it is making activist professors at public universities immune from criticism.  By order of the Canadian government:

That Mr. Boissoin and The Concerned Christian Coalition Inc. shall cease publishing in newspapers, by email, on the radio, in public speeches, or on the internet, in future, disparaging remarks about gays and homosexuals. Further, they shall not and are prohibited from making disparaging remarks in the future about Dr. Lund or Dr. Lund’s witnesses relating to their involvement in this complaint. Further, all disparaging remarks versus homosexuals are directed to be removed from current web sites and publications of Mr. Boissoin and The Concerned Christian Coalition Inc.

That fact that I vociferously disagree with Mr. Boissoin (I am in fact thrilled, for example, that gays will be able to marry soon in California), I whole-heartedly support his right to publicly voice his opinions, even if it makes some people feel bad.  Dr. Lund, as I understand it, as a professor at a state university, is a government employee, and a vociferous one at that.  All limitations on speech are bad, but this decision has crossed that critical line of protecting government employees from criticism, what we would think as the absolute solid heart of the First Amendment (while simultaneously restricting religious beliefs, just for extra credit).

Posted on June 10, 2008 at 08:03 PM | Permalink | Comments (8)

Don't Get Uppity

I have always wondered how people could describe European countries as more egalitarian than the US.  Yeah, I know the income distribution tends to be flatter, but that is almost entirely because the rich are richer in the US rather than the poor being poorer.  But pure income distribution has always seemed like a terrible way to make comparisons.  My perception has always been that class lines in Europe are much harder than they are in the US.  The elites in Europe have made a sort of arrangement in which they pay off the masses with an income floor and low work expectations in turn for making sure that none of the masses can in turn challenge their elite status or join their ranks.  The government protects large corporations form competition, foreign or domestic.  The government protects existing laborers against new entrants into the labor market.  The government makes it virtually impossible for the average guy to start a business.  The result is a lower and middle class who won't or can't aspire to breaking out of their class.  Elites are protected, and no one seems to care very much when political elites enrich themselves through public office and then entrench themselves and their families in the power system.  This, presumably, is why the American political class thinks so much of the European model.

Bryan Caplan writes via Marginal Revolution:

In the U.S., we have low gas taxes, low car taxes, few tolls, strict zoning that leads developers to provide lots of free parking, low speed limits, lots of traffic enforcement, and lots of congestion.

In Europe (France and Germany specifically), they have high gas taxes, high car taxes, lots of tolls, almost no free parking, high speed limits (often none at all), little traffic enforcement, and very little congestion. (The only real traffic jam I endured in Europe was trying to get into Paris during rush hour. I was delayed about 30 minutes total).

If you had to pick one of these two systems, which would you prefer? Or to make the question a little cleaner, if there were two otherwise identical countries, but one had the U.S. system and the other had the Euro system, where would you decide to live?

Much as it pains me to admit, I would choose to live in the country with the Euro system. If you're at least upper-middle class, the convenience is worth the price. Yes, this is another secret way that Europe is better for the rich, and the U.S. for everyone else.

Posted on June 10, 2008 at 07:51 PM | Permalink | Comments (8)

But We Can Run Healthcare

By now, this story has been linked all over, but it is still hilarious.  The folks who want to run the US healthcare system and the US energy industry have found that they are not competent enough to manage even the Senate cafeteria:

Year after year, decade upon decade, the U.S. Senate's network of restaurants has lost staggering amounts of money -- more than $18 million since 1993, according to one report, and an estimated $2 million this year alone, according to another.

The financial condition of the world's most exclusive dining hall and its affiliated Capitol Hill restaurants, cafeterias and coffee shops has become so dire that, without a $250,000 subsidy from taxpayers, the Senate won't make payroll next month....

In a masterful bit of understatement, Feinstein blamed "noticeably subpar" food and service. Foot traffic bears that out. Come lunchtime, many Senate staffers trudge across the Capitol and down into the basement cafeteria on the House side [where food service is provided privately]. On Wednesdays, the lines can be 30 or 40 people long.

This is not a new issue - it has been a festering sore that the Senate has been unable to manage for decades.  And we're talking about a single freaking cafeteria here.  More from Alex Tabarrok

Posted on June 10, 2008 at 07:27 PM | Permalink | Comments (0)

News You Can Use

I have noticed that my readership is skewing a little old, so to capture that critical males 18-24 demographic, I will, as a public service, provide this critical information that colleges seldom provide in trying to choose a major.  HT TJIC

Posted on June 10, 2008 at 07:11 PM | Permalink | Comments (4)

Because China is Sheriff Joe's Role Modle

Frequent readers will know that I have little love for our self-aggrandizing, civil rights violating Sheriff Joe Arpaio.  A recent Arizona Republic article wrote:

A veteran Republican lawmaker wants to know why a high-level chief for the Maricopa County Sheriff has made recent trips to China.

Because China is Sheriff Joe's role model!  It's telling that our sheriff sends his deputies on fact-finding missions to Latin American countries and China to learn new policing techniques.  Also, the article gets into some of the increasingly weird dealings in the Sheriff Joe's infatuation with facial recognition software.

Posted on June 10, 2008 at 07:04 PM | Permalink | Comments (5)

My Addiction to Health and Prosperity

Kevin Drum titles a post on providing government incentives for high MPG cars "Ending the Addiction,"  by which I presume he means addiction to gasoline.   I really struggle with the point of view on life that describes consumer affinity for enormously value-producing technologies to be an "addiction."  One could equally well refer to our preference for good health or prosperity to be an "addiction," particularly when fossil fuels have played such a central role in fueling the industrial revolution and the prosperity which it has brought.  With the current jump in oil prices tied so closely to growing wealth in China, never has the tie between fossil fuel use and prosperity been more obvious.

Drum advocates for what he calls a "progressive" proposal:

For cars, the most effective thing would be a "feebate": In the showroom, less-efficient models would have a corresponding fee, while the more-efficient ones would get a rebate paid for by the fees. That way when choosing what model you want you would pay attention to fuel savings over its whole life, not just the first year or two. It turns out that the automakers can actually make more money this way because they will want to get their cars from the fee zone into the rebate zone by putting in more technology. The technology has a higher profit margin than the rest of the vehicle.

I will say that this is probably less bad than other "progressive" proposals I have heard, but the logic here is based on consumer ineptness.  Higher gas prices, which drive higher lifecycle costs, are presumably providing exactly this incentive without any government program.  The problem, it seems, is that progressives don't think very much of the common people they wish to defend.  Just as the justification for Social Security is that the average person can't be trusted to make good decisions about their retirement savings so we elites will do it for them, this seems to be the logic here, but even more patronizing.   Here is the best bit which really demonstrates the point I am making:

Here's a further suggestion: require stickers to list the estimated cost of fuel consumption over a five year period.

Basically this calculation is total estimated miles per year divided by mpg times estimated gas prices times five. A simple piece of math with four numbers that can be completed on a calculator in 10 seconds or by hand in less than 30 seconds.  Mr. Drum, a big supporter of our current monopoly government school system, apparently does not think that people educated in this system can do this math for themselves.  Could it be clearer that "progressivism" is really about disdain for the common man and a belief that elites should make even the smallest decisions for them?

Posted on June 10, 2008 at 09:20 AM | Permalink | Comments (18)

Ignoring Incentives

OK, here is my question:  Do the folks in this article understand incentives and simply ignore them, or are they truly ignorant?

In a move that would make zero a grade of the past, the Chapel Hill-Carrboro school district is considering making 61 the lowest grade for a failing assignment.

The goal would be to assure that a single test-day disaster doesn't ruin a semester. Some teachers, students and parents say the change would coddle failing students....

Homework would not count for more than 20 percent of the quarterly grade, according to the proposal. Other proposed revisions include giving students more time to make up incomplete assignments while offering more support strategies, making it easier for them to pass.

"Students [would] have a chance to recover," Martin said. "Getting a bad grade or having a bad day does not mean you are a failure. This is about hope."

There is simply no way this is going to help, and it is amazing to me that educated people can't see it, yet I think that is the case (I don't believe they are trying to be evil)  A staggeringly large percentage of what goes awry in the world can be explained by bad or mismatched incentives, so it is incredible to me that our education system seems to so consistently resist teaching this topic.

Posted on June 9, 2008 at 07:12 PM | Permalink | Comments (20)

The Oil Prices We Deserve

A good column on gas prices by George Will.

Can a senator, with so many things on his mind, know so precisely how the price of gasoline would respond to that increase in the oil supply? Schumer does know that if you increase the supply of something, the price of it probably will fall. That is why he and 96 other senators recently voted to increase the supply of oil on the market by stopping the flow of oil into the Strategic Petroleum Reserve, which protects against major physical interruptions. Seventy-one of the 97 senators who voted to stop filling the reserve also oppose drilling in the Arctic National Wildlife Refuge.

One million barrels is what might today be flowing from ANWR if in 1995 President Bill Clinton had not vetoed legislation to permit drilling there. One million barrels produce 27 million gallons of gasoline and diesel fuel. Seventy-two of today's senators -- including Schumer, of course, and 38 other Democrats, including Barack Obama, and 33 Republicans, including John McCain -- have voted to keep ANWR's estimated 10.4 billion barrels of oil off the market.

Posted on June 9, 2008 at 06:57 PM | Permalink | Comments (9)

Turning America into Europe

The Europeans have crafted a regulatory environment in their labor market that grants all kinds of protections and gauranteed benefits at the expense of new or unskilled workers trying to join the workforce.  We are doing the same thing:

This year, it's harder than ever for teens to find a summer job. Researchers at Northeastern University described summer 2007 as "the worst in post-World War II history" for teen summer employment, and those same researchers say that 2008 is poised to be "even worse."

According to their data, only about one-third of Americans 16 to 19 years old will have a job this summer, and vulnerable low-income and minority teens are going to fare even worse.

The percentage of teens classified as "unemployed"—those who are actively seeking a job but can't get one—is more than three times higher than the national unemployment rate, according to the most recent Department of Labor statistics.

One of the prime reasons for this drastic employment drought is the mandated wage hikes that policymakers have forced down the throats of local businesses. Economic research has shown time and again that increasing the minimum wage destroys jobs for low-skilled workers while doing little to address poverty.

According to economist David Neumark of the University of California at Irvine, for every 10 percent increase in the minimum wage, employment for high school dropouts and young black adults and teenagers falls by 8.5 percent. In the past 11 months alone, the United States' minimum wage has increased by more than twice that amount.

Posted on June 9, 2008 at 06:43 PM | Permalink | Comments (1)

Day at Yankee Stadium

My son and I went to see a game today in Yankee Stadium. both because he is a big Yankees fan and to see Yankee Stadium one last time before they tear it down.  While the Yanks lost, with Mariano Rivera giving up a solo home run in the 9th, my son, who is a huge A-Rod fan, got to see A-Rod go yard to tie the game in the 8th.  A couple of observations:

  • There is a whole different seat-ethic going on in Yankee Stadium.  Every single time we got up to get food or go to the bathroom, we found someone in our seats.  Seat numbers on tickets seem to be a recommendation rather than an absolute assignment
  • If you leave aside the history, there are a lot of very good design reasons for blowing up Yankee Stadium.
  • The Yanks showed a nice Rocky-themed film in the 8th, but puh-leeze -- there is not any team in the world that can less wrap itself in the mantle of scrappy underdog.  If any team is Apollo Creed, its the Yankees.
  • Enter the Sandman is great entry music for a closer like Rivera.

Posted on June 9, 2008 at 05:45 PM | Permalink | Comments (6)

UN Human Rights Council Calls for Restricting Free Speech

Oh, those wacky guys on the UN "Human Rights" Council.  They are now looking to Saudi Arabia as a model for protection of individual rights:

The top U.N. rights body on Thursday passed a resolution proposed by Islamic countries saying it is deeply concerned about the defamation of religions and urging governments to prohibit it.

The European Union said the text was one-sided because it primarily focused on Islam.

The U.N. Human Rights Council, which is dominated by Arab and other Muslim countries, adopted the resolution on a 21-10 vote over the opposition of Europe and Canada....

The resolution "urges states to take actions to prohibit the dissemination ... of racist and xenophobic ideas" and material that would incite to religious hatred. It also urges states to adopt laws that would protect against hatred and discrimination stemming from religious defamation.

Saudi Arabia said, "Maybe Islam is one of the most obvious victims of aggressions under the pretext of freedom of expression."

"It is regrettable that there are false translations and interpretations of the freedom of expression," the Saudi delegation told the council, adding that no culture should incite to religious hatred by attacking sacred teachings.

Hat tip:  Yet another Weird SF Fan

Update:  I am kind of amazed the irony is lost on some folks, so I guess I need to be more explicit:  I found it depressing that the UN Human Rights Council is calling for limits on speech.

Posted on June 8, 2008 at 07:25 AM | Permalink | Comments (11)

Integration of Immigrants

I am not big on arguing the immigration issue from an integration perspective, any more than I like to argue about who will pick the lettuce.  Free movement around the globe and the ability to take a job by mutual consent of the two parties rather than based on their country of origin should drive immigraiton policy.

I live in the state with the highest percentage of illegal immigrants, and I have never gotten my head around why this was culturally bad.  I think the Hispanic culture here brings at least as much to the table as, say, the Irish do in Boston.  So I did not find this to be surprising (from the Manhattan Institute, via Reason)

In general, the longer an immigrant lives in the United States, the more characteristics of native citizens he or she tends to take on, said Jacob L. Vigdor, a professor at Duke University and author of the study. During periods of intense immigration, such as from 1870 to 1920, or during the immigration wave that began in the 1970s, new arrivals tend to drag down the average assimilation index of the foreign-born population as a whole.

The report found, however, that the speed with which new arrivals take on native-born traits has increased since the 1990s. As a result, even though the foreign population doubled during that period, the newcomers did not drive down the overall assimilation index of the foreign-born population. Instead, it held relatively steady from 1990 to 2006.

"This is something unprecedented in U.S. history," Vigdor said. "It shows that the nation's capacity to assimilate new immigrants is strong."

Posted on June 7, 2008 at 12:47 PM | Permalink | Comments (11)

Dodging Socialization

Lots of new blog posts today.  The reasons is that I am in introvert's bliss, dodging the requirement to stand by my wife at reunions and be introduced to a lot of people I don't know and don't really know how to begin talking to.  So I have retreated to the Vassar library, a beautiful example of college Gothic, with my kids.   The only small problem I have is that I think some parents need to teach their kids better library manners.  Lots of kids dumped here in the library today, and teenagers are all around my watching YouTube with the sound turned way up and talking loudly about what they are seeing.  However, having avoided all social interaction, I am resisting the downward spiral into grumpy-old-man land by not snapping at the kids around me.

Posted on June 7, 2008 at 12:40 PM | Permalink | Comments (1)

How Mussolini-Style Fascism Almost Came to the US

First, it was the National Recovery Act, where FDR explicitly tried to creat an economic system modelled on Mussolini-style fascism.  This was killed by the Supreme Court.  But the will of government to create an economic system where private companies win and lose based on how well connected they are to politicians never goes away.  The lastest attempt to set up such a managed system was via the Lieberman-Warner climate bill:

But perhaps even more pernicious is the way that “carbon credits” are distributed.

The credits are best described as a pulled-out-of-thin-air government-created fiat currency, that is accepted only by the government in exchange for the government’s permission to let you emit CO2. (If ever a system was perfectly set up to be abused and politicized by politicians, this is it.)

Government bureaucrats will decide sector by sector and industry by industry which companies get the credits. Implicitly, that same decision by government regulators also determines which companies will need to buy credits from the politically-connected companies who could get their carbon credits for free.

Posted on June 7, 2008 at 12:33 PM | Permalink | Comments (3)

They Knew Exactly What They Were Doing

OK, so this guy committed fraud:

In the hundreds of bills for which he has provided estimates to lawmakers since 2000, the actuary, Jonathan Schwartz, said legislation adjusting the pensions of public employees would have no cost, or limited cost, to the city.

But just 11 of the more than 50 bills vetted by Mr. Schwartz that have become law since 2000 will result in the $500 million in eventual costs, or more than $60 million annually, according to projections provided by Robert C. North Jr., the independent actuary of the city pension system, and by Mayor Michael R. Bloomberg’s office....

Mr. North and other city employees made the calculations on the 11 bills when they were before the Legislature, but for the other bills, no alternative to Mr. Schwartz’s projections could be found. The New York Times reported last month that in an arrangement that had not been publicly disclosed, Mr. Schwartz was being paid by labor unions. He acknowledged in an interview that he skewed his work to favor the public employees, calling his job “a step above voodoo.”

But really, did any of the legislators supporting these bills really think the costs were zero?  If the public employees union is asking for a pension change, you can be sure it is not to save the state money.  This does not let legislators off the hook for failing to exercises any common sense.

Posted on June 7, 2008 at 12:17 PM | Permalink | Comments (2)

From the Guy Who Really Deserved His Peace Prize

Last year, Al Gore won the Nobel Peace Prize for proposing world-wide government actions that will prevent a billion of more people form escaping poverty.  But, once upon a time, Norman Borlaug won a Peace Prize for actually helping the poor help themselves.  Here is what he is saying today.  Folks from the EU to Bono to Al Gore are standing in the way, again, of people feeding themselves by aggressively applying the technology we take for granted in America:

Yields can still be increased by 50-100% in much of the Indian sub-Continent, Latin America, the former USSR and Eastern Europe, and by 100-200% in much of sub-Saharan Africa, providing political stability is maintained, bureaucracies that destroys entrepreneurial initiative are reigned in, and their researchers and extension workers devote more energy to putting science and technology to work at the farm level....

I now say that the world has the technology - either available or well-advanced in the research pipeline - to feed a population of 10 billion people. The more pertinent question today is whether farmers and ranchers will be permitted to use this new technology. Extremists in the environmental movement from the rich nations seem to be doing everything they can to stop scientific progress in its tracks. Small, but vociferous and highly effective and well-funded, anti-science and technology groups are slowing the application of new technology, whether it be developed from biotechnology or more conventional methods of agricultural science. I am particularly alarmed by those who seek to deny small-scale farmers of the Third World -and especially those in sub-Saharan Africa - access to the improved seeds, fertilizers, and crop protection chemicals that have allowed the affluent nations the luxury of plentiful and inexpensive foodstuffs which, in turn, has accelerated their economic development.

Posted on June 7, 2008 at 12:12 PM | Permalink | Comments (0)

But its for the Kids

What is adult prohibition of marijuana achieving, if teenage use rates of marijuana are nearly as high as those for cigarettes, where we don't have adult prohibition.  Prohibitionists argue that adult marijuana must be banned because its legal availability to adults would make it easier for teens to obtain, but a direct comparison of marijuana and tobacco smoking demonstrates little utility from this approach:

The cigarette use figure represents a sharp drop from the 2005 survey, when it was 23 percent. Marijuana use, at 20.2 percent in 2005, showed a much smaller decline....

Another report released this week, the Fiscal Year 2007 Annual Synar Report on tobacco sales to youth, showed the 10th straight annual decline in the rate of illegal tobacco sales to minors. In 1997, 40.1 percent of retailers violated laws against tobacco sales to minors. In 2007 the rate had dropped to just 10.5 percent, the lowest ever.

"Efforts to curb cigarette sales to teens have been wildly successful, and it's past time we applied those lessons to marijuana," said Aaron Houston, director of government relations for the Marijuana Policy Project in Washington, D.C. "Tobacco retailers can be fined or put out of business if they sell to kids, but prohibition guarantees that we have zero control over marijuana dealers. Foolish policies have guaranteed that the marijuana industry is completely unregulated."

Jacob Sullum provides additional analysis in the rest of the post.

Posted on June 7, 2008 at 12:00 PM | Permalink | Comments (1)

Geothermal

I don't know much about geothermal power, but I do know I don't hear much talk about it of late.  Anthony Watt thinks this is a mistake, and discusses the potential.  To some extent, the problem with geothermal's acceptance is that it breaks our current centralized power model in favor of distributed power.  There are few spots where geothermal potential is large enough to run a big power plant, but apparently many where there is the ability to heat a single building.

Posted on June 7, 2008 at 11:54 AM | Permalink | Comments (3)

When Work Ethic Disapears

A while back, Megan McArdle observed that Sweden's semi-socialist state performed well for a number of years, riding on residual work ethic in the system, a sort of cultural bank that eventually will be overdrawn.   According to Michael Moynihan, it appears this point has been reached:

Sweden does have the highest rate of workers on sick leave in Europe, despite being consistently ranked by the OECD as Europe's healthiest country. As my former colleague Johan Norberg has observed, sick leave payments—which, at the time of the last election, were as high as 80 percent of a worker's salary—accounted for a staggering 16 percent of the government budget.

Wow!  That is really staggering.  And not at all surprising.  Even in this country, I can't tell you how many people there are who consider a permanent disability to be roughly equivalent to hitting the lottery.  Income for life, without working!  I even had one woman who sued my company for actually (as the law requires) reporting her salary to the tax authorities rather than paying her under the table as she had hoped.  By creating evidence she could work, I endangered her disability application that was in the works (she kept a set of crutches in her car which she only used when on business related to this application).

The government figure of 7 percent unemployment was repeatedly mocked by both former Prime Minister Göran Persson's detractors and allies. A study by McKinsey Global estimated the true figure—which included those on sick leave, in early retirement, in jobs programs—to be between 15 and 17 percent. Jan Edling, a researcher with the Social Democratic trade union LO, estimated the total figure of unemployed to be 19.7 percent. (Edling's report was suppressed and he was himself offered "early retirement.") The Confederation of Swedish Enterprise said the figure was 16.5 percent. Other studies ranged from 12 percent to 18 percent.

The author also makes a point I have tried to make a number of times -- that the ability of the US economy to integrate and give opportunity to poor immigrants is a huge positive, in terms of assessing relative merits of different economic systems on the poor, that is never considered when evaluating European welfare states:
And the problem of unemployment in Sweden loops back around to the difficulty Sweden has had in integrating its immigrants into the job market.

As Swedish economist Esra Karakaya wrote in Aftonbladet in 2006, the unemployment rate among immigrants in Sweden is 29 percent—another staggering figure, in marked contrast to the joblessness rate among immigrants in this country. This, Karakaya convincingly argues, is "because the labor market is governed by rigid job security laws" that are incompatible with a globalized economy. Indeed, a recent study tracking the fortunes of Somali immigrants in Sweden and in Minneapolis (reported here in Swedish, summarized here in English) found that its sample group in the U.S. started approximately 800 companies. In Sweden, they managed only 38. In a recent editorial in the newspaper Expressen, Nima Sanandaji, a Kurdish immigrant, argued that it was "important to study how the Swedish system of benefits, taxes and [regulated] job market leads the same group of people to be successful on one side of the Atlantic and to social poverty and dependence in Sweden."

By the way, when you do the analysis right, the poorest quintile in Sweden does about the same as in the US.  The difference is that in 10 years, the poorest quintile in Sweden will still be the same folks, while the poorest quintile in the US will have moved up, to be replaced with new immigrants.

Posted on June 7, 2008 at 11:50 AM | Permalink | Comments (0)

Bankrupcy of the Modern Transit Model

The Anti-planner observes:

Over the past 25 years, the population of the Pittsburgh urban area has remained fixed at about 1.8 million people. Driving, however, has increased by almost 50 percent.

During this period, Pittsburgh has spent hundreds of millions of dollars upgrading light-rail lines, building exclusive busways, and — in the latest project — building a $435 million transit tunnel under the Allegheny River. Despite (or because of) this investment, transit ridership has dropped by more than 25 percent.

Although the numbers vary slightly from place to place, Pittsburgh’s story is pretty typical of transit everywhere. Sure, some cities have seen ridership gains, but subsidies to transit are huge and transit does not make a notable (meaning 5 percent or more) contribution to personal mobility in any urban area except New York (where it is 10 percent).

He has a good summary of what's wrong and what might work instead.  I appreciated this observation in particular:

Why do we put up with this? The answer, of course, is that transit is pork. “For most transit agencies in the United States, if they were to write a mission statement that is reflective of what they do, they would indicate that they exist for the purpose of serving their employees and vendors,” not transit riders, notes Cox.

Posted on June 7, 2008 at 11:35 AM | Permalink | Comments (6)

In Search of the Good Life

Tim Harford Via TJIC:

Superficially, it seems that many people seek sunny climes, especially now that air conditioning is available. For example, long-run population growth in the “Sunbelt” — the US South - is often attributed to a demand for, well, sun.

Harvard economists Ed Glaeser and Kristina Tobio think otherwise. They argue that before 1980, the boom in the South was thanks to the region's growing productivity. After 1980, population continued to grow, but house prices lagged behind those elsewhere in the US, suggesting that the driving force was not high demand but permissive planning rules. Certainly balmy California, with its tighter restrictions on building, did not enjoy the same population growth.

All of this tends to suggest that people don’t value sunshine quite as much as is supposed.

I have pretty convincing anecdotal evidence that the first part, at least, is true.  I worked for a large manufacturing corporation called Emerson Electric (no relation to the electronics company).  They are one of the few Fortune 50 companies not at all coy to admit that they move factories around the world chasing lower wages.  They had an epiphany decades ago, when in their planning, they assumed the move overseas was always a trade-off of wages for productivity... until they visited at motor plant in Brazil that had first world automation and productivity combined with third world wages.  That got their attention.  To their credit, they have pushed this further and further, such that not only are their factory workers in Mexico, but their plant superintendents and skilled workers and even their engineers are now Mexican too.

Anyway, if you listen to the company tell this story, phase 1 of the story was not a move to Mexico or Asia but to the south.  They must have moved probably 50 manufacturing plants over a decade from the northeast to the south during the sixties and seventies. 

This constant movement seems to be a natural life-cycle of locations as they grow wealthy.  Poorer regions eagerly welcome newcomers who may bring jobs and prosperity.  But, once the prosperity is there, the prosperous in town begin using government and other institutions to try to lock in their gains.  Corporations use government to fight new competitors.  Wealthy homeowners pass zoning to keep home prices high and rising.  Unions tend to increase and lock in gains for current workers at the expense of new workers.  A kind of culture of hostility emerges to any new job that makes less than $54,000 a year, any house that costs less than $400,000, and any immigrant who doesn't have a pale face.

Posted on June 7, 2008 at 10:33 AM | Permalink | Comments (0)

What A Great Line

A friend of Megan McArdle calls the Boston city hall "a poured concrete Vogon love poem.  What a great line, and entirely appropriate of a hideous example of public architecture.  But I would have singled out a different Boston structure, the Peabody Terrace Apartments at Harvard.

Since this is the last time I may be hitting the theme of Vogon poetry for a while, I laughed the other day on a course on the Roman emperers when the professor said that Nero would force the upper class to attend his musical and poetry performances, and that some invitees where known to fake death to try to escape.

Posted on June 6, 2008 at 07:55 PM | Permalink | Comments (1)

Introvert's Nightmare

I am at my wife's college reunion, basically 2 days of continuous cocktail party conversation with people I do not know and who are here mainly to see long-lost friends rather than meet anyone new.  Not my best milieu. 

Posted on June 6, 2008 at 07:49 PM | Permalink | Comments (1)

Prices vs. Government Action

Very often on this blog I criticize some ill-conceived government intervention as being bloated and/or ineffective and ill-conceived.  A great example is corn-ethanol, where the government has spent billions and caused consumers to spend additional billions in higher food and gas prices, all for a technology that does nothing to reduce oil consumption or CO2 output.

Too often, I criticize these programs for being stupid and ill-conceived, which they are.  But what I don't take the time to also point out is the necessarily narrow focus of these government actions.  No matter how hard Congress works to stuff energy and farm bills with every micro-managing pork barrel project their campaign donors could wish for, Congress still only has the bandwidth to affect a tiny fraction of a percent of what a single change in market prices can achieve.  Prices have absolutely stunning power of communication.  When gas prices go up, every single citizen likely reassesses his/her behavior and spending in a myriad of ways.  Thousands of entrepreneurs sit at their desk staring at the walls, trying to dream up business opportunities that these new prices may signal.  And thousands of energy producers, from the tiniest to the largest, rethink their investment plans and priorities. 

Posted on June 5, 2008 at 09:23 PM | Permalink | Comments (18)

Feed Repairs

I made some feed changes.  Can someone who has had problems with my feed please try it again and let me know by email if it is still broken or is working.  Thanks

Posted on June 4, 2008 at 08:15 PM | Permalink | Comments (3)

Historical Revisionism

I think regular readers know that I am not one to see Islamic terrorists hiding under every rock.  In fact, I am not sure I have written a single post on the current state of Islam or ties to terrorism.  I don't see the world primarily in terms of some great culture war with Islam.  Certainly a number of fundamentalist Islamic states suck in terms of human rights, and some of that is probably due to ties with Islam, but many other states suck nearly as much without any Muslim help.

That being said, I must say as someone interested in history that this argument from Dr. Mahmoud Mustafa Ayoub of Berkeley, as reported from the Canadian human rights tribunal by Andrew Coyne, strains credulity:

What is jihad? Article equates it with Al Qaeda: fighting, suicide bombing etc. But word actually means, originally, “to strive, to do one’s best.” Koranic sense is that religious struggle we must all engage in within our souls against evil tendencies. There is also “social jihad,” the obligation to change things that are wrong. This does not mean violence. The Koran is not a book of violence.

The notion of armed struggle, or violent jihad, is mentioned in the Koran. “Permission has been given to those who have been wronged only because they say God is our lord that they fight in self-defence.” (Sura 22.) So jihad is not limited to fighting — it’s just one type of jihad, and should only be done in self-defence. The extremist, violent types are an anomaly. “They are more a problem for us than for the west.”

I have no problem with modern folks interpreting the Koran in this way for themselves.  But this is absurd from a historical context.  This portrayal of jihad as a sort of peaceful civil rights movement may be how moderate Muslims want to make the Koran relevant to their modern life, but it is outrageous in the historic context of if the 7th century.  People of all faiths in this era didn't have sit-ins to correct social wrongs -- they gathered up their friends and some swords and went out to try to chop up the folks who did them wrong.  Muhammad was a brilliant military leader, uniting disparate Arab tribes out of nowhere to carve out a huge part of the western world as their empire.  His (and his successors') achievement is roughly equivalent to an unknown set of tribes suddenly bursting out of the Amazon and taking over modern North America.

The concept of jihad as originally applied in the 7th and 8th centuries was bloody and militaristic -- and effective.  So much so that the Catholics copied many of the key parts for their crusades.  The 7th century was a totally different world in its outlook and assumptions.  Here is one example:  We have heard many times of the slave revolts in Rome, and most of us have seen Spartacus.  But not a single person in the 1000 years of the Roman empire, slave or not, is recorded to have ever advocated the elimination of slavery.  They may have wanted to be free themselves, or treated better, but everyone accepted the institution of slavery even while trying not to be a slave themselves.  We, with our 19th century anti-slavery movement, see the slave revolts of Rome as something they simply were not.  I believe a similar revisionism is at work here on jihad.

All that being said, I have no opinion on whether or not the militaristic concept of jihad animates any substantial number of modern Muslims or not.  I simply am not well enough informed, and currently find it hard to find any text discussing this issue that is trustworthy on either side.

Postscript:  It is true that the Muslims showed special respect in their lands to Jews and Christians  - in part for religious reasons and in part for practical reasons related to special taxes.  The Spain of three religions under Muslim rule was certainly more dynamic and tolerant than the counter-reformation Catholic Spain.  But this fact does not obviate the militaristic origins of jihad.  Islam respected Christians and Jews .... in the lands where the Muslims had taken over and ruled. Where Muslims did not yet rule but wanted to, all bets were off.

Posted on June 4, 2008 at 05:23 PM | Permalink | Comments (14)

Restricting Credit to the Unsophisticated -- And Are You Really Any Better?

After years of arguing that expanded credit is critical for the poor, and attacking banks for "red-lining" poor and minority districts, the liberal-left of this country has reversed directions, and has decided that the poor can't handle credit.

No matter how much folks want to paint the recent mortgage problem as some sort of fraud perptrated on homeowners, the fact of the matter is that in large part, lenders lowered their income standards and a lot of those folks now can't pay.  While we have yet to see any specific legislation beyond bailouts, it is impossible for me to imagine any reaction-regulation that does not have the consequence (intended or not) of restricting credit to the poor.

But these restrictions are not limited to the housing market.  Many states, for example, are cracking down and even outright banning payday loan companies, often the last resort (legal) credit source before people turn to the loansharks.  First in Ohio (via Mises Blog)

  If Ohio's 1,600 payday-lending stores want to continue operating past this fall, it appears they will have to find something else to offer besides payday loans.

   A hotly debated bill that effectively would spell the end of the short-term, high-interest payday-lending industry in Ohio sailed through the Ohio Senate yesterday despite pleas from lenders that their stores would close and 6,000 employees would be put out of work.

   The Senate was unable to find a compromise that both satisfied payday lenders and eliminated the debt trap that bill supporters said forced too many borrowers to take out new loans to pay for old ones. So it did what the House did last month: dropped the hammer.

   "I think everybody said there is just no way to redeem this product. It's fundamentally flawed," Bill Faith, a leader of the Ohio Coalition for Responsible Lending, said of the twoweek loans. The industry "drew a line in the sand, and the legislature kicked the line aside and said we're done with this toxic product."

And perhaps soon in Arizona.  Yes, the interest rates are astonishing, though the dollars involved are seldom huge for the short life and small size of the loan.  And, as an extra added bonus, Tony Soprano does not send someone to break your legs if you don't pay (the Sopranos being the only alternative provider once payday loan companies are illegal).

So, for those of you oppose payday loans, you are welcome to comment below about what a bad idea they are.  However, I challenge folks to criticize payday loans without simultaneously implicitly expressing disdain for the intelligence of payday loan customers, or trumpeting your ability to make better decisions for payday loan customers than they can make for themselves.

However, for those who think they are ever so much smarter than payday loan customers, who are charged a lot of money for small liquidity boosts, consider this:  Let's say you take out $40 each week from an ATM to keep you liquid and that the ATM fee is $1.50.  You are therefore spending $1.50 or 3.75% for a one week liquidity boost of $40, which you must again refresh next week.  Annualized, you are effectively paying 195% to get liquid with your own money.  For this kind of vig, at least payday loan customers are getting the use of someone else's money.

Posted on June 4, 2008 at 01:14 PM | Permalink | Comments (27)

Update on the Massachussetts Health Insurance Mandate

Via Michael Tanner:

  • Slightly less than half of Massachusetts’ uninsured population actually complied with the mandate. True, the number of people without health insurance was reduced from 13% of the state’s population to 7%, but when the bill was passed, advocates promised that “all Massachusetts citizens will have health insurance.”  Perhaps it depends on your definition of “all.”
  • Most of those who are signing up are low-income individuals, whose coverage is fully or partially subsidized, proving once again that if you give something away for free people will take it. It certainly appears that it is the expensive and generous Massachusetts subsidies (up to 300% of the poverty level), not the unprecedented individual mandate that is responsible for much of the increased coverage.
  • Adverse selection remains a big problem, with the young and healthy failing to comply with the mandate. The state refused to change its community rating laws which drive up the cost of insurance for young, healthy individuals. Not surprisingly, they don’t find this a good deal.
  • The program is far exceeding its projected costs, with at least a 33% budget overrun in its first year.
  • The program has increased demand for health care services without increasing the supply of providers. As a result, patients are having trouble finding providers and waiting lists (Canada here we come) are beginning to develop.

Posted on June 4, 2008 at 10:05 AM | Permalink | Comments (3)

I am Going to Break Every Window in Chris Plummer's House to Stimulate the Economy

We all know that the media is perfectly capable of ignoring even the most basic precepts of economics, but I thought Chris Plummer's article was especially heroic in doing so.  Even more so, it is absolutely stunning in its arrogance.  In his article, he writes on all the great ways that $8 a gallon gasoline will help make the world a better place.  I will stay away from the global warming related issues -- I have a whole other blog dedicated to that -- but here are a couple of the most egregious parts:

They may contain computer chips, but the power source for today's cars is little different than that which drove the first Model T 100 years ago. That we're still harnessed to this antiquated technology is testament to Big Oil's influence in Washington and success in squelching advances in fuel efficiency and alternative energy.
           
Given our achievement in getting a giant mainframe's computing power into a handheld device in just a few decades, we should be able to do likewise with these dirty, little rolling power plants that served us well but are overdue for the scrap heap of history.

OK, this first one is a science problem and not an engineering problem.  Here is the problem:  Gasoline contains more potential energy by weight and volume than any power storage source we have been able to invent (OK, its actually second, nuclear fuel is first, but I presume Plummer is not going there).  That is the problem with electric cars, for example.  Electric traction motors are demonstrably better sources of motive power than internal combustion engines.  Even Diesel railroad engines are actually driven by electric traction motors.  The problem is energy storage.  Batteries store much less energy per pound and per cubit foot than gasoline.  Ditto natural gas and hydrogen (except at very high pressures).

This claim that only the political power of oil companies keeps no-brainer alternative technologies at bay is absurd, though it is one that never dies in the lunatic fringes.  Mr. Plummer is more than welcome to make himself a billion dollars by selling one of these mystery technologies he fails to disclose.  I will be first in line to buy.

Necessity being the mother of invention, $8 gas would trigger all manner of investment sure to lead to groundbreaking advances. Job creation wouldn't be limited to research labs; it would rapidly spill over into lucrative manufacturing jobs that could help restore America's industrial base and make us a world leader in a critical realm.

This is the broken window fallacy on steroids.  I am a HUGE optimist about the limitless capabilities of the human mind, probably more so than Mr. Plummer (by the way, if he is such an optimist, he should read some Julian Simon).  But the best that humanity can probably do any time soon is offset a goodly percentage of the damage from $8 gas.  There is no net win here.  If there were, he should also be advocating $10 bread, $2,000,000 starter home prices, and $200 a month internet service.  Just think about all the innovation that would be required to react to these!

On a similar note, Venezuela's Hugo Chavez and Iran's Mahmoud Ahmadinejad recently gained a platform on the world stage because of their nations' sudden oil wealth. Without it, they would face the difficult task of building fair and just economies and societies on some other basis.

Yes sir.  Chavez would be much worse off if he was getting $8 for his gas rather than $3.  What is this guy thinking?  Well, he says this:

In the near term, breaking our dependence on Middle Eastern oil may well require the acceptance of drilling in the Alaskan wilderness

OK, but that can be done at $3 gas,and should have been allowed at $2 gas.  This oil could have been developed in an environmentally friendly way years ago.  Only Congressional stupidity stands in the way  (probably with the past support of Mr. Plummer).

The recent housing boom sparked further development of antiseptic, strip-mall communities in distant outlying areas. Making 100-mile-plus roundtrip commutes costlier will spur construction of more space-efficient housing closer to city centers, including cluster developments to accommodate the millions of baby boomers who will no longer need their big empty-nest suburban homes.
           
Sure, there's plenty of land left to develop across our fruited plains, but building more housing around city and town centers will enhance the sense of community lacking in cookie-cutter developments slapped up in the hinterlands.
This is an aesthetic and taste argument (note the "antiseptic") - the author thinks that suburbs are un-aesthetic and he thinks that urban life is superior.  Not surprising, as he chooses to live in San Francisco, and people there have self-selected for that kind of life.  Fine.  But I don't want it.  And the idea that it is good to pay $8 for gas to conform to his aesthetics is sickening.  (By the way, the opposite of antiseptic is germ-ridden.  Why don't people ever therefore use that as a modifier for urban communities?)

OK, I can't really get to all his points, but I have saved perhaps the best for last.  Here is one of the most incredibly condescending, authoritarian, and insensitive arguments I have ever seen.  He thinks it is better for poor and middle class Americans to pay $8 a gallon for gas because:
Far too many Americans live beyond their means and nowhere is that more apparent than with our car payments. Enabled by eager lenders, many middle-income families carry two monthly payments of $400 or more on $20,000-plus vehicles that consume upwards of $15,000 of their annual take-home pay factoring in insurance, maintenance and gas.
           
The sting of forking over $100 per fill-up would force all of us to look hard at how much of our precious income we blow on a transport vehicle that sits idle most of the time, and spur demand for the less-costly and more fuel-efficient small sedans and hatchbacks that Europeans have been driving for decades.
So, doubling the cost of necessities for the average American will make them financially healthier?  His argument is that people do all kinds of dumb things financially that a smart person like he would never do, and if gas prices drained everyone's wallet, they would not have any money left to make dumb purchases he does not approve of.  If this is such a great idea, shouldn't we all just move to North Korea and have done with it?

The anti-planner, where I got the link, has his own response.

Posted on June 4, 2008 at 09:25 AM | Permalink | Comments (15)

Really a Joke

I am finding Andrew Coyne's live blog of the Canadian hate speech "trial" to be endlessly fascinating.  Imagine taking the the most self-important but dysfunctional local school board you can find, give them a knowledge of court procedure and the rules of evidence mainly through watching People's Court reruns, and put them in charge of enforcing speech and censorship, and you will about have duplicated this proceeding.

Interestingly, the current evidence being entered in the proceeding seems to be blog comments made on non-Canadian blogs.  Every so often, we have to go through an educational process with the MSM to help them understand that commenters on blogs do not necessarily represent the opinion of the blogger.  It may be OK to use blog comments as evidence that the community at the Free Republic or the Democratic Underground are loony, but not to say that blogger X or Y is a racist because racist comments have been posted on his blog.

It appears that the government of Canada needs a similar education, but I can see this being hard to do.  Remember, each of the hearing "judges" are essentially people who make their living as government censors.  Their job is wiping out speech with which they do not agree.  It is therefore quite likely difficult for them to comprehend that many bloggers (like myself) have no desire to edit or control the content of our commenters.

Posted on June 3, 2008 at 01:36 PM | Permalink | Comments (9)

Sorry for the Advertising Spam

The Arizona Republic has taken to embedding the code for their on-site advertising in the middle of sentences, sometimes in between two letters of a word.  This means that sometimes when I copy snippets from their web site, I end up with popups and spam on the blog, particularly since this stuff does not show up on the post preview, only when it goes to the site.  Sorry.

Posted on June 3, 2008 at 01:00 PM | Permalink | Comments (2)

Ethanol, Florida Style

It is difficult to imagine that we would have the extensive, absurd subsidies of corn ethanol that we have today if it were not for the fact that Iowa is the first stop on the presidential campaign trail.  Every four years, here-to-fore fiscally sober and rational candidates stand up on Iowa TV and pledge to support ethanol subsidies.

But today it appears the primaries are finally over (it appears that Ms. Clinton will bow out tonight) and so attention now focuses on the general election.  And though I am not really an expert, I would presume the election will again turn on a few states including Ohio, Pennsylvania and, of course, Florida.

It appears that Florida Democrats have a plan to parlay their swing state status into pork, in the same way that Iowa has done for years.  The only difference is the issue is not ethanol, it's subsidizing beach-front homes:

As hurricane season begins, Democrats in Congress want to nationalize a chunk of the insurance business that covers major storm-damage claims.

The proposal -- backed by giant insurers Allstate Corp. and State Farm Mutual Automobile Insurance Co., as well as Florida lawmakers -- focuses on "reinsurance," the policies bought by insurers themselves to protect against catastrophic losses. The proposal envisions a taxpayer-financed reinsurance program covering all 50 states, which would essentially backstop the giant insurers in case of disaster.

The program could save homeowners roughly $500 apiece in annual premiums in Florida, according to an advocacy group backed by Allstate and State Farm, the largest writers of property insurance in the U.S.

But environmentalists and other critics -- including the American Insurance Association, a major trade group -- say lower premiums would more likely spur irresponsible coastal development, already a big factor in insurance costs. The program could also shift costs to taxpayers in states with fewer natural-disaster risks....

The legislation passed the House with bipartisan support, 258-155, late last year, despite a presidential veto threat. Although a Senate vote is unlikely this year, proponents are trying to make it a litmus-test issue in the presidential race. The two Democratic contenders, Sen. Hillary Clinton of New York and Sen. Barack Obama of Illinois, in their recent visits to Florida -- a key swing state -- have both voiced support for the plan.

Big winners would be coastal states, particularly Florida, where more than half of the nation's hurricane risk is centered. Currently, property-insurance rates in Florida are among the highest in the nation. Florida also has a struggling state reinsurance fund that would be helped by a federal program....

Florida's status as a presidential swing state has helped the plan win support from Sens. Clinton and Obama. Sen, Clinton is one of the bill's co-authors, along with Democratic Sen. Bill Nelson of Florida.

Florida Democrats' effort to make a federal disaster fund a big issue in this year's presidential race was one reason the state moved up its primary election to January from March, defying party rules. (That move is partly what's behind the current, heated battle between the Democratic candidates over how to count Florida's delegates in the nominating race.)

Posted on June 3, 2008 at 12:44 PM | Permalink | Comments (10)

The Front Line of the Labor Market

A popular anti-immigrant tactic in Arizona is to try to ban day laborers from public places.  Though it's not how I would choose to sell my labor, many people choose to advertise and sell their labor from street corners and in public spaces.  And many of these folks, contrary to common perceptions, are legal residents of this country.

Here is a bit of good news:

A federal judge on Monday issued a temporary order blocking the town of Cave Creek from enforcing a law aimed at stopping day laborers from gathering on streets to look for work.

In her ruling, U.S. District Judge Roslyn Silver found that the ordinance is an unconstitutional restriction of free speech, and that the possibility of irreparable harm exists.

“Plaintiffs, as day laborers, face not only the loss of First Amendment freedoms, but also the loss of employment opportunities necessary to support themselves and their families,” Silver wrote in the ruling.

 

Posted on June 2, 2008 at 08:36 PM | Permalink | Comments (11)

Great Moments in the Defense of Free Speech

Andrew Coyne is live-blogging the Mark Steyn inquisition.  Check it out.

A few snippets:

10:16 AM
They’re going to call, among others, Dr. Andrew Rippon, professor of Islamic Studies at the University of Victoria, to show that Steyn has misunderstood the relationship between the Koran and Islamic society. Well, that’s as may be. Would be a good subject for debate. But why exactly does that require the state to adjudicate it?...

10:57 AM
Just coming back from a break. Lots of media interest, it seems: CBC, CTV (I’m told), the National Post, local media, and a guy from the New York Times, who’s doing a piece comparing how the two countries’ legal systems deal with speech cases. Needless to say, he can’t believe what he’s witnessing…

11:04 AM
Under Section 7.1, he continues, innocent intent is not a defence, nor is truth, nor is fair comment or the public interest, nor is good faith or responsible journalism.

Or in other words, there is no defence.

Posted on June 2, 2008 at 01:29 PM | Permalink | Comments (1)

Far Be It For Me To Disagree, But...

I love Arizona and the Phoenix area.  However, I thought the NY Times listing of Scottsdale as one of the #9 place to visit this summer to be a bit odd.  Next up will be the suggestion to visit Buffalo in February.  Yes, there are a lot of screaming deals at luxury hotels with great spas, so if want two days of spa treatments and proximity to lots of good restaurants, go for it.  But expect to find something like Paris in August (but with better attitudes).  You may be here but we'll all be gone, if we can afford it.  Typical summer temperatures every day are 108-112F, with occasional excursions higher into territory that is stupid-hot.  Yeah, its dry heat, and that is exactly what we tell our turkey every Thanksgiving.  And yeah, the wind blows a bit -- feels just like a hair dryer. 

Posted on June 2, 2008 at 01:07 PM | Permalink | Comments (1)