Blueberry Tofu

Government Unfunded Pensions

2007-04-06T14:20:00.000-05:00

Coyote Blog harps on one of my favorite issues that no one else seems to notice; unfunded pension liabilities by governments. Private company owners go to jail for shenanigans that the government routinely gets away with. The New York Times uncovered the latest fraud by a government in New Jersey. These cases are the rule, not the exception, for the public sector and nothing will be done about it until it's a full blown crisis.

I have written more on unfunded/underfunded pensions here, here, here and here.

Baseball Season

2007-04-05T10:07:00.000-05:00

Well baseball season has begun pretty well for the Indians. Great game yesterday afternoon even though Larry Vanover's strike zone was about the size of a quarter. I'm sure the fans braving the snow and 30 degree weather really enjoyed that. I hope today's game featuring Dice-K vs. Greinke is umped a little better because I'll be there. It's going to be all of 40 degrees at game time but this is a premiere matchup that I wouldn't miss for anything.

Some thoughts and predictions at this early stage in the season. The White Sox have shown this week that they are in danger of being in more of a battle for last place than they will be in for first place. But, I don't think the Royals have the pitching to make that battle very interesting. The Tigers are going to learn how difficult it is to repeat but still may get the Wild Card in a battle between the A's, Angels and Blue Jays.

The Nationals are hands down the worst team in the league this year, it's not even really a battle. I think the Red Sox are a Schilling injury away from being irrelevant this year. The Mariners will be the least interesting and worst team in the league, not a great combination.

Are the defending champions going to come in last in the NL Central this year? I wouldn't rule it out; they're old, don't hit well, don't have a good rotation and looked to not be major league ready against the Mets. The NL Central will be as even as any division has been. I don't think any team will win less than 70 games or win more than 90 games. The team that plays the best in the division will win it. I think it will be the Brewers, Sheets was very impressive on opening day and the addition of Suppan gives them the best 1-2-3 of any team in the division although Harang, Arroyo and Bailey may be the best by year's end. I think the Pirates have a legitimate shot at beating the Cardinals this year, alas in the battle for 5th place, but Bucs fans have to enjoy the little victories.

The Phillies are the class of the National League, meaning they would win about 80 games in the AL. The Mets aren't far behind but Milledge has got to be traded for a front line starter, maybe Buerhle or Garland when the White Sox throw in the towel, because they're not going far with Oliver Perez taking the ball on a regular basis. An August rotation of Glavine, Martinez, Pelfrey, Buerhle or Garland, El Duque or Maine could give them a good chance at 100 wins. The first team to 100 wins, I think it will be the Phils.

The NL West is a mess with only San Francisco out of the hunt. I don't think Colorado or Arizona are quite ready for prime time but they will be exciting at times. San Diego and LA will battle in a blah-fest, the winner of the division will have about 88 wins.

As I wrote earlier, the A's and Angels will be competitive in the West, whoever doesn't win it will be in the Wild Card chase. I give the edge to the Angels unless the Sarge Jr. and F-Rod controversies bring them down. Hopefully, Chone Figgins will get back on the field quickly and the Angels find a way to get Brandon Wood and Erick Aybar and Kendry Morales to the major leagues, whether with the Angels or not. If those guys are playing somewhere the Angels will be better.

The AL East, wow, could it be less stellar. 25% of major league payrolls reside in this division and the most interesting team, the Devil Rays, has a low payroll. But they have the best positional talent in the division. Unfortunately, they're going to be in a lot of 9 - 8 games because they don't have any pitching. The Yankees will buy their way into a good pitching staff and they have a great lineup. I think they take this division with 95 wins and no opposition in site. The Blue Jays will come up with about 88 wins and challenge for the Wild Card. The Red Sox will be done by August when Schilling goes down and decides to become a full-time blogger. Beckett's blisters will reappear, Dice-K will be an interesting 15 game winner, Manny will be Manny and Ortiz will mash. They'll probably be pretty fun to watch, but have mid-level talent in the bullpen, Varitek is on the decline and JD Drew will suck all the fun of the '04 team out of the clubhouse. Big disappointing season on the way.

The Indians are going to win 100 and show that the Central isn't as even as believed in spring training. The Twins are going to miss Liriano and Matt Garza will have the growing pains that Santana and Liriano didn't. The Twins just don't have the pitching to compete in this division. The Tigers are going to be good, just not as good as they were in the first half of last year. The Royals are going to steal some of the White Sox's wins from last year putting them on par with the White Sox in the division.

Playoffs: Indians, Yankees, Angels, Tigers (wild card), Phillies, Brewers, Dodgers, Mets(wild card)
World Series: Indians, Mets
Champion: Indians

The day after Hell will freeze over.

Home Ownership and Unemployment

2007-03-21T15:10:00.000-05:00

Greg Mankiw has a nice post asking whether getting rid of subsidies for home ownership would reduce natural rates of unemployment. I answer, yes, as well as say eliminating the home mortgage interest deduction would have 18 other beneficial effects.

Intellectual Welfare

2007-03-21T12:19:00.000-05:00

Coyote blogs about another instance of the government limiting a market to protect people from themselves. Let's get this straight, people should be free to make bad decisions. Outlawing bad decisions is the opposite of freedom.

Splainations

2007-03-20T19:51:00.000-05:00

My previous post about borderline racism inspired some comments that I wasn't engaging properly in the debate. Point taken, but it took a little bit of snark to get me back in the game so the last post wasn't entirely wasted. Anyway, Megan McArdle who started this whole debate amongst Yglesias, Drum and herself has nice post explaining her thoughts on vouchers. I'm going to riff off of these because she's mostly right, just want to clarify some differences I have with her.

1) The American educational system sucks.

I would say it sucks for the poor.

2) It particularly sucks for poor and minority kids

See my #1, I don't think middle class kids have it that bad unless they're in some rich enclave of an inner city school district with a large proportion of poor kids.

3) It has sucked in approximately the same way for at least forty years.

Mostly agree, but I think the Great Society has increased the number of unemployable therefore increases the number of kids who have no real incentive to get an education.

4) The institutional barriers to not sucking are apparently insurmountable with the current interest groups in place. 5) It is extremely segregated by class, race, and income 6) It is extremely hard to recruit and keep good teachers 7) As a result, the schools with the most attractively upper middle class parents and children get almost all of the good teachers

Right on!

8) The main reason that it is hard to get good teachers (outside of rural areas where it is hard to get good anyone to move there) is that their pay, unlike that of other union workers, is at the bottom of the distribution for their education level.

I don't think this one is true at all. Teachers are paid close to the same amount as other occupations requiring a 4 year degree, especially if you pro-rate based on the hours teachers work in a year. Coyote did a nice post about this several years back.

9) Given that the pay is at the bottom of the distribution for educated professionals, one of the primary attractions of the job is its short workyear and near-ironclad job security. Short of molesting the students or screaming racial epithets at them, it's awfully hard to get fired from a teaching position.

A lot stuffed into this item, but it is hard to get fired which screws with the incentives.

10) Jobs whose primary attraction is short hours and the difficulty of getting fired rarely attract the cream of the crop. The best teachers are either those few gifted passionate souls who want to teach, or women who are trying to match their schedule to that of their children. The latter group is shrinking; the former group has always been small.

Not much more to build on, this is a fairly minor point.

11) Any meaningful reform of the school system that actually improves them will need to pay teachers much more.

I don't agree at all with this. I think many people would teach for the amount of money paid to teachers now. The system is what decintevizes teachers (I know I just made up a word).

12) Paying the current group of teachers much more will improve their standard of living immeasurably, but will do absolutely nothing for the students.

Wholeheartedly agree.

13) Therefore, coupled with higher teacher pay must come the ability to get rid of substandard teachers.

Must be able to clear dead weight easily.

14) This is not remotely feasible within the existing system

True!

15) The programmes which have been shown to work best with disadvantaged kids are the ones that are heavily scripted, involve lots of repetition and rote learning, and otherwise make life no fun for the teacher.

I don't agree with this one, I think a market system would bring many ways of learning into the education world, some would be fun for teachers others wouldn't, but kids would be matched to a system in which they could learn.

16) These programmes are rarely implemented, implying that teaching disadvantaged kids to read and do math are somewhere well down the priority list of your average school district.

Agreed, there's no reward for innovation.

17) Monopolies are rarely responsive to their customers.

Ask me about Time Warner cable!

18) School board elections are not a particularly good way to gather feedback on school performance, but other than lawsuits, it is the single mechanism currently available to school districts. School board elections are a particularly bad way to gather feedback in very large, dysfunctional polities like cities.

This is one that slips by most folks. There is no good way to get rid of bad school policies, especially when only a minority see the harm in a particular policy (ie. no music education).

19) A school where parents may pull their children at any moment is a school that worries about pleasing parents and children.

A very important point.

20) The government cannot hand out money without making sure schools meet basic requirements, like having a building, teachers, and some students. Any voucher programme will also have to periodically test kids to ensure that they are making progress.

Here's a big disagreement between McMegan and me, parents would be the feedback mechanism for vouchers. If the school can continue to get enrollment, that school is successful. We don't need government testing to verify kids are learning in a private school.

21) This is not the same thing as imposing the same set of elaborate regulations on everything from teacher hours to eraser purchasing that currently hamstring public schools, and then complaining that voucher schools don't do any better.

Agreed, I guess.

22) Current teacher certification standards are lunatic protectionism promulgated by education schools collecting fat rents for slapping a laminate veneer of professionalism on educators. Any one I have ever met who has done a real degree, and then sat through education classes, has attested to their utter lack of useful content. We have math teachers who are very good at making posters about race, and very bad at math. The way to teach someone to teach is to give them some elementary child psychology, and then have them practice on actual children, who will illustrate the folly of listening to professors of child psychology. "Teacher standards" are the absolute last thing we should be imposing on voucher programmes. Principals are pretty good at figuring out if a teacher can teach.

The big throwdown against education programs. I agree wholeheartedly that teachers need not be certified especially only certifying teachers with a degree in Education.

23) Any voucher programme will have to offer bonuses for educating difficult kids: poor kids, kids with emotional problems, kids with learning disabilities, and so forth. Otherwise, those kids will end up stuck in a ghetto. On the other hand, if you get the pricing right, you don't need to worry about lotteries and so forth.

A lot of room for debate here, I think that Democrats could certainly sign on to this as an Affirmative Action type program, but based on factors other than race. I'm on board with different voucher amounts for troubled kids.

24) To hell with rich people: if you're in, say, the top 5-10% of the income distribution, you ought to get the same help educating your kids as my parents got, which is to say none.

Certainly a little bit of income phaseout should be included.

25) Some people will be worse off under this system. There is no change ever that leaves every single person better off. This is not a reason to avoid change.

Important point.

On the whole I agree mostly with McMegan's explanations/thoughts. I have a really difficult time with those who think that public education doesn't have room for competition or that competition can't exist.

Borderline Racism

2007-03-19T12:21:00.000-05:00

I know it's been a while since my last post, 4 months to be exact, but I've been busy. Anyway, I'd like to thank Kevin Drum for outraging me enough to get me to figure out my Blogger sign-in and posting a quick thought.

I'm not worried much about the standards at $15,000-a-year private schools, but I am worried about the standards at storefront operations in the inner city. The prospect of massive abuse is just too great.

To rephrase:

I'm not worried much about the standards at schools for rich white people, because they know how to spend their money, but I am worried about the standards at black schools because they don't know how to spend their money, they need rich OC white guys to look out for them. The prospect of massive abuse is just too great.

Democratic Leadership

2006-11-09T10:34:00.000-06:00

I hope this isn't a harbinger of what to expect of Democratic leadership in Congress. Matthew Yglesias wants Democrats to not take any leadership on confirming or rejecting Bob Gates (he went to my high school, I can call him Bob).

My initial read -- subject to revision as we learn more -- is that they should take advantage of the presence of some hard-core wankers in their caucus. Blocking Gates is problematic. Giving Gates a seal of approval is also problematic. So, if Webb wins, let Gates come to the floor and let him be confirmed by 49 Republicans plus some combination of Lieberman, Ben Nelson, and Dick Cheney. That way Bush gets to keep running Bush's war Bush's way on Bush's say-so and Bush gets to keep reaping the blame when things keep going poorly.

So rather than take the lead and vote the way they feel, Yglesias is promoting an avenue that allows Democrats to be unaccountable. Because Gates is almost assured of being confirmed, they take no risk by actually voting for confirmation and if Gates' Iraq strategy doesn't work, they will have no blame. If Gates comes in and does a wonderful job, they can say they voted against him because of Bush's record of nominating cabinet members. No pain either way. I don't really see how this approach could be considered working with the President.

Then there's this little piece of non-leadership from Kevin Drum before the election on Tuesday.

Golly. You mean the Democratic document didn't have a whole section about exactly which taxes Nancy Pelosi wants to raise and by exactly how much? I wonder why? Kinsley then follows up this faux bumpkinism with a complaint that the Democrats also fail to present a plan for crushing the Iraq civil war, even though he admits one sentence later that neither does anyone else. If it weren't for the 800-word limit on op-eds, I figure the next paragraph would have been a complaint that Democrats lack a plan for turning water into wine.

Once again, the Democrats are afraid to actually say how they're planning on paying for their plans. Isn't this what they've been criticizing Republicans for for 6 years?

I don't know how to feel. I'm glad the Republicans aren't in charge of Congress any more because a divided government that actually has oversight works better than one party rule. On the other hand, I disagree with just about everything the Democrats stand for on the economic side of the table and it appears they will show no leadership whatsoever. They'll just try to position themselves to win the next election, which is what the Republicans have been charged with for the past 6 years. I guess I don't get how anything really changed.

Smoking Ban and Gambling

2006-10-26T08:28:00.000-05:00

While reading the link from Radley's post about smoking ban silliness, I came across this little piece:

The new smoking ban applies to bars that serve food and those that don't have keno licenses. Some bars have applied for keno licenses to keep their smokers happy, and a few decided to give up food instead of smoking.

The state/city is increasing it's customer base, it's not about public health, it's about more establishments getting keno licenses and increasing state/city revenue.

By the way, calling 911 to report a smoker is a dangerous activity that threatens dispatcher's ability to actually, you know, handle more important things, like immediate danger reports.

Evil Waltons

2006-10-19T09:58:00.000-05:00

How could Wal-Mart do this to the people? The Waltons, with their $19B each should quit exploiting the people. Now 8600 more have volunteered to be exploited, with a waiting list of over 45,000.

War on Wal-Mart

2006-10-18T08:29:00.000-05:00

The other night I watched a little of the CNBC documentary about Wal-Mart. It's a real interesting show that explains their culture and processes to keep prices low. I believe there is nothing inherently evil about Wal-Mart, even if I prefer Target.

Unfortunately, labor unions see Wal-Mart in a different light and Democrats are listening. The WSJ has an excellent op-ed today explaining the phenomenon (I don't usually like to excerpt a whole article but I don't have a free link).

Wal-Mart may be expanding in the People's Republic of China, but here in capitalist America the low-price retailer has become the Democratic Party's favorite pinata. The media like to portray this as a populist uprising against heartless big business. But what they don't bother to disclose is that this entire get-Wal-Mart campaign is a political operation led and funded by organized labor.

We've done a little digging into the two most prominent anti-Wal-Mart groups, and they might as well operate out of AFL-CIO headquarters. An outfit called Wal-Mart Watch was created by the Service Employees International Union (SEIU), probably the most powerful union in America after the National Education Association. Wal-Mart Watch is backed by Five Stones, a 501(c)3 organization that received $2,775,000 in 2005 from the SEIU, or 56% of its $5 million budget. According to financial records, SEIU also gave Five Stones $1 million in 2004 to launch the anti-Wal-Mart group, and SEIU president Andy Stern is the Wal-Mart Watch chairman.

A second group, Wake Up Wal-Mart, is more or less a subsidiary of the United Food and Commercial Workers Union (UFCW). Wake Up Wal-Mart refuses to divulge its funding sources, but here is what we do know: The group was founded by the UFCW, is housed at UFCW headquarters, and its campaign director's $135,000 salary is paid by the UFCW.

Wake Up Wal-Mart also has close ties to the Democratic Party. Its union-funded campaign director is Paul Blank, who was political director of Howard Dean's failed Presidential campaign. The group sponsored a 19 state, 35-day bus tour across the U.S. earlier this year, staging anti-Wal-Mart rallies. Nearly every major Democratic Presidential hopeful has joined in the Wal-Mart-bashing, including Senators Joe Biden and Evan Bayh, New Mexico Governor Bill Richardson, and trial lawyer-turned-man-of the-people John Edwards. They all seem to believe they have to take this line to pass union muster for 2008.

Even Hillary Rodham Clinton has joined in the political fun. Never mind that she served six years on the Wal-Mart board during her time in Beltway exile as an Arkansas lawyer and, according to the Arkansas Democrat-Gazette, was paid $18,000 per year plus $1,500 for every meeting near the end of her tenure. Most recently, Mrs. Clinton returned a $5,000 campaign contribution from Wal-Mart to protest its allegedly inadequate health care benefits. Maybe someone should ask her if she's returned her director's pay, with interest.
* * *

Most of the local protests against Wal-Mart are organized through the left-wing activist group ACORN, an acronym for the Association of Community Organizations for Reform Now. ACORN is the group that put the squeeze on the Chicago City Council to pass an ordinance this summer to require Wal-Mart, Target and other big-box stores to pay a minimum $10 an hour wage and $3 an hour in benefits by 2010. (Democratic Mayor Richard Daley vetoed the bill.) ACORN also pretends it is a locally organized and funded voice of the downtrodden masses. But guess where ACORN gets much of its money? Last year the SEIU chipped in $2,125,229 and the UFCW $165,692.

Then there are the anti-Wal-Mart "think tanks," if that's the right word for these political shops -- notably, the Economic Policy Institute (EPI) and the University of California at Berkeley Labor Center. The job of these two outfits is to publish papers backing the economic claims of Wal-Mart critics. The UC Berkeley group recently asserted that Wal-Mart "reduces total take-home pay for retail workers."

The UC Berkeley Labor Center has received at least $43,550 from SEIU. The Economic Policy Institute received $100,000 from the SEIU and $40,000 from the UFCW in 2005 and has published several anti-Wal-Mart studies, particularly on the benefits of the Chicago ordinance. By the way, Andy Stern also sits on the EPI board. He's a busy guy.

Now, we're not predisposed to be pro- or anti-Wal-Mart. We've criticized Wal-Mart lobbying on policy grounds -- for example, when the company supported a minimum wage increase to court some nice publicity while also knowing this would harm any lower-priced competitors. However, it is simply fallacious to argue that Wal-Mart has harmed low-income families.

More than one study has shown that the real "Wal-Mart effect" has been to increase the purchasing power of working families by lowering prices for groceries, prescription drugs, electronic equipment and many other products that have become modern household necessities. One study, by the economic consulting firm Global Insight, calculates that Wal-Mart saves American households an average of $2,300 a year through lower prices, or a $263 billion reduction in the cost of living. That compares with $33 billion savings for low-income families from the federal food stamp program.
* * *

Alas, what's good for working families isn't always good news for unions and their bosses. They hate Wal-Mart because its blue-coated workforce is strictly non-union -- a policy that dates back to the day founder Sam Walton opened his first store. Today the company employs 1.3 million American workers, and its recent push into groceries has made life miserable for Safeway and other grocery chains organized by the service workers or the UFCW.

Wal-Mart pays an average of $10 an hour, which is more than many of its unionized competitors offer. And typically when a new Wal-Mart store opens in a poor area, it receives thousands of job applications for a few hundred openings. So Wal-Mart's retail jobs of $7 to $12 an hour, which the unions deride as "poverty wages," are actually in high demand.

But as we say, this campaign isn't about "working families," or any of the other rhapsody-for-the-common-man union slogans. If Wal-Mart were suddenly unionized, Big Labor's membership would double overnight and union leaders would collect an estimated $300 million in additional dues each year to sway more politicians. Short of that, their goal is to keep Wal-Mart out of cities so their union shops have less competition. That's what the war against Wal-Mart is truly about.

I guess because Democrats aren't in charge of anything they don't get branded with the catering to special interest stick. But, when do you ever see them turning down union money or doing something the unions don't like? The 2 shining examples of this are Wal-Mart bashing and support for public schools.

More Shelf Blogging

2006-10-08T08:38:00.000-05:00

The shelves may be a little hard to see, but there's 4 of them there. We needed some shelves in the girls' closet to hold their winter clothes while we go through this Indian summer. Bonus points for me because these shelves had to be extra sturdy so my 20 month old girls couldn't pull them down. I believe I accomplished that mission. Also, we kissed the vertical blinds in the living room goodbye and hung up some horizontal blinds with a valance. I give you Shade Blogging!

For more Shelf Blogging check here, here and here.

Political Questions

2006-10-07T14:01:00.000-05:00

If you're like me, and for your sake I hope you're not, you find yourself flummoxed to come up with questions when a politician comes to your door soliciting a vote. I have opinions and I want these people to tell me what they believe, but I don't want them to just give me the standard little "I'm for this, this and this and against that, that and that."

Also, typically the people trawling around in my neighborhood are candidates for city council, state representatives or some other local office. These are some of the most important offices for me, but, I typically can't come up with a question to ask these people on the fly, so I'm looking for the kind of questions that get at the candidates inner beliefs. The kind of thing Democrat and Republican used to mean.

For example, I would want to know if they believe in free trade, what they think the role of government is in this country etc. Those aren't questions John Q. Campaigner are typically ready to answer, but they're important for Campaigner to have an answer. Especially because today's local politician is tomorrow's national politician. I don't want to be electing someone for local office when I don't believe in what they think on national issues.

So, in light of this I'm going to email some of the bloggers I most respect and see what they think. I'm looking for pretty general questions that aren't stacked to get an answer a certain way like, "do you think it was worth thousands of American lives to start an illegal war in Iraq?". If the question's loaded, Campaigner will know how I want him to answer it.

R.I.P Buck O'Neil

2006-10-07T13:28:00.000-05:00

I was saddened to learn last night via the Bottom Line on ESPN that Buck O'Neil had passed. Buck was probably the most famous Kansas Citian, certainly the most loved. It's like a piece of the city died. But, I know that Buck O'Neil meant a lot to people outside of Kansas City as well. Wright Thompson, a former KC Star reporter, has a nice tribute to Buck on ESPN.

We've all lost that magnificent baritone voice now, and the world is poorer for it. Not in the way we normally are when a famous person dies. No, O'Neil's voice was truly a gift to all of us. It taught us that love is more important than hate. It taught us that forgiveness is more important than bitterness. It taught us to live life now, to eat dessert always, to never let a red dress pass by.

When he didn't get into the Hall of Fame this year, people rightfully howled. As the news reached him, a final denied dream in a life full of dreams denied, he just smiled.

"God's been good to me," he said that day. "If I'm a Hall of Famer for you, that's all right with me. Just keep loving old Buck. Don't weep for Buck. No, man, be happy, be thankful."

On a day that should have been the pinnacle of a life dedicated to helping others, he showed up at the podium in Cooperstown anyway to help honor the Negro Leaguers who did make the cut, and he led the crowd in a song that will never be heard again:

"The greatest thrill Â in all my life Â is loving you."

He sang those words to the folks there and to those at home. Sitting here now, trying to imagine a world without Buck, I can't stop thinking about that song. As a former reporter for The Kansas City Star, I had my share of interaction with Buck. I heard him make cynical school children stand and sing in loud voices. It's clear to me now that knowing and loving Buck has been the greatest thrill in my professional life. It's been a thrill for all of us who knew and loved Buck, either in person or in spirit.

Thompson felt it appropriate to point out that he worked in KC in his national article. I think that's appropriate, Buck was one of those people that made you proud to be a Kansas Citian. He was our own and we loved him.

I met Buck once and got my picture taken with him. He had taken hundreds of pictures with people that day (it was a Royals open house) but, he took the time to ask my name and several other questions. He was particularly interested in the girl I was with, I remember.

Sometimes I would see Buck at Royals games and I would wave, he would wave back like he knew me. It always made me feel like he remembered me from the day we took that picture. I think he made everyone feel that way whenever he was around.

Craig, over at Royals Authority, has the text from Buck's Cooperstown speech here as well as his personal Buck stories.

Alright, sit down. This is outstanding! IÂve been a lot of places. IÂve done a lot of things that I really liked doing. I hit the homerun. I hit the grand slam homerun. I hit for the cycle. IÂve had a hole-in-one in golf. IÂve done a lot of things I liked doing. I shook hands with President Truman. Yeah. Oh, man, I took Â Oh, [shook hands] with the other President and IÂhugged his wife, Hilary. So IÂve done a lot of things I liked doing. But IÂd rather be right here, right now, representing these people that helped build a bridge across the chasm of prejudice Â not just the ones like Charlie Pride and me that later crossed it. Yeah. This is quite an honor for me.

Next, Negro League baseball. All you needed was a bus, and we rode in some of the best buses money could buy, yeah, a couple of sets of uniforms. You could have 20 of the best athletes that ever lived. And thatÂs who we are representing here today. It was outstanding. And playing in the Negro leagues Â what a lot of you donÂt know. See, when I played in the Negro leagues Â I first came to the Negro leagues Â five percent of Major League ball players were college men because the major leaguers wanted them right out of high school, put them in the minor league, bring them on in. But Negro leagues, 40 percent of Negro leagues, leaguers, were college men. The reason that was, we always spring trained in a black college town and thatÂs who we played in spring training, the black colleges. So when school was out, they came and played baseball. When baseball season was over, theyÂd go back to teaching, to coaching, or to classes. That was Negro League baseball. And IÂm proud to have been a Negro league ball player. Yeah, yeah.

And I tell you what, they always said to me Buck, ÂI know you hate people for what they did to you or what they did to your folks.Â I said, ÂNo, man, I Â I never learned to hate.Â I hate cancer. Cancer killed my mother. My wife died 10 years ago of cancer. (IÂm single, ladies.) A good friend of mine Â I hate AIDS. A good friend of mine died of AIDS three months ago. I hate AIDS. But I canÂt hate a human being because my God never made anything ugly. Now, you can be ugly if you wanna, boy, but God didnÂt make you that way. Uh, uh.

So, I want you to light this valley up this afternoon. Martin [Luther King] said ÂAgapeÂ is understanding, creative Â a redemptive good will toward all men. Agape is an overflowing love which seeks nothing in return. And when you reach love on this level, you love all men, not because you like Âem, not because their ways appeal to you, but you love them because God loved them. And I love Jehovah my God with all my heart, with all my soul, and I love every one of you Â as I love myself.

Now, I want you to do something for me. IÂm fixinÂ to get off this stage now. I think I done my six minutes. But I want you to do something for me. I want you to hold hands. WhoeverÂs next to you, hold a hand. Come on, you Hall of Famers, hold hands. All you people out there, hold hands. Everybody hooked up? Everybody hooked up? Well then I tell you what. See, I know my brothers up here, my brothers over there Â I see some black brothers of mine and sisters out there Â I know they can sing. Can you white folks sing? I want you to sing after me:

The greatest thing Â come on everybody Â

The greatest thing in all of my life is loving you.

The greatest thing in all of my life is loving you.

The greatest thing in all of my life is loving you.

The greatest thing in all my life is loving you.

Thank you, folks. Thank you, folks. Thank you, folks. Thank you, folks. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Now, sit down. Now, sit down. I could talk to you 10 minutes longer, but I got to go to the bathroom.

DDT's New Friend

2006-09-18T15:06:00.000-05:00

Finally the World Health Organization has come around and approved the use of DDT to eradicate malaria in undeveloped countries. The WSJ has a nice editorial outlining my thoughts.

Malaria is the number one killer of pregnant women and children in Africa and among the top killers in Asia and South America. It's long been known that DDT is the cheapest and most effective way to contain the disease, which is spread by infected mosquitoes. But United Nations health agencies and others have for decades resisted employing DDT under pressure from anti-pesticide environmentalists. After tens of millions of preventable malarial deaths in these poor countries, it's nice to see WHO finally come to its senses.

The agency's malaria chief, Arata Kochi, told reporters that "one of the best tools we have against malaria is indoor residual spraying. Of the dozen or so insecticides WHO has approved as safe for house spraying, the most effective is DDT." He also said, "We must take a position based on the science and the data."

Mr. Kochi's intellectual honesty is commendable and all too rare among public health officials in this debate. For decades, the science and empirical data about DDT's effectiveness have been distorted or suppressed. Nevertheless, and Rachel Carson's scare-mongering notwithstanding, there is no evidence that DDT use in the amounts necessary to ward off malarial mosquitoes is harmful to humans, wildlife or the environment. Period.

By contrast, there's plenty of evidence -- from the U.S. and Europe to Australia, India, Sri Lanka and Brazil -- that spraying DDT is the best intervention. According to Pierre Guillet, another WHO official at Friday's press conference, South Africa temporarily stopped using DDT in 1996 because green groups were opposed, not because it wasn't working. Malaria takes a heavy toll on a country's economy by discouraging foreign investment and incapacitating otherwise productive people, so these anti-DDT alarmists have been helping to impoverish those they don't kill. There is something other-worldly, or worse, about well-heeled greens trying to deny the world's poorest people the very tool used by rich nations to eradicate this disease.

Even if WHO's decision won't change those minds, its stamp of approval on pesticide use matters in the public health world. Other organizations, ranging from the World Bank to Aid for International Development to Doctors Without Borders, look to WHO for guidance and will now likely reassess their own guidelines. The U.S. is typically the largest donor to these international agencies, and the recent efforts of Republican Senators Sam Brownback of Kansas and Tom Coburn of Oklahoma, who have called for DDT intervention and more responsible allocation of aid dollars generally, no doubt played a role in WHO's decision.

One insecticide won't end malaria, and DDT's proponents don't claim it will. But by keeping more people alive and healthy, DDT can help create the conditions for the only lasting solution, which is economic growth and development. It's encouraging that even a U.N. health agency seems to have figured that out.

Emphasis mine on my favorite sentence. Development is the malaria eradicator, not DDT, but DDT supports development.

Democrats Vs. Wal-Mart

2006-09-14T15:08:00.000-05:00

I love it when George Will really lays into something.

Liberals think their campaign against Wal-Mart is a way of introducing the subject of class into America's political argument, and they are more correct than they understand. Their campaign is liberalism as condescension. It is a philosophic repugnance toward markets, because consumer sovereignty results in the masses making messes. Liberals, aghast, see the choices Americans make with their dollars and their ballots and announce -- yes, announce -- that Americans are sorely in need of more supervision by . . . liberals.

Before they went on their bender of indignation about Wal-Mart (customers per week: 127 million), liberals had drummed McDonald's (customers per week: 175 million) out of civilized society because it is making us fat, or something. So, what next? Which preferences of ordinary Americans will liberals, in their role as national scolds, next disapprove? Baseball, hot dogs, apple pie and Chevrolet?

No. The current issue of the American Prospect, an impeccably progressive magazine, carries a full-page advertisement denouncing something responsible for "lies, deception, immorality, corruption, and widespread labor, human rights and environmental abuses" and for having brought "great hardship and despair to people and communities throughout the world."

What is this focus of evil in the modern world? North Korea? The Bush administration? Fox News Channel? No, it is Coca-Cola (number of servings to Americans of the company's products each week: 2.5 billion).

Next up is football (too violent), beer (fattening and causes drunkenness) and television (should be exercising or reading).

Consumer Choice in Health Care

2006-09-08T08:37:00.000-05:00

I've been reading, for the past 2 days, all the lefty bloggers tut-tutting about the Rand survey that studied medical care that a group of seniors was getting. Now, I admit that the results of the test were pretty damning (the patients rated their care higher than the quality it actually was). But, it still didn't sit right with me. I don't think a third party can determine what I like better than I can. Let's call this the Totino's pizza corollary. I like the $1.50 Totino's frozen pizzas better than I like the $5.99 Digiorno frozen pizza. I'm sure that in a taste test among 250 of the top pizza experts the Digiorno pizza would come out a huge winner. But for me, I like the crisp crust and the ratio of sauce to cheese on the Totino's (for those that haven't had the pleasure, Totinos doesn't have a lot of cheese). Does the fact that the experts would agree that Digiorno is better invalidate my opinion? I would argue, no.

Greg Mankiw takes my Totino's Corollary to new territory today;

What if the quality of the health care were judged not by the consumer but instead by an employee of the postal system? Or, worse, by a random member of Congress, while he was running for reelection and accepting campaign contributions from a variety of health-care providers? Yes, decision making in health care is hard, so mistakes are inevitable. But is there any reason to think that collectivized decision making is usually better than individual decision making?

Granted, my Totino's Corollary certainly makes light of educated health care opinion, but I also believe that a medical treatment that the consumer believes in has a much better chance of succeeding than one which is foisted upon them when they have very little choice in the manner. Especially a treatment that is determined by what would be a gigantic bureaucracy that kowtows to political interests.

Free to Choose in Estonia

2006-09-05T09:32:00.000-05:00

Greg Mankiw excerpts John Tierney's column about Estonia, the Baltic Tiger. I wrote a couple of papers in graduate school about the reforms that Estonia undertook and how American businesses can capitalize on those reforms. What I find most interesting is how Laar instituted the flat tax and other Friedman ideas in a formerly Soviet republic.

Earlier today I read this post on Drum's blog.

Nonetheless, we desperately need radically more attention paid to full employment policies; to labor organization in service industries; to the distributional inequities of free trade policies; to national healthcare; and to significantly more progressive taxation.

I read Drum to remember why I am not a Democrat. Everything he is advocating in that sentence is everything that Friedman, Estonia, Ireland and other success stories would strongly stand against. Estonia has a very free market and their distribution inequality is virtually nonexistent in relation to the US. Why is that? Government policies aid in making the poor poorer, not free market economic policies.

Liberal School Choice

2006-07-26T15:34:00.000-05:00

Let the schools pick the students. Anything to give more power to public bureaucrats instead of to the people.

Betts suggests this: first fund the schools equally on a per-student basis. Then distribute trade-able rights to admit highly advantaged students; and allow schools to auction those rights. Schools would then be forced to figure out how much they valued the money they were spending relative to the highly advantaged children they wanted. We don’t know what the outcome would be. At one end of the spectrum you’d have schools with high concentrations of advantage and not much money; at the other end of the spectrum high concentrations of disadvantage and loads of money. It would probably take a few years for administrators to work out what the real costs of disadvantaged children were; but they would have a powerful incentive to work it out.

I'm just about speechless.

Chicago Living Wage

2006-07-25T08:36:00.000-05:00

Cafe Hayek's Russell Roberts takes down a proposed law in Chicago. The Chicago city council has a proposal to force big box retailers (defined as more than a billion dollars in sales with stores greater than 90,000 square feet) to pay workers $10/hr plus $3 in benefits. Target and Wal-Mart have responded by suspending plans to open more stores and deciding whether to close additional stores. Mayor Daley would also like to know how the aldermen in Chicago are going to replace the 8000 lost jobs if Wal-Mart doesn't continue its expansion.

Of course, if this plays out where the "living wage" is enacted and Target and Wal-Mart leave, then we're left with the unseen effects of such a law. With no big boxes prices will gradually rise to levels seen in the non-big box retailer world. Of course, this effect will be slow and unseen, therefore no one will really complain about it. There will just be 20,000 less jobs in the greater Chicago area. But that's not what gets aldermen elected, raising people's wages with a law gets them elected. Unfortunately, this law not only won't raise anyone's wages it will end up lowering wages by having more people fighting for fewer jobs in the retail sector.

In addition, the unskilled teenagers who can't find work stocking shelves or whatever unskilled kids do at Target are not going to get any job experience. With fewer business unable to give a teenager a job because of wage standards that teenager never gets a chance to get a toehold in the labor force. How's he going to get started? What happens is the kid gets public assistance at the first opportunity, then becomes involved in the neverending circle of government dependency. This dependency is what draws him out to vote for an alderman who will raise the wages of the poor by imposing some minimum wage. The cycle starts again, relegating another generation of teenagers to government dependency.

Global Warming Skeptic

2006-07-21T15:57:00.000-05:00

Coyote Blog once again makes a coherent and unvitriolic case against global warming alarmism. Of course, to question the conventional wisdom of future doom from global warming is to be the ultimate in wingnuttery. But until climatoligists can come up with a model that works for the past 50 years, I don't necessarily believe their model for the next 100.

City Busybodies

2006-07-17T12:52:00.000-05:00

Mike Hendricks takes the city of Kansas City to task for outlawing selling gas to someone who hasn't already paid for it. It seems the city is tired of enforcing theft laws so they're putting the onus on business owners. Hendricks asks the next logical question.

Will bank lobbies be outlawed because that’s where bank robberies often occur?

Capitalism and Freedom

2006-07-17T10:02:00.000-05:00

I'll let Kevin Drum's post on public vs. private education lead off my review of "Capitalism and Freedom" by Milton Friedman.

First, there's that 8th grade reading score, which is a whopping 5.7 points (about half a grade level) below that of private schools. That's a big difference.

Second, these scores confirm a widely-reported and disturbing trend: public schools seem to do OK at the elementary level, but student scores start to drop significantly in secondary school. In this study, the delta between public and private schools dropped 6.8 points in reading and 3.5 points in math between 4th and 8th grades. If the study had been extended to 11th grade, I suspect that decline would have continued.

I don't have any answers here except for a guess: namely that the pedagogy wars don't really matter much. Phonics vs. whole word? New math vs. old? Open classrooms vs. strict discipline? Without disparaging the people who work hard trying to figure this stuff out, it seems as if practically any of these approaches can succeed or fail depending on how well they're implemented.

But what does seem to show up over and over again is the effect of concentrated poverty. Nearly everything I've read suggests that when the number of kids in poverty reaches about 50% in a school, teaching becomes nearly impossible — and that this matters much more in secondary school than in elementary school.

(First off, Drum asserts that there really isn't much of a difference between public vs. private; the portion that I selected doesn't make that clear, but I was mostly interested in the paragraphs selected. Sorry, if I misrepresent the point of Kevin's post.) Friedman addresses the point of concentrated poverty on the public schools in "Capitalism and Freedom". His policy suggestion is vouchers which allow parents to choose their child's school based on factors they deem important rather than having the state decide based on geography. Friedman argues this would alleviate some of the problems of concentrating poverty in certain schools. Of course, another reason of poverty being concentrated geographically is the state's entry into building housing for those poverty, concentrating all of the impoverished into a small geographic area. Friedman's solution to this is to give the poor cash to use how they wish. The main part of this cash would come in the form of the negative income tax, which today is called the Earned Income Tax Credit.

Friedman's writing is truly inspiring (admittedly, I am predisposed to believing in what he is writing). Above, I chose 3 policies that I believe the government has failed it's citizens; housing, education and poverty. As Friedman argues, government control in and of itself is to blame. This control has really affected other aspects of the system, for instance Housing and Urban Development affecting the education system. Whereas, giving the power to the people would not have affect the schools as much as concentrating poverty in one location.

Friedman's argument is against the concentration of power instead, to borrow from George H.W. Bush, of the thousand points of light. This week is the FDA's 100th anniversary. Friedman also takes down the idea of giving licensing function to the government, specifically the FDA and licensing of doctors. In this OC Register editorial by Satya Thallam, you can find the Friedman influence.

The FDA requires that a manufacturer of a new drug must prove both safety and effectiveness (the latter mandate added in 1962). By increasing the time and cost necessary to bring a drug to market, fewer drugs are developed, and even approved drugs forgo years of beneficial use. Fortunately, things have been improving, with the FDA now on par with the speedier approval times of similar agencies in Europe.

Economist Sam Peltzman has shown that the number of new drugs approved declined precipitously after imposition 44 years ago of the effectiveness requirement. He also showed that the proportion of inefficacious drugs didn't change in wake of the added requirement, writing that the "penalties imposed by the marketplace on sellers of ineffective drugs … left little room for improvement by a regulatory agency." His conclusion has been confirmed by other researchers.

But even if the FDA does little in the way of ensuring effectiveness, we should sing its praises for keeping us safe, right?

Noble intentions aside, any reasonable concept of safety is at best relative. The safe use of a drug is dependant on innumerable particulars, unique to the individual. By attempting to create a safety standard for something as variable as physiology, the FDA imposes onto the marketplace a rule that is at once clumsy and constricting.

Manufactured insulin may be essential to some and deadly to others. Radiation therapy and the AIDS cocktail often entail debilitating side effects. What should be the rule for considering them safe or not?

While the regulation of dosage, side effect and precautionary information helps the FDA mitigate this one-size-fits-all problem, the agency's failure to account for variation is seen in significant off-label usage, the unregulated prescription of drugs for uses other than the ones they were approved for.

Consumers are protected by a dynamic mixture of expert consultation, individual experimentation, independent and industry certification and the tort system. The FDA should be mindful of this existing system, because no one lobbies for the patients who die, or delay treatment, while waiting for a promising therapy to be approved.

The FDA's mission is ubiquitous; it affects every aspect of our lives. And so the story goes, we have the sausage- (and law-) making process to thank.

The policy prescriptions Friedman espouses in "Capitalism and Freedom" will probably never be extremely popular, but generations will read this book and be inspired by it's expression of freedom. It is a wonderful book that is as relevant today as it was in 1962.

The Wikipedia page for the book describes the impact of "Capitalism and Freedom".

The effects of Capitalism and Freedom were great yet varied in the realm of political economics. Some of Friedman's suggestions are being tested and implemented in many places, such as the flat income tax in Slovakia, a floating exchange rate which has almost fully replaced the Bretton Woods system, and school vouchers for Hurricane Katrina evacuees, to cite a few prominent examples. However, many other ideas have scarcely been considered, such as the end of licensing, and the abolition of corporate income tax (in favor of an income tax on the stock holder). Though politicians often claim that they are working towards "free trade," an idea the book supports, no one has considered taking his suggestion of phasing out all tariffs in 10 years. Nevertheless, Friedman popularized many ideas previously unknown to most outside economics. This and other works helped Milton Freedman to become a household name. The Times Literary Supplement called it "one of the most influential books published since the war." However, many of the ideas described in this book remain radical (or, according to critics, reactionary) and controversial to this day.

To see Friedman explain his theories, Radley has a link to a '60's era taxpayer subsidized television interview.

School Choice

2006-07-06T14:21:00.000-05:00

When we stop calling school choice and vouchers a satanic idea maybe we can have a real debate about it. Milton Friedman explains his revolutionary idea from 50 years ago in the linked article.

“The fundamental thing that’s wrong with our present setup of elementary and secondary schooling is that it’s a case in which the government is subsidizing a product,” he says. “If you subsidize the producers, as we do in schooling, they have every incentive to have a status quo, and a non-progressive system, because they are a monopoly.”

Friedman finds it unfair that a mother who sends her child to private school should also have to pay to educate children whose parents send them to public school — an injustice made more egregious in his view by the fact that the private school mom probably has more money and so has already paid more in taxes.

But he is just as ticked off by what he sees as the great unfairness to poor kids.

“It’s very clear that the people who suffer most in our present system are people in the slums — blacks, Hispanics, the poor, the underclass.”

When I ask him about the “achievement gap” separating low-scoring black and Latino students from better-scoring whites and Asians, he blames my “friends in the union.”

“They are running a system that maximizes the gap in performance. . . Tell me, where is the gap between the poor and rich wider than it is in schooling? A more sensible education system, one that is based on the market, would stave off the division of this country into haves and have-nots; it would make for a more egalitarian society because you’d have more equal opportunities for education.”

But how would overburdened minimum-wage workers be expected to find the time to research a slew of school options, I ask — hearing the patronizing tone of my question as it crosses my lips.

“Who’s in a better position?” Friedman asks.
...
“In the last 10 years, the amount spent per child on schooling has more than doubled after allowing for inflation. There’s been absolutely no improvement as far as I can see in the quality of education. . . .
The system you have is like a sponge. It will absorb the extra money. Because the incentives are wrong.

“Would you really rather have your automobile produced by a government agency? Do you really prefer the post office to FedEx? Why do people have this irrational attachment to a socialist system?”

Friedman says that Americans have benefited enormously from free market competition in virtually every other part of their lives. He thinks it’s a matter of time before consumers demand the same right to choose how their children’s minds will be nourished as they do in deciding what food to feed them.

Kitchen Confidential

2006-07-06T13:15:00.000-05:00

Over the past several weeks I have been enjoying "Kitchen Confidential": Adventures in the Culinary Underbelly by Anthony Bourdain. Bourdain has a show on the Travel Channel where he goes to exotic locales and eats their local fare. Fox had a sitcom last season based on this book starring Bradley Cooper, or as I refer to him, Sack Lodge. I liked that show which was a behind the scenes look at a kitchen at a fine dining restaurant. Wow, what an introduction.

The book was eminently enjoyable. There were no punches pulled by Bourdain. He describes kitchens as unbridled cruelty and pain, what I like to refer to as scraped knuckles. There is no coddling in a kitchen; slice your hand open? Stick it in ice water, wrap it up, get back on the line. Burn your hand? Shut up and get back on the line. Get your feelings hurt? Leave.

Bourdain takes several enjoyable detours through his life story, such as items for your home kitchen, how to cook like a chef, and what not to do at a restaurant; such as don't get fish on a Sunday. Bourdain's life story is rough. His early line cooking days were done as a junkie as well as copious amounts of weed and coke. Nowadays, just 7 or 8 drinks while doing a shift in the kitchen.

Bourdain tells a great story and his love of cooking shines through his surprisingly good writing, being that he's a cooking school graduate and never went to college. I'm probably the only person to put this combination together but "Kitchen Confidential" reminded me of "The Things They Carried". The way Bourdain tells story is not unlike how O'Brien tells a story. Towards the end of "Kitchen Confidential" when Bourdain is telling of how a chef he greatly admires runs a kitchen is completely unlike how he himself runs a kitchen, writes that everything the reader has read in the book before is obviously wrong. That reminded me of O'Brien's chapter explaining that it didn't matter whether a war story actually happened because it could have happened. Bourdain's explanation just struck me as being similar.

"Kitchen Confidential" was a very enjoyable read. I will probably read Bourdain's new book, "The Nasty Bits" and another book called "Heat" which has interested me on the New Releases table at Barnes & Noble. Having never worked in a restaurant before, yet loving restaurants, I enjoy the look that Bourdain gives.

Worst People in America

2006-06-22T09:28:00.000-05:00

The folks at Right Wing News (a funny title for a 'news' organization) compiled a survey of right of center bloggers, as to who are the worst people in America. They used the definition that Keith Olbermann is using for his upcoming book "The Worst Person in the World: And 119 More Strong Contenders"; "It's a euphemism for somebody who's wrong and egregiously stupid and abusing their own position."

Some interesting names on the list are Pat Robertson and Fred Phelps. So, I must conclude that Robertson and Phelps basically offend most people, not just one side of the political spectrum. The not so interesting names are Barbra Streisand, George Clooney and Natalie Maines. They're just lightweight celebrities without the power to make drastic change and, I believe, when they speak, most people take what they say with a grain of salt. Of course, the usual suspects, Hillary and Bill, Al Gore, Barbara Boxer, Howard Dean and Harry Reid are strongly represented, no real surprise there.

The people on the list that I would include are Noam Chomsky, Paul Krugman, Michael Moore, Jesse Jackson, Ted Kennedy, Cynthia McKinney, Nancy Pelosi, Jimmy Carter, Phelps and Robertson. Chuck Schumer made Honorable Mention on their list, but, he would definitely have a spot on mine. I would also throw in Dick Durbin, Ann Coulter, Michelle Malkin, Mike Nifong, Morgan Spurlock, Don Fehr, Dusty Baker, the investigator who raided Jason Grimsley's house and Dennis Hastert. Coming up with 20 is kind of hard so Baker has to be included. I don't like to pick on people because they have opinions and express them, right or wrong. The people on my list, I believe, have opinions, but express things they don't believe to further their own careers in a niche that they've carved out for themselves. Offer suggestions in comments if there's anybody I missed who should be on this list.

Bias

2006-06-20T15:23:00.000-05:00

I've been enjoying for the past couple of days the 'discussion' between Jane Galt at Asymmetrical Information and Henry Farrell at Crooked Timber about alleged bias in an Economist story. Without giving away my feelings on the issue at hand, organized labor and immigration, I enjoyed Ms. Galt's eloquent refutation of the perceived bias in the Economist article.

it's the natural human tendency to find things more believable when they agree with what you already believe. Mr Farrell, I'd suggest, simply doesn't notice it in other papers because, well, they agree with him more, and hence he finds them more believable. The Economist is no less methodologically rigorous than any other paper anyone I know has written for; indeed, it is rather more rigorous than most about things like fact-checking. The difference is that The Economist states its opinions, rather than maintaining a facade of neutrality while slanting the article so that the readers come to the same conclusion that the reporter did. This, of course, is more irritating if you happen to disagree with the analysis, but it is not measurably more "objective".

I have the same view. Fox News is nearly universally hated in the liberal blogosphere for being 'right-wing hacks', but what if they only feel that way because watching Fox News makes liberals question the story because they viscerally disagree with how the story is presented, balanced. I'm not saying that Fox News is balanced, but I definitely think it's more balanced than CBS News or CNN. Liberals just can't see the bias in CBS because they believe the stories presented.

Shelf Blogging

2006-06-19T21:00:00.000-05:00

For Father's Day, I was tasked with hanging some shelves. I'm very pleased with how they turned out. I measured, used the level, employed some power tools and now I have 3 very sturdy shelves which I can use to hold picture frames so the desk is a little less cluttered.

Inspiration for shelf blogging comes from Radley. I'm sure he'd be as proud of this as being cited in Breyer's dissent from Hudson.

North Korea Photos

2006-06-16T15:45:00.000-05:00

Every time I see photos of North Korea, I'm always amazed at the empty roads. More depressing pictures can be found here.

Bare Breast Being Broadcast Briefly

2006-06-15T13:17:00.000-05:00

If you're going to fine someone $325,000 per incident of indecency, you should probably define indecency.

The bill does not apply to cable or satellite broadcasts, and does not try to define what is indecent. The FCC says indecent material is that which contains sexual or excretory material that does not rise to the level of obscenity.

Basically this bill will ensure that what we see on network TV will be increasingly more vanilla and cable networks such as FX, Comedy Central, Bravo and TNT will be the go-to places for real comedy and drama. Next will come an FCC power grab to regulate the cable networks, because they're showing T&A all evening long.

After I saw Janet Jackson's breast on the Superbowl, I knew this would happen. I can't believe (actually I can) that people are so offended about a bare breast being broadcast briefly. Maybe I could understand a little more if it was Bea Arthur's breast instead of Janet Jackson's.

Breast-Feed or Else

2006-06-14T15:04:00.000-05:00

The New York Times yesterday ran a story explaining Tom Harkin's bill to put warning labels on cans of formula expressing the supposed virtues of breast feeding. Of course, I find this whole business utterly annoying. For the mothers of multiples, breast feeding, while not impossible, is certainly much more difficult and pretty unhealthy for the mother. In addition, several women don't produce enough milk to adequately feed their children. In any case, it's ridiculous to put a warning label extolling the supposed virtues of breast feeding on formula. Clark has more outrage at this proposed bill.

Library Lurking

2006-06-09T07:10:00.000-05:00

I can't believe reporter Carl Monday could look himself in the mirror after reporting this story. The incident happened 2 years ago and Monday just baits the poor kid who has no idea what this interview is about. Very poor journalistic ethics, but, sadly, that's the case with most of these types of investigative reporters.

1776

2006-06-01T11:48:00.000-05:00

During my vacation I read"1776" by David McCullough. I've always been more of a Revolutionary period buff than WWII or Civil War and greatly looked forward to this book. Fortunately for me, McCullough delivered a wonderful book. I'm not much of a war book reader, more of a fan of Constitutional Convention history, but the beginnings of the Revolutionary War are pretty interesting when written well.

The interesting things I learned were George Washington's relative ineptitude in early 1776 and while not a surprise, the ragtagitude of the Rebel army. It is shocking that the Rebels were able to overcome the beginning of the war and defeat the vastly superior British army and navy. The other interesting thing was the contempt the British army felt for the rebels. McCullough points out that the Americans had a higher standard of living in 1776 than any other people in the world at the time. The British could not understand why these relatively wealthy people would revolt against the king and held them in very low regard because of their rebellion.

The revolution could have very easily gone the other way, but for the, in retrospect, utter ridiculousness of the British generals deciding to sit out the winter and allowing the rebel army to take the offensive and do a surprise attack that turned the tides of the war. In late December of 1776, Washington was able to muster a master strike against the sitting British army that put them completely on the defensive. This battle forced the British to employ a new southern strategy that wasn't focused on in the book but extended the war for several years.

"1776" didn't really focus on any of the ideas of the founders that eventually found their way into the Declaration of Independence, instead focusing on tactics of the war. Nevertheless, it was an interesting and quick read, that was very fitting to read over Memorial Day weekend. Reading about how much our first soldiers suffered over the first winter campaign in American military history really puts in perspective how lucky we are to live in the greatest country in the history of the world and just how trivial many of the matters we fight about are in the grand scheme of things.

Vacation

2006-05-31T08:21:00.000-05:00

Sorry to my regular readers, I've been on vacation for the last week and neglected putting up any posts while away. I'm back now refreshed and ready for regular posting.

School Closings

2006-05-19T10:41:00.000-05:00

Some are worried about No Child Left Behind school closings. With the closings, they believe, students will struggle trying to find new schools and class sizes will increase. However, that's not the case, charter and private schools can pick up the slack, espescially with vouchers for children who have been cheated in a failing school.

A problem many charter schools have, though, is finding space to hold classes. The school from "Our School" had that problem. Well, public school closings help fill that need as well.

"If we could get the building this year, it would be awesome," said Murdock, whose plan is to open the Nia Community Public Charter School in a Baptist church annex that she expects to outgrow in three years. "I would hate to see [the school system] close down facilities and let them sit vacant when charter schools could use them."

For charter school officials, who are marking the 10th anniversary of the launch of their movement with festivities this weekend, the downsizing of the regular school system is a golden opportunity to relieve a longstanding space crunch. The District's pricey real estate market has forced many of the independently run schools to hold classes in less-than-ideal places -- community centers, church basements, warehouses, even spaces above or beneath convenience stores.

Now they are eyeing the six schools that Superintendent Clifford B. Janey wants to close, as well as space in nine other school system facilities that would be available for leasing under his plan. The school board plans a final vote June 28 on the proposal, which would eliminate 1 million square feet of space. The board has promised to shed another 2 million square feet by August 2008.

"This is the best opportunity we've had to solve the facilities problem," said Robert Cane, executive director of the advocacy organization Friends of Choice in Urban Schools (FOCUS), which is sponsoring a gathering in Anacostia Park and open houses at most city charter schools tomorrow to celebrate the anniversary of the law allowing such schools to be established in the District.

There are currently 51 D.C. charter schools, with more than 17,400 students, while the school system's enrollment has dropped from 80,000 to 58,000 over the last decade. Members of the D.C. Council and Congress have pressed the school board to lease the unneeded space to charter schools, which are spending $16 million a year on leases in the commercial real estate market.

Charter school officials have long complained about difficulties they've faced in getting hold of former public school buildings, and the closings plan could increase those tensions. A dispute already has broken out over whether federal law gives charter schools a right of first refusal on the buildings to be vacated this summer.

Political Posturing

2006-05-18T09:01:00.000-05:00

Radley's Fox column this week is about political posturing in the face of high gas prices. Politicians, typically, are pretty free market until the laws of supply and demand produce results that make their constituents jumpy. The best thing to do, of course, is let the market play out, alternative energy sources will become profitable and energy prices will go down.

The really perverse thing about all of this is that at the same time they're carrying on about high gas prices, the same politicians are talking about the importance of alternative energy and our "oil dependence." But alternative energy sources will emerge the day they become more efficient and profitable than gasoline.

So long as gas is cheap, gas will continue to be our preferred source of energy. Once gas grows scarce, and consequently more expensive, other fuel sources will become lucrative -- at which point someone will develop them, sell them, and get rich from them.

But politicians can't just sit back and let the market take its course. They need to control things. So even as they're bending over backward to keep gas artificially inexpensive (staving off market incentives to develop alternative fuels), they're giving billions of taxpayer dollars to research and development boondoggles (read: corporate welfare) to find replacements for gas. It's waste stacked on waste stacked on waste.

Brewing Up a Business

2006-05-15T14:24:00.000-05:00

I read Brewing Up a Business: Adventures in Enrepreneurship From the Founder of Dogfish Head Craft Brewery by Sam Calagione. If you live in the midwest it's doubtful you've ever heard of Dogfish Head, actually if you live on the east coast you're probably just as likely to have never heard of Dogfish Head brewery. Sam Calagione founded Dogfish Head because of his love of craft brewing and experimenting with different beer styles. Calagione likes to use nontraditional ingredients and infuse them into traditional beer styles making them his own. His brews are the premium of the premium, costing, in many cases $10/6-pack. Beers such as Immort Ale and Raison D'Etre are not really accessible to Joe Six-Pack swilling Budweiser sixers, but to beer geeks these are great flavors and interesting brews.

Anyway, Calagione tells of his experiences, failures and successes in opening his microbrewery and brewpub. It's an interesting story, expecially for someone who enjoys entrepreneurial stories, small business and most of all beer. It's like the perfect storm of stories for me. Dogfish Head Brewery would fit perfectly in the "Small Giants" book. Calagione is seeking to make the most creative brew, not necessarily the beer for the average beer drinker. Dogfish Head beer is for the beer geek and is pushing the bar for breweries nationwide.

Calagione tells a compelling and entertaining story. His management and leadership insights are fun and well reasoned, citing real situation examples that really cement ideas in your head better than many management books. "Brewing Up a Business" is a real accessible management book, much more accessible than their beer, which I've never tried. Sam if you read this send me a sixer, I'd love to try it. If you really want I'd like to have it on tap at the house. At the very least, I'll look for it on my next trip east.

Willis Shocker

2006-05-15T10:00:00.000-05:00

Bruce Willis apparently digs the Shockers.

In answer to Clark's question, I'll bet he's a fan of Blueberry Tofu.

Sutcliffe Drunk

2006-05-11T19:13:00.000-05:00

Great audio of a drunk Rick Sutcliffe (one of my favorite ex-Cubs) joining the Padres broadcast booth for an inning. Apparently Sut had hoisted a few with buddy Bill Murray before and during the game.

Liberal Litmus Test

2006-05-11T11:46:00.000-05:00

Jane Galt joins Dan Drezner in taking Atrios' liberal litmus test. When I first read this list (paraphrased here by Kevin Drum), I was opposed to most of the items immediately but was most blown away by the triviality of most of the items, they were basically feel good items for liberals with no real effects. So here goes my feelings on the items:

Undo the bankruptcy bill - No, it does help creditors and I don't see it as a huge impediment to those who really need to file for bankruptcy.
Repeal the estate tax repeal - No, basically inconsequential and I can't think of a reason why the government would feel entitled to this money, it's already been taxed once.
Increase the minimum wage and index it to the CPI - No, doesn't have the intended effects and will worsen recessions
Universal health care - Never in a million years
Increase CAFE standards - Market will increase MPG in autos
Pro-reproductive rights, getting rid of abstinence-only education, improving education about and access to contraception including the morning after pill, and supporting choice. On the last one there's probably some disagreement around the edges (parental notification, for example), but otherwise. - Kind of a broad topic, but, I wouldn't limit access to contraception, wouldn't want the government involved in sexual education in any case, and can support 'pro-reproductive rights', so NO.
Simplify and increase the progressivity of the tax code - Simplify yes, but progressivity would not be a deciding factor, flat tax is the way to go.
Kill faith-based funding. Certainly kill federal funding of anything that engages in religious discrimination. - I'd be all for getting rid of a lot of funding, so yes.
Reduce corporate giveaways. - Pretty generic, but, any subsidies and tariffs should be looked at and probably eliminated so Yes.
Have Medicare run the Medicare drug plan - Get rid of Medicare and the Medicare drug plan, No.
Force companies to stop underfunding their pensions. Change corporate bankruptcy law to put workers and retirees at the head of the line with respect to their pensions. - Worst idea ever!
Leave the states alone on issues like medical marijuana. Generally move towards "more decriminalization" of drugs, though the details complicated there too. - Yes, legalize, tax and regulate.
Paper ballots - Inconsequential, Luddite and No
Improve access to daycare and other pro-family policies. Obviously details matter. - No, no government intervention needed.
Raise the cap on wages covered by FICA taxes. - Only if that money is used to fund a private account system, otherwise no.
Marriage rights for all, which includes "gay marriage" and quicker transition to citizenship for the foreign spouses of citizens. - I'll go with a yes, but overall pretty inconsequential.

So I have 11 No's on 16 questions. I am decidedly not a liberal in Atrios' eyes. However, I received a questionnaire from Chairman Ken Mehlman of the Republican Party. I disagreed with much of the questions on that questionnaire, so I'm probably not a Republican (at least in good standing). I sure do wish there was a viable 3rd party.

The Postaffluent Society

2006-05-10T12:50:00.000-05:00

I think George Will took a wrong tack last week when he wrote about John Kenneth Galbraith's ideas and writings.

Galbraith brought to the anti-conformity chorus a special verve in depicting Americans as pathetic, passive lumps, as manipulable as clay. Americans were what modern liberalism relishes -- victims , to be treated as wards of a government run by liberals. It never seemed to occur to Galbraith and like-minded liberals that ordinary Americans might resent that depiction and might express their resentment with their votes.

Advertising, Galbraith argued, was a leading cause of America's "private affluence and public squalor." By that he meant Americans' consumerism, which produced their deplorable reluctance to surrender more of their income to taxation, trusting government to spend it wisely.

If advertising were as potent as Galbraith thought, the advent of television -- a large dose of advertising, delivered to every living room -- should have caused a sharp increase in consumption relative to savings. No such increase coincided with the arrival of television, but Galbraith, reluctant to allow empiricism to slow the flow of theory, was never a martyr to Moynihan's axiom that everyone is entitled to his own opinion but not to his own facts.

A better strategy would be to just quote Galbraith and let the reader come to their own conclusion that those ideas are bankrupt, as Robert Samuelson did today.

"Automobiles have an importance greater than the roads on which they are driven," he wrote scornfully. "Alcohol, comic books and mouthwash all bask under the superior reputation of the [private] market. Schools, judges and municipal swimming pools lie under the evil reputation of bad kings [government]." The book argued for more government spending and less private spending.

The World Is Flat

2006-05-10T08:41:00.000-05:00

Over the weekend I finished reading "The World Is Flat" by the mustache of understanding, Thomas Friedman. All jokes aside about how Friedman doesn't really understand metaphors and the fact that he's an egomaniacal starf***er, I typically enjoy Friedman's writing. I think he gets a lot of criticism because he doesn't fit neatly into the liberal/conservative worldview of the United States. Instead he has his own ideas (which I don't agree often) but he's able to present them and his support for them without denigrating others' ideas, which is increasingly rare.

In "The World is Flat", Friedman explores the triple convergence of events that has, in his words, flattened the world. The factors of production can be almost anywhere and work on almost anything. The increased use of the internet, workflow tools and standardized software packages has flattened the world because of increased collaboration between citizens of different countries. Of course, this is a giant "well, duh" but Friedman explores the causes and the effects of these changes that have occurred since he wrote "The Lexus and the Olive Tree", another good book.

I did like "The World is Flat", Friedman consolidated some thoughts I had had. But, while reading, the thing that struck me the most was the hopefulness of Friedman. There was a palpable sense of optimism in the book and that made even more enjoyable for me. Friedman explored a favorite topic of mine, how easy it is for the world's poor to plug into the global marketplace. All it takes, in many parts of the world, is an internet connection and an ebay account and you can have your own marketplace. The problem lies in government regulations and red tape that hinder an individual's ability to start their business.

I think Friedman did an excellent job at presenting the world as he sees it. And, in turn, it was fun to read. I don't think there were too many great insights from Friedman, but he did get me thinking about several ideas. If a book can get me to think, I will typically enjoy it, "The World is Flat" got me thinking and I did enjoy it.

Costa Rican Flat Tax

2006-05-06T13:31:00.000-05:00

The Costa Rican President-elect, Oscar Arias, is poised to introduce a flat tax on corporate and individual earnings. Taking a cue from the successful Eastern European countries, Arias hopes it will increase Costa Rica's competitiveness. Mary Ansastasia O'Grady had a nice editorial in yesterday's WSJ about Arias' plans.

Yet the flat tax has already proved an effective way to fight poverty in a host of developing countries. (See nearby table.) For individuals, tax evasion goes down and tax collection goes up because of better compliance. Low corporate rates attract capital, spurring economic growth and job creation. That means there is more money in government coffers to help the needy. Without a laundry list of tax exemptions and loopholes, corruption is thwarted.

Emphasis mine, this thought of reducing corruption brings to mind John McCain saying recently he would rather have a clean government than free speech, he could adopt a flat tax proposal and significantly reduce tax complexity, thereby reducing corruption. Instead he seems focused on reducing free speech.

Another benefit of a flat tax and a good way to sell it would be as an offset of runaway gas prices. From Cafe Hayek:

The average price of unleaded 87-octane gasoline in 2004 was $1.88 per gallon. Today it's about $2.93 -- so, $1.05 per gallon more today than in 2004. Thus, at $2.93 per gallon, we Americans are spending $68.3 billon more per year for gasoline than we spent in 2004. (I'm crudely assuming that this higher price of gasoline doesn't cause the quantity demanded of gasoline to fall. Of course, to the extent that this higher price does cause quantity demanded to fall, the extra amount of money we spend on gasoline per year will be lower than $68.3 billion.)

Let's put this figure in perspective: According to this just-released paper from the Cato Institute, Chris Edwards reports that the annual cost in 1995 of complying with federal-income-tax requirements was $112 billion. In 2005, this compliance cost was up to $265 billion -- $153 billion more in 2005 than in 1995. Adjusted for inflation, this compliance-cost increase is $122 billion (in 2005 dollars).

Note that in 2005 our cost of complying with federal-income-tax regulations was $53.7 billion more, in real 2005 dollars, than the extra amount we're now spending compared to 2004, on an annual basis, for gasoline.

And Congress has the gall to pontificate about the alleged unacceptability of the higher prices now charged by oil companies.

To me, it's clear that a simplified tax code with a flat rate would benefit nearly everyone, clean up some corruption and make the United States even more competitive.

Back to Costa Rica:

The traditional Latin American method of curing the condition known as scarce resources is to raise taxes. But one reason the budget is already strained is that Costa Rica's steeply progressive income tax rates for individuals have provoked skyrocketing evasion. Government estimates say 70% of taxes owed are not paid.

On the corporate side, the current rate of 30% already discourages investment. And Costa Rica's special tax-free zones for exporters need to be phased out by 2009 if the country is to remain compliant with World Trade Organization rules. Thus there are strong incentives to create a new flat tax for both individuals, to boost compliance, and for corporations, to regain competitiveness.

Introducing a flat tax is analogous to hanging out a sign that says: Open for business. Just ask Slovakia, which in 2004 adopted a flat tax for corporations and individuals of 19%. Since then it has been drawing in large amounts of capital from Western Europe and its economy is growing rapidly. After Russia implemented a 13% flat rate for individuals, evasion went down and revenues rose sharply.

Mr. Arias already understands the connection between lower corporate taxes, investment and rising living standards. He has mentioned Ireland, with its 12.5% corporate rate, as a model for Costa Rica. The Costa Rican daily La Nación reported last month that he was considering special corporate tax zones with rates below 10%. Referring to a 15% rate under discussion in Congress, La Nación reported that "Dr. Arias asserted that one cannot fool himself thinking that anyone can compete at that high tax."

That's a promising start for the debate but to be competitive Costa Rica will have to avoid a policy of limiting low flat rates to special economic zones since other flat-tax countries don't attach strings. Moreover, as Chris Edwards of the Cato Institute points out, "Carving out special tax rates and incentives for particular industries and regions is not only inefficient, it is an open invitation for corruption."

There is growing support for a flat tax from some of Costa Rica's opinion makers. An April 10 editorial in La Nación supported the idea and an important former central bank president has come out in favor of it. If Costa Rica introduces a flat tax now, it could get a jump on its Cafta neighbors in attracting investment. With its highly literate population, a flat-tax Costa Rica could easily become a prime destination for multinational investment.

A recent KPMG survey reported that the average corporate rate for the Latin American region is over 28%. That means that any Latin country that adopts a simple, low rate for the entire nation will instantaneously grant itself a vast comparative advantage. Over to you, Mr. Arias.

At this point in Latin America, any country that is pro-business is welcome. Incorporating a flat tax with competitive rates really sends the message, as O'Grady puts it, that you're open for business.

Optical Inch

2006-05-06T11:10:00.000-05:00

Hilarious ad campaign about a sensitive male issue.

Click all the links, the music video is priceless.

The longer you wait the longer your pubes get.

Denkinger

2006-05-02T11:09:00.000-05:00

Last night, while watching the Sox-Yankee game I realized that the ESPN show "Top 5 Reasons You Can't Blame.." was on and it was about Deckinger's blown call in the '85 World Series. It's clear that Orta was out at first, but that play had very little real effect in the game or should have. The Cardinals virtually self destructed after that call. I maintain that champions can overcome the adversity that comes from a bad call. The fact that the Cardinals didn't even compete after the call is evidence of the fact that the Cardinals did not deserve to win that series.

Anyway, the show was fabulous (I've seen it several times and enjoy it every time) and really brings back to my memory those great days of that World Series. And it's always good to remember that the Royals not only won that championship, but they completely demoralized the Cardinals. Also, I learned from the show of the Keith Hernandez curse. How great is that!

Bolivian Nationalization

2006-05-02T09:19:00.000-05:00

I've been thinking about Bolivia's seizure of the country's natural gas industry since I wrote about it yesterday. I didn't really give it any attention in that post because my natural reaction to nationalizing a previously private enterprise is entirely negative.

Since a country taking over a private company's assets is seen in the business world as completely negative and would affect investment in capital assets by private enterprise because without property rights that investment is basically at risk of becoming an expense. However, Ricardo's theory of comparative advantage dictates that a country should focus it's power on those industries it does best, would effectively turning off the spigot for foreign direct investment in your country and running an economy based on natural gas extraction be an advantage for Bolivia?

53% of FDI projects are extraction projects. If the state takes over those projects and lose all the rest (they haven't had any significant FDI projects in 2 years), and they trade natural gas for other products to sustain their economy, aren't they taking full advantage of their comparative advantage?

I would think my initial reaction that state control of the industry would not be beneficial for Bolivia, but I'm interested in if it could get Bolivia to (I don't know what the opposite of autarky is) complete specialization and if that would outweigh the state control (assuming, of course, a stable government).

Shocker Escort

2006-05-02T06:46:00.000-05:00

How important are Shockers to baseball? The Red Sox traded for Doug Mirabelli yesterday morning. They then chartered a jet and arranged for a police escort to get Dougie to the game on time. Not too many times has a player received a police escort to a game in May. It must be because he's a Wichita State alum.

Curse of Natural Resources

2006-05-01T13:25:00.000-05:00

Unfortunately Bolivia is going to experience the curse.

How to Make Something Worse

2006-04-28T14:38:00.000-05:00

Add Rosie!

Supply and Demand for Dummies

2006-04-28T08:56:00.000-05:00

The one-armed man (Krauthammer reminds me of the one-armed man from "The Fugitive") points to the reason gas prices are high; Supply and Demand. I'll say it again, let the pricing mechanism work.

Demand is up. China has come from nowhere to pass Japan as the number No. 2 oil consumer in the world. China and India -- between them home to eight times the U.S. population -- are industrializing and gobbling huge amounts of energy.

American demand is up because we've lived in a fool's paradise since the mid-1980s. Until then, beginning with the oil shocks in 1973, Americans had changed appliances and cars and habits and achieved astonishing energy conservation. Energy use per dollar of gross domestic product was cut by 30 percent in little over a decade. Oil prices collapsed to about $10 a barrel.

Then amnesia set in, mile-per-gallon ratings disappeared from TV ads and we became "a country of a million Walter Mittys driving 75 mph in their gas-guzzling Bushwhack-Safari sport-utility roadsters with a moose head on the hood, a country whose crude oil production has dropped 32 percent in the last 25 years but which will not drill for oil in the Arctic National Wildlife Refuge for fear of disturbing the mating habits of caribou."

I wrote that during the '96 witch hunt for price gougers. Nothing has changed. Except that since then, U.S. crude oil production has dropped an additional 12.3 percent. Which brings us to:

· Supply is down. Start with supply disruptions in Nigeria, decreased production in Iraq, and the continuing loss of 5 percent of our national refining capacity because of damage from hurricanes Katrina and Rita. Add to that the mischief of idiotic new regulations. Last year's energy bill mandates arbitrary increases in blended ethanol use that so exceed current ethanol production that it is causing gasoline shortages and therefore huge price spikes.

Why don't we import the missing ethanol? Brazil makes a ton of it, and very cheaply. Answer: the Iowa caucuses. Iowa grows corn and chooses presidents. So we have a ridiculously high 54-cent ethanol tariff and ethanol shortages.

Another regulation requires specific ("boutique") gasoline blends for different cities depending on their air quality. Nice idea. But it introduces debilitating rigidities into the gasoline supply system. If Los Angeles runs short, you cannot just move supply in from Denver. You get shortages and more price spikes.

And don't get me started on the missing supply of might-have-been American crude. Arctic and outer continental shelf oil that the politicians kill year after year would have provided us by now with a critical and totally secure supply cushion in times of tight markets.

The non-starter of reducing the ethanol tariff is probably the best thing Congress and the President can do to reduce gas prices. Of course, it will never happen, because there's important elections to be won in ethanol producing states. I don't hear any politicians calling for a halt to this tariff.

Making Beer Ever Lighter

2006-04-26T15:03:00.000-05:00

The WSJ today has a good cover story today about Anheuser Busch's strategy of making Budweiser pleasing to every palate across America. How can they do that? By making it as bland as possible. However, with regional brewers like Sam Adams, Boulevard and Anchor and niche brewers like Dogfish Head, Abita and New Belgium as well as Miller Lite eating up Bud's market share and selling more flavorful beer, AB's strategy is no longer working.

For decades, Anheuser's aim was to develop a beer that would sell across America, one inoffensive enough to appeal to the nation's varied palate.

Now, that goal is out of step with a shift in consumers' tastes. From coffee to fashion to media, niche products are rising, especially ones that consumers can customize, and the great mass brands of the postwar period are under attack. Imported brews and smaller so-called "craft" beers with stronger flavors are more readily available and are selling fast, as are wines and spirits.

Moreover, for all its devotion to consistency, Anheuser concedes Budweiser has changed over the years. It quietly tinkered with its formula to make the beer less bitter and pungent, say several former brewmasters, a byproduct of the company's desire to create a beer for the Everyman.

The question of taste has created opportunities for Anheuser's rivals and has resulted in some ferocious marketing battles. Anheuser, an industry bellwether, used to shrug off such challenges. Now, among myriad other factors, it's begun to take a toll on Anheuser's financial performance and has led beer makers to a moment of self-reflection.

Anheuser's flagship brand, Budweiser, has been losing market share for more than 15 years. Two years ago, Anheuser as a whole lost market share as its Bud Light for the first time didn't pick up the slack. In 2005, after years of confidently raising prices, the brewer decided to discount cases of beer to retain customers. The brewer's profits last year slipped 18% and its stock fell 14%.

Anheuser says the earnings decline is unrelated to the taste of its beer. It also notes that Bud Light is on average more expensive than Miller Lite, which Anheuser says is a sign of the brand's continued strength. The company, however, has also acknowledged that the discounts were designed to combat SABMiller PLC's Miller Brewing Co., which has relentlessly poked fun at Bud Light's flavor in national TV ads. In part because of the discounts, Anheuser's shipments picked up late last year. The company is expected to report first-quarter earnings today.
...
In search of new drinkers, Anheuser last year threw more than 30 new products into the market. And, in a little-noticed move Anheuser is loath to discuss, the brewer recently added more hops to its beer to make it stronger.

After World War II, marketers strived to create products that would appeal to palates across the U.S. They succeeded, and partly with the help of the interstate highway system, built an unrivaled mass-market food industry. As refrigeration became widespread, it swiftly delivered products to every corner of the country at a reasonable price.

A diverse nation learned to like the same things. As regional varieties gave way to national brands, companies embraced soft-edged, broadly appealing formulas, which gradually lightened products from cigarettes to bread. It was a winning strategy that created success stories such as ranch dressing, Maxwell House coffee and Kraft cheese. A similar strategy in Hollywood produced the mass-market situation comedy and the Hollywood blockbuster. Market research fed the trend with its relentless tendency to find the common denominator.

For a long time, consumers were satisfied. Daniel Ennis, director of the Institute for Perception in Richmond, Va., a group that analyzes consumers' flavor preferences, says every person has an "ideal" taste for a beer or potato chip or cookie. But in the real world, companies create foods consumed by millions. "People live in suboptimal situations," says Mr. Ennis, who has consulted for Miller. "They don't send their kids to the best schools, they don't have the best jobs, they don't eat the best foods."

Or drink the strongest beer. From 1950 to 2004, the amount of malt used to brew a barrel of beer in the U.S. declined by nearly 27%, and the amount of hops in a barrel of beer declined by more than half, according to Brewers Almanac. Part of that decrease is due to improvements in how brewers extract flavor from hops. Nonetheless, beer's taste became steadily lighter. (Flowers of the common hop plant, Humulus lupulus, are used as a flavoring and stability agent in beer, helping create its characteristic bitter taste and aroma.)

The beer industry measures bitterness using a scale called International Bitterness Units. The higher number of IBU's, the greater the bitterness. Over the past twenty years the IBU's of most American-style lagers has dramatically declined, from roughly 15-20 IBU's to fewer than 10 today, according to the Siebel Institute, a Chicago laboratory and brewing school that tests beer.
...
The gradual move toward lighter tastes accelerated in the mid-1970s when Miller introduced Miller Lite. Anheuser followed with Bud Light several years later. Consumer tastes, influenced by the 1980's fitness and diet craze, gravitated toward products that promised fewer calories. Brewers followed and started tweaking the flavor of their full-calorie lagers as well, according to beer executives and industry analysts.

Bud's ever-increasing lightness worked for years. But lately, consumers have started cooling on mass brands in favor of smaller, often unknown rivals. The proliferation of new media gave consumers more information about niche products. Their tastes grew more sophisticated and aspirational, spurred by an increase in overseas travel.
...
"I think you're seeing an increased consumer acceptance that bitter is a positive characteristic in beer," says Keith Lemke, vice president of the Siebel Institute.

Last year, craft beer shipments by volume grew 9% to 7.1 million barrels, according to the Brewers Association, the craft beer industry group. Beer drinkers reached for tiny brands such as Fat Squirrel Nut Brown Ale, Obsidian Stout and Dogfish Head Chicory Stout. Likewise, imported beer volume grew 7.1% to 25.6 million barrels, according to information compiled by the Beer Institute, the industry group for the big brewers.

At the same time, domestic beer volume dropped 1.2% to 178.8 million barrels. While the sales of regular American beer still dwarf those of the upstarts, the momentum is not running in its favor.

Those who know me, know that I don't drink AB products. Miller Lite is my preferred brand while golfing and Boulevard and Goose Island products make up most of my other beer drinking. A beer with an IBU of 10-20 is just not flavorful enough for me to waste my time with. I prefer a really hoppy beer, one of my favorites is called Hazed and Infused. I've felt for a long time that Anheuser Busch has ruined Americans' taste for real beer. It's nice to see an article like this that points out AB's strategy and that more flavorful beers are catching up. Mostly, though, I was just interested in a WSJ front page article about beer.

Immigration Enforcement

2006-04-26T14:42:00.000-05:00

I think Kevin Drum may be for greater enforcement of illegal immigration simply because George Bush doesn't enforce it, but I'm pretty sure he can't actually believe this.

But — there's an alternative. Don't worry so much about the workers themselves, and instead crack down on employers. If the total cost of employing illegals — i.e., actual cash wages plus fines and possible criminal charges — goes up, employers will simply decide it's cheaper and more convenient to increase the cash part of that wage equation and hire American citizens instead. And if jobs for illegal immigrants dry up, illegal immigration will dry up too.

And the best part is that it's free! Make the fines big enough and the enforcement consistent enough, and the fines pay most of the cost of the enforcement. Couple it with more generous quotas for legal immigration, and the whole "illegal" part of the immigration problem could dry up almost entirely within a few years. It's as close to a free lunch as you can get.

A free lunch does not exist when you're basically putting law enforcement on a commission. It leads to massive police corruption every time. For instance, if you're living in a community where the drug warriors get to keep your car if they find drugs in your car, the drug warriors are going to make sure they find drugs in every car. Who doesn't want a bigger budget? Red light cameras work the same way, they don't want to make the streets safer they want the revenue from the tickets. If they don't get enough revenue they quicken the yellow light so more people will run the red.

Never mind that we should remove all barriers to entry for immigrants, just document them in some way so they can pay into Social Security and the IRS and not be third class citizens with no police protection. But, the very idea that Drum would want to pay Immigration Control based on the amount of fines they can collect is the epitome of a police state. A police state is certainly not a free lunch.

Oil and Gas Windfall Profits Tax

2006-04-25T14:56:00.000-05:00

In an effort for lawmakers to get reelected Bush and the Republican congress seem to be kowtowing to Democratic demagoguery by looking at an oil windfall profits tax and looking into charges of price gouging. Once again, the economic ignorance on display by politicians is astounding. These measures will cause shortages and lines for gas. The real problem is we don't have the refining capacity to keep up with demand and the oil companies have to charge more because of the scarcity of refined gas. Without the pricing signals of the market, we will all be a party to waiting in line for gas.

As the WSJ editorial board points out today, politicians could go a long way to alleviating some of the problem.

Beyond the ethanol fiasco, the oil markets are once again providing a tutorial in supply and demand in a global commodity market. Strong economic growth from the U.S. to China is driving up demand, even as political uncertainty in oil-producing countries such as Venezuela and Iran is leading to supply worries and some speculation. The Federal Reserve has also played a role by flooding the market with dollar liquidity that has produced higher prices across all commodity markets.

Congress could help a little in the short term if it asked the Bush Administration to end the 54-cent-a-gallon tariff on imported ethanol. That would especially help drivers in coastal states suffering from spot shortages. Naturally, however, the domestic ethanol industry is threatening retribution against any Member who suggests such a thing; so much for industry gratitude.

The GOP might also refocus its attention on legislation the House passed last year to reduce the number of "boutique fuels" to six from 17. These special gasoline blends are required in different parts of the country in the name of reducing pollution. Their primary effect, however, is to raise gas prices and make it difficult to move gas around the country during shortfalls. The Environmental Protection Agency could also ease environmental rules for those parts of the country suffering shortages.

Meanwhile, we're also hearing more about the country's reliance on "foreign oil." But if Congress wants to ease that dependence, it will have to open more of the U.S. up to oil and gas exploration. Had the Senate opened up the Arctic National Wildlife Refuge to exploration when the Bush Administration requested it in 2001, some of this oil might now be joining American supplies. The same goes for natural gas drilling along the Outer Continental Shelf. Yet the very Democrats who deplore foreign supplies and shout about high prices vote again and again to block domestic oil exploration.

The last time the U.S. had a gasoline panic, in the wake of Katrina, some quick Bush Administration action and private ingenuity eased the problem in record time. Gasoline prices that had climbed above $3 a gallon quickly settled back closer to $2. Markets will make the same adjustments today if they are allowed to send price signals without Congress getting in the way. Republicans can blame business all they want for high prices, but sounding like liberal Democrats won't save them in November.

Let the markets react. With the increase in gas prices, more people will switch to more fuel economy cars, oil companies will invest in more exploration like in the oil sands of Canada, meaning more oil will be supplied while less is demanded. Longer term solutions or alternative energies will emerge if oil prices keep rising. But, lawmakers discouraging profits in energy production will only hamper efforts.

Another elephant in the room is the increasing wackiness of Venezuelan President Chavez.

Venezuela's Congress, made up entirely of Mr. Chávez's allies, is considering sharply raising taxes and royalties on foreign companies' operations in the Orinoco River basin, the country's richest oil deposit. Major oil companies like Exxon Mobil Corp. and ConocoPhillips of the U.S. and Total SA of France have invested billions of dollars there to turn the basin's characteristically tar-like oil into some 600,000 barrels a day of lighter, synthetic crude.

Mr. Chávez, a left-wing populist who favors greater state control of the economy, also wants to seize majority control of the four Orinoco projects and force private companies who run them to accept a minority stake, according to a top executive at state-run oil company Petróleos de Venezuela SA, known as PdVSA.

The moves would up the ante in Mr. Chávez's long-running battle with foreign oil companies, which he accuses of making outsize profits amid high oil prices at the expense of a poor nation. The stakes are high because Venezuela, the world's fifth-largest oil exporter, holds the world's biggest oil reserves outside the Middle East and is the third-biggest supplier of crude to the U.S.

The Orinoco plan mirrors the terms of a recent takeover by PdVSA of some 32 smaller conventional oil-production projects previously run by private companies. That effort culminated in the seizure of two fields run by Total and Italy's ENI SpA. Yesterday, Oil Minister Rafael Ramirez said Venezuela has no plans to compensate Total and ENI for the lost fields.

If the latest initiative succeeds, it would eliminate the country's remaining privately managed oil fields.

"We would like all of the [Orinoco] associations to migrate to mixed companies," said Eulogio del Pino, the executive in charge of PdVSA's relations with private companies, in an interview published Saturday in Venezuelan newspaper El Universal. Mixed company is the government's term for an enterprise in which it owns 51%.

Under terms of the government's plan, oil royalties in the Orinoco region also would rise to 30% from the current 16.7% and taxes would jump to 50% from 34%. Higher royalties translate into less revenue for private companies and taxes take a bite out of their remaining profits.

Chavez is going to suck out any profitability for the oil companies in that part of the world and Venezuela will be sitting on tough to extract oil with no partners with the ability to extract it, which, of course, leads to a more reduced supply.

I'm sure we're going to have very high gas prices over the months to come, but the market will eventually alleviate the demand and supply pressures and offer alternative solutions. Certainly government taxes and tariffs are not going to alleviate any of the price signals.

Deficit Not Debt

2006-04-24T10:26:00.000-05:00

Coyote Blog today rationally explains why the trade deficit is not a debt and should not be a cause for concern. I hope it's not too condescending for those non-economists who constantly call the trade deficit a debt.

Pension Bailout

2006-04-21T09:16:00.000-05:00

The WaPo has an interesting article today about the future insolvency of the Pension Benefit Guaranty Corporation. Many pie in the sky liberals decry the coming extinction of defined benefit pension plans as putting all of the risk of retirement on the individual. When in reality there is reduced market risk but increased political risk.

In the dynamic creative destruction of a market economy, companies which seem unassailable may in time fail, and credits which seem impeccable may in time turn out to default.

The biggest potential additional loss to the PBGC today is the threat that it would be forced to assume the liabilities of the General Motors pension fund, with constant media speculation that GM may in the end declare bankruptcy. But as the idea which became the PBGC was developed in the 1960s, it was reasonable to view GM as presenting virtually no risk.

Capitalism's creative destruction makes virtually every company's future a crapshoot. The largest of the companies with thousands of retired people receiving what was promised them (and, I would argue, the retirees have every right in the world to collect on those promises) start to sink under their own weight. When that happens the PBGC rescues the company's pension and pays out the benefits to the retirees. Of course, there's the gigantic moral hazard involved in this. If I'm a struggling company, why would I fund my pension scheme when I need to invest in R&D, a new distribution center or new technology? I won't, I'll try to save my business and let the PBGC bail me out.

Unfortunately for taxpayers the PBGC is not fully funded either. With Social Security and Medicare in fiscal trouble several years down the road, the PBGC failing will have severe implications on the American taxpayer. The only way to plan for your own retirement is to have the risk fall on your shoulders in the form of market risk. You can diversify away market risk but not political risk.

Greg Mankiw discusses this issue more on his excellent blog.

Please Tell Me What to Do

2006-04-19T14:00:00.000-05:00

William Saletan writes in today's WaPo about the war on obesity.

So we've found a new enemy: obesity. Two years ago, the U.S. government discovered that the targets of previous crusades--booze, sex, guns and cigarettes--were killing a smaller percentage of Americans than they used to. The one thing you're not allowed to do in a culture war is win it, so we searched the mortality data for the next big menace. The answer was as plain as the other chin on your face. Obesity, federal officials told us, would soon surpass tobacco as the chief cause of preventable death. They compared it to the Black Death and the Asian tsunami. They sent a team of "disease detectives" to West Virginia to investigate an obesity outbreak. Last month, Surgeon General Richard H. Carmona called obesity "the terror within" and said it would "dwarf 9/11."
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Targeting kids is a familiar way to impose morals without threatening liberties. You can have a beer or an abortion, but your daughter can't. The conservative aspect of this argument is that you're entitled, as a parent, to decide what your kids can do or buy. That's the pitch Sen. Tom Harkin (D-Iowa) made last week in a bill to crack down on junk food in schools. The liberal half of the argument is that kids are too young to make informed choices. In this case, it's true. Studies show that little kids ask for products they see on television, fail to distinguish ads from programs, and are heavily targeted by companies peddling candy, fast food and sugared cereal.

This stage of the fat war will be a rout. In schools, the audience is young and captive, and the facts are appalling. According to a government report, 75 percent of high schools, 65 percent of middle schools and 30 percent of elementary schools have contracts with "beverage"--i.e., soda--companies. The sodas are commonly sold through vending machines. The contracts stipulate how many thousands of cases each district has to buy, and they offer schools a bigger cut of the profits from soda than from juice or water. Soda companies, realizing they're going to lose this fight, are fleeing elementary schools and arguing that high-schoolers are old enough to choose. But health advocates refuse to draw such a line. They're not going to stop at kids.

To keep junk food away from adults, fat fighters will have to explain why obesity is the government's business. Some say the government created the problem by subsidizing pork, sugar, cream, high-fructose corn syrup and other crud. Harkin reasons that the government pays for school lunches and must protect this "investment." But the main argument is that obesity inflates health care costs and hurts the economy through disability and lost productivity. A few weeks ago, former president Bill Clinton, a confessed overeater, told the nation's governors that obesity has caused more than a quarter of the rise in health care costs since 1987 and threatens our economic competitiveness. It's not our dependence on foreign oil that's killing us. It's our dependence on vegetable oil.

Sometimes this crap gets depressing. I started out my morning by reading some moron claiming that because smoking bans aren't really bad for business they're a good thing and then I subject myself to reading about people limiting my food options. This health stuff really sucks because once these jerks get socialized medicine they can really claim that my love of Oreos and fried chicken should be outlawed in the interests of reducing health care expenditures.

Child Porn

2006-04-18T14:34:00.000-05:00

The Numbers Guy from the WSJ seeks out an answer for a question I often have.

Yet in a press release ahead of a recent House of Representatives hearing aimed at curbing the industry, Texas Republican Joe Barton said, "Child pornography is apparently a multibillion … my staff analysis says $20 billion-a-year business. Twenty billion dollars." Some press reports said the figure applied only to the industry's online segment. The New York Times reported, "the sexual exploitation of children on the Internet is a $20 billion industry that continues to expand in the United States and abroad," citing witnesses at the hearing.

$20 billion sure sounds like a scary number. Unfortunately, that number seems to come from the ether because no one takes responsibility for it. Then the numbers guy comes upon the stat I tried to investigate here.

This isn't the first number from the NCMEC that struck me as questionable. The group provided the estimate that one in five children is sexually solicited online, which appeared in public-service ads distributed by the Ad Council. The stat has received a fresh round of publicity thanks to donated air time from MySpace, a site popular with teens. As I wrote last year, the "one in five" estimate was based on research that was five years old which only covered children who spent time online. The survey also used a broad definition of sexual solicitation. Yet the stat persists. The NCMEC told me last July it hoped to have new research by the end of last year. Now, spokeswoman Tina Schwartz says the group expects new research to be released in the next couple of months.

These things infuriate me. They cause people to place a greater significance on online stalkers than they need to and cause people to worry about child porn a lot more than they need to. But it sure sounds scary to say a MySpace page will lead to your child being sexually assaulted.

Protectionist Fervor

2006-04-17T12:49:00.000-05:00

Sebastian Mallaby challenges conventional wisdom of a fear of China in today's WaPo.

This week's visit from Chinese President Hu Jintao will inflame two kinds of economic pessimism. The first holds that China is forcing a race to the bottom: Its legions of poor workers are driving down U.S. wages. The second claims that China is racing to the top: It's spending ever more on science and engineering. Both sorts of pessimism are only half right. Both miss the real source of U.S. economic dynamism.
...
Likewise, it's true that China is striving to catch up in science, hiring Western professors and pressing its researchers to publish in international journals. But there is no straight-line connection between scientific progress and economic advance. What matters is how companies deploy technology. Americans are good at that.
...
For one reason or another, American business excels at this. Our much-maligned education system seems to encourage people to think across categories and take risks. Our freewheeling and undeferential culture is good for interdisciplinary cooperation. And then there is the role played by U.S. business schools, which increasingly focus on the skills that make this teamwork possible.

I agree with Mallaby that China's ability to have scientific breakthroughs is not only a good thing for China, but a good thing for the US. Our comparative advantage lies in being able to implement systems to benefit from scientific advancement. Part of that knowledge comes from the free market and part comes from our entrepreneurial spirit, which in large part comes from immigrants.

Unfortunately, not everyone feels that immigrants are good for our economy, especially "illegal" immigrants. But, the illegal part is the problem. If we just made it easy and imposed no restrictions on immigration, many of the underlying social issues (health care for illegals, underground economy, no labor protections for illegals) would go away. This is an issue that cuts support for both parties, some liberals are against immigration because it allegedly lowers wages (read the commenters) for unskilled American workers and some conservatives have a problem with the illegality of illegal immigration as well as some racist tendencies. I agree with Drum's assertion and most economists that immigration benefits our economy, but not by much. The real gains are seen in future generations. In the early 1900's, the incoming Irish were seen as bad for America, but now the Irish have assimilated and greatly benefitted this country (see Ronald Reagan or if you like, the Kennedy clan). The same will be true of the Mexicans and Africans that are coming in this wave of immigration.

When we hear this continuous drumbeat of trade with China doesn't benefit us and we must stop immigrants from entering this country, it's just the natural tendency of people to be protecionist. Let's keep it straight, mercantilism is a disaster for the countries that practice it, tariffs (such as the old Hawley-Smoot tariff) drive economies into depression (as we would know if we watched Ferris Bueller). Restricting immigration is nothing different from a tariff and paying a higher price for "buying American" is nothing but a subsidy for American workers and only hurts our economy in the long run.

Let's not just take my word for it that protectionism is bad, take Jim Owens, CEO of Caterpillar, writing in today's WSJ;

Caterpillar is one of America's major manufacturers; last year alone we exported more than $9 billion in products. But we've also become a major British manufacturer, a major Brazilian manufacturer and a major Chinese manufacturer -- just to name three of the 40 countries where we have a presence. By expanding globally, we have maintained our ability to grow. We refused to concede markets to competitors and thus kept them from gaining undue strength to block our entry. When it made sense to invest for local access, we did so.

In fact, wherever Caterpillar invests, we find that our U.S. exports to these countries increase as well. Take China. Over the last few years, we have more than doubled our Chinese workforce and significantly expanded our sales there. At the same time, we have increased our U.S. exports to China by 40% -- helping to create some 5,000 new production jobs here in the U.S.

Our global footprint also gives us a natural hedge position. History shows that the world's major currencies -- dollar, euro, yen -- can move anywhere from 15% to 40% against one another in a two-year period. In our business, a good margin is five to 10 cents on the dollar. Having a fully integrated manufacturing presence in each currency zone helps protect us from these movements.

None of this is to say that operating a global business -- particularly with a U.S. manufacturing base -- is easy. There are, however, four important strategies that American manufacturers must take to compete with the world's best.

First, manufacturers must focus on designing and producing the highest-quality products incorporating the most up-to-date technology. We have to stay aggressive with our product development programs -- and ensure the goods we manufacture are desired the world over.

Second, we must continue to embrace lean manufacturing principles, increase the use of robotics and automation, and focus on just-in-time delivery. These tools will enable us to keep costs low and productivity high.

Third, manufacturers must invest in people -- providing the education and workforce training they need to help us succeed. Our international competitors will work to produce better products and adopt world-class processes -- but they cannot replicate our market size and proximity. The ideas and competitive spirit that our people bring to the workplace must be nurtured.

Fourth, manufacturing companies must believe they can compete on the world stage. We must look at globalization and international competition as an opportunity to make ourselves stronger and more efficient -- and not, as some are proposing, as a reason to turn inward.

Personally, I can think of no faster path to a worldwide recession than for the multiple engines of the global economy to turn against one another. In recent years, commodity prices have risen, and over the last two years global economic growth is as strong as most people can ever remember. Millions have been lifted out of poverty. These gains have come with the rapid rise of China and India and the recovery in Southeast Asia.

But the gains of the Asian economy have not prevented the rapid economic growth and job creation in the U.S. Inflation and interest rates are low -- business confidence is high -- and unemployment is very low. Put another way, our economy is hitting on all cylinders. And all this could easily be endangered if our policymakers implement wrongheaded protectionism -- or if American companies refuse to engage constructively with the world. The stakes have never been higher -- and the benefits of globalization have never been clearer. Trade liberalization, in the end, is a "win-win-win" proposition. It's good for U.S. manufacturers, it's good for the U.S., and it's good for the world.

The equation, needless to say, also runs in reverse. What's good for the world is good for the U.S. and for U.S. manufacturers. Look at it this way: The U.S. has only 5% of the world's population. That means 95% of potential customers are located abroad. Trade liberalization brings more and more of these people into the global economy. As their quality of life improves, they become potential consumers of the products we provide.

American manufacturing can win on the world stage. If we embrace globalization with the spirit of optimism and fierce competitiveness that has made American manufacturing great, we will ensure we stay on top of the world economy for years to come.

Caterpillar is, of course, a model of how to survive in a global world. A lesson can be learned from their innovations and from the failure of Detroit's automakers to adapt to the global market.

More Climate Change

2006-04-14T20:04:00.000-05:00

The Devil's Kitchen has more on climate change, specifically the Euston Manifesto. Clearly the Devil is fooling us so the overworld is as hot as hell. Capitalism is too successful, the left has to come up with hysteria so their beloved governments can take control of the world again instead of the market. I've said too much read the Devil.

Undercover Economist

2006-04-12T10:03:00.000-05:00

I'll let Tim Worstall provide an introduction to my review of "The Undercover Economist" by Tim Harford.

Julie Bindel in The Guardian.

My local supermarket, in a posh area of London, inadvertently offers shopping based on a sort of class apartheid. The shelves containing organic vegetables draw shoppers' attention to the free-range eggs, which in turn point to the small freezers selling a range of expensive organic ice creams placed near the array of dried fruits promising "no fat or sugar". People with children called Oscar and Chloe shop in those sections, leaving others to the shelves groaning with brightly coloured pop, sweets and own-brand tins of spaghetti hoops, where you can almost hear the mental calculations of hard-up mums worried about overspending.

"Inadvertently"? ItÂs deliberate you uneducated fool. Supermarkets will never put the organic vegetables next to the conventional ones, organic ice cream next to regular. ItÂs called price discrimination...to put it another way they donÂt actually want you, the organic shopper, to see quite how much theyÂre ripping you off for your middle-class guilt trip. That brightly coloured pop is that luminescent orange precisely so that you wonÂt buy it in preference to the vastly more expensive pastel hued one that wonÂt clash with your curtains.

In his book, Harford explores topics such as how supermarkets stack organic foods together with other higher priced items because organic items are signaling mechanism that the consumer is willing to spend more money. He also has a bit of an unhealthy interest in coffee, and pointing out my favorite point about Fair Trade coffee; if you pay producers of coffee more, more coffee producers will enter the market.

Another interesting discussion in the book is about health care. While he doesn't spell it out, Harford basically endorses HSA's. Health care consumers now have no incentive to price shop or question treatments because insurance companies will be paying for it. When given the motivation to question treatment or put a dollar value on a treatment, overall health care prices will go down. And for serious healthmaladiesladies catastrophic insurance would be necessary.

Another great aspect of the book deals with market failures called externalities. Externalities are the biggest problem people have with Capitalism and free markets. But, coupled with the discussion of externalities is discussion of government failures stemming from externalities. For instance, because I wrote about it yesterday, the minimum wage, the government is basically setting a wage floor with the minimum wage. Raising the minimum wage in the name of helping the poor, is a rather poor way of doing it because not everyone earning a minimum wage is poor and trying to support a family. In fact, raising the minimum wage would increase the household income of quite a few middle class families with teenagers working and moms and dads with a part-time job to get out of the house or to pay for painting for example. Instead, maybe focusing on increasing the payout of the Earned Income Tax Credit would be a better policy decision because only the poor receive the EITC. Raising the minimum wage has an externality of raising prices for many goods and since many union wages are tied to the minimum wage it would benefit many middle class homes and in effect hurting poor households. Harford discusses how best to work a tax to prevent congestion on roads. His idea would be to have a tracking device in your car that would charge you more for driving during rush hour and in congested areas. This in turn would reduce the externality of crowded roads. As well for polluting industries, the carbon trading system is a great success because it puts a price tag on those industries for installing carbon reducing systems.

Later in the book, after Harford has done a fine job of teaching basic economic principles, he takes on some tricky economic subjects such as why some countries are poor, globalization and why China has been a success. The answer is, of course, the government getting out of the way. In poor countries, officials are corrupt, won't enforce contracts and don't invest in infrastructure. Globalization benefits countries because of competitive advantage. China is a success story because they switched to market mechanisms away from central planning.

Read the whole book, it's very interesting and informative.

Climate of Fear

2006-04-12T09:03:00.000-05:00

Richard Lindzen writing in today's WSJ claims that the feeding frenzy over global warming is basically scientist clamoring for more Federal money. Any dissenters in the scientific community must be shouted down.

Alarm rather than genuine scientific curiosity, it appears, is essential to maintaining funding. And only the most senior scientists today can stand up against this alarmist gale, and defy the iron triangle of climate scientists, advocates and policymakers.

Read the whole thing, I'm sure there will be some blogosphere discussion of this editorial today. Always beware of scientist when they won't even allow debate, as global warming advocates do.

Minimum Wage Follies

2006-04-11T12:33:00.000-05:00

Kevin Drum read two editorials today in the LA Times about the minimum wage. Unfortunately he concludes the arguments used are the only arguments against a minimum wage and concludes:

How tired and threadbare. If this kind of juvenile flailing is the best that opponents can come up with, there truly must not be any arguments left against raising the minimum wage. So how about if we stop listening to fatuous stuff like this and just give the working poor a helping hand instead? Raising the minimum wage a buck or two is the least we can do for them.

Raising the minimum wage is the least you can do for the working poor. As in, it would do the working poor no good whatsoever as I explained here and here.

Immigrants and Entrepreneurship

2006-04-11T09:35:00.000-05:00

John Gartner, writing in today's WaPo, brings up an interesting point about immigration:

America is an amazing natural experiment -- a continent populated largely by self-selected immigrants. All these people had the get-up-and-go to pull up stakes and come here, a temperament that made them different from their friends and relatives who stayed home. Immigrants are the original venture capitalists, risking their human capital -- their lives -- on a dangerous and arduous voyage into the unknown.

Not surprisingly, given this entrepreneurial spirit, immigrants are self-employed at much higher rates than native-born people, regardless of what nation they emigrate to or from. And the rate of entrepreneurial activity in a nation is correlated with the number of immigrants it absorbs. According to a cross-national study, "The Global Entrepreneurship Monitor," conducted jointly by Babson College and the London School of Economics, the four nations with the highest per capita creation of new companies are the United States, Canada, Israel and Australia -- all nations of immigrants. New company creation per capita is a strong predictor of gross domestic product, and so the conclusion is simple: Immigrants equal national wealth.

The difference between the United States and most other countries is our entrepreneurial spirit. That spirit comes from the immigrant nature of our country, as we get further from being an immigrant, get comfortable, that spirit will subside. I would like to see a study that presents correlation between entrepreneurship and which generation of American it is. My guess is the correlation would be negative, meaning as the generation grows (2nd, 3rd, 4th) the less likely they are likely to be entrepreneurs. We need to keep bringing immigrants to this country.

Let's get the lesson of Sept. 11 right. We need to screen who gets into the United States, to keep out the suicide bombers. But if they're not here to kill us, chances are they will inject new life into our economy. In my book, I predicted that future historians will be able to date the beginning of the decline of the American empire to the day we stop being the destination of choice for immigrants. Ominously, U.S. immigration peaked in 2000. Is this the beginning of the end? I hope Osama bin Laden will not end the great American experiment.

Another aspect of 9/11 is foreign students not being granted student visas, which encourage the world's youth to come to the United States to study. Universities are having a tough time filling up slots for these science and math students because American public schools are not producing math and science candidates.

Mickelson

2006-04-10T11:35:00.000-05:00

Congratulations to Phil Mickelson for winning the Masters. Although, I think the New York Times may have gone overboard on Mickelson hatred.

De Villepin Blinks

2006-04-10T08:27:00.000-05:00

Chirac and de Villepin are withdrawing the CPE, backing down from the students and unions. This, of course, is bad news for the future of France. True, the CPE wasn't going to transform France into a bastion of capitalism, but, it was a step in the right direction. Now the French government can't even take a step in the right direction because of this "victory" by the left. Viva la France!

Kegerator Blues

2006-04-08T14:30:00.000-05:00

I love beer. I like to sit down and watch a baseball game or other shows on TV and enjoy a nice cold beer. But, I didn't like going to the liquor store all the time and having empty bottles cluttering up the place so I did what any good beer lover would do, I bought a refrigerator and converted it into a kegerator. Now, I have cold beer on tap at all times.

Unfortunately, for me, there seems to be a market failure in that liquor store's keg service is completely inadequate. Most keg buyers are one time buyers, they're buying for a party and they want Bud Light or Miller Lite or some other mass market beer. A big liquor store typically has these on hand at all times and most liquor stores will get you one in a couple of days. But, for the discerning beer drinker, such as myself who may want to buy a keg of Goose Island Hex Nut Brown Ale, keg buying is a whole world of pain in the ass.

I had an experience last fall where I called my regular keg supplier (Lukas Liquor, if you're in the KC area and care) and ordered a keg of Boulevard Nutcracker Ale (Boulevard's winter seasonal beer and a wonderful concoction at that). Lukas told me they could have it in a couple of days. I call back, after not hearing from them, a couple of days later and they tell me that they can't get that particular keg. It would have been nice if they would have called when they found this out instead of waiting for me to call, but they offered up an excuse so I ordered the aforementioned Goose Island Hex Nut Brown Ale. Same story, after several days I called and they said they couldn't get the keg. I gave them one more shot with another slightly harder to find beer and had the exact same result. I decided to go to another store, closer to my house.

Mind you, Lukas was the second liquor store I purchased from. The first, Royal Liquor, where I got my first couple of kegs, was really rude and didn't seem to care about me being a customer and they wouldn't give me my deposit back on a keg. So I went to Lukas and then to Gomer's which is somewhat closer to my house. The problem with Gomer's is they didn't really seem to care about my business either and they didn't carry too many kegs without having to order, so it was a bit of a crapshoot what kind of beer I would get from them. Plus, they were a little more expensive than Lukas.

A couple of months ago, when I went to a local brewpub, I noticed on the menu that they sold kegs of their beer. I inquired about what I needed to do and how much it would cost. It seemed reasonable so last week I called them and placed an order for one of my wife's favorite brews, 75th Street Raspberry Wheat. It took them 5 days to call me back and say it was ready, really pretty good service. So I went in last night to pick it up, but, it turns out they use a different type of tap than I have. The brewer was very kind and called a local tap distributor to see if they could sell me one and he even offered to let me borrow one of theirs. However, I didn't want to go through the trouble of dissembling my current assembly so I asked for my money back and left kegless with no real prospects except to tuck my tail between my legs and go back to Lukas.

My point is this; more people need kegerators so liquor stores can make money by providing good keg service to individuals.

Immigration Bill Stalls in Senate

2006-04-07T14:22:00.000-05:00

I'm not sure if this is a good thing or a bad thing. I'm leaning towards bad because it would have started approximately 5 million "illegals" on the road to citizenship. But, the Senate bill would have had to go to committee with the horrible House bill and certainly been made worse, so this development may make the House bill wither on the vine which is good for everyone. As I've written before, it's probably best if they do nothing at all.

Jobs Americans Won't Do

2006-04-07T10:31:00.000-05:00

The WSJ has a good editorial today making the economic case for keeping the borders as open as possible.

Our answer is that a closed economy ultimately would make America a less competitive and hence poorer country--because we'd have less human capital, and because we'd be using the human resources we did have less efficiently. Among higher-skilled and -educated workers, pulling away the U.S. welcome mat means all of that talent would go to work creating wealth and jobs in other countries.

But keeping out foreign laborers for the alleged benefit of low-skilled U.S. workers is equally short-sighted. Yes, immigrants compete for these entry-level jobs most directly with Americans who lack a high-school diploma. But the percentage of Americans between 18 and 64 without a high-school degree has been dropping relentlessly for decades, which is a good thing. Even without immigration, poorly educated Americans would still have to compete in a global economy that increasingly places a premium on skills.

In any case, most economic studies have found only a very small negative immigration impact on the wages of even the lowest-skilled American workers. Restrictionists advertise the study by Harvard's George Borjas, who found the widest impact across all income levels. But Diana Furchtgott-Roth of the Hudson Institute points out that his study assumes that immigrants and native-born workers are perfect substitutes. In the real labor world, immigrants often fill niche markets and bring varied skills.

Immigrants also increase the demand for labor, not just the supply. That is, they are also consumers who create jobs by buying goods and housing here. Former Federal Reserve Chairman Alan Greenspan often pointed out how immigration has been driving housing demand. And if immigrants really were "stealing" American jobs, we wouldn't have had the remarkable job growth of recent years.

Perhaps the biggest fallacy is that the same jobs that foreign workers now fill would exist in their absence. That's not likely to be the case. Seal the border, and what you'd see is not the same number of jobs at higher wages but, rather, fewer of these types of jobs overall in the U.S. This is certainly the case in parts of Europe, where some services (such as dry cleaning) are rare and cost a fortune.

"The biggest disruption probably would come in light manufacturing," says Dan Griswold, who follows immigration at the Cato Institute. "Our textile industry has managed to hang on to the extent that it has because North Carolina textile mills have be able to hire immigrants. The domestic carpet industry based in Georgia has managed to survive and thrive due to immigrant labor. The same holds true for meat-packing plants in the Midwest."

Eliminate the immigrant labor force and these jobs don't--presto!--start paying more to attract Americans. In a global economy, they're much more likely to disappear or move overseas as domestic employers find themselves less able to compete with foreign producers. And many of the same politicians who complained about "cheap" immigrant labor would then want to block the import of products that were once made here.

Businesses can't raise wages or prices willy-nilly without respect to the ability and willingness of consumers to pay for a good or service. The agriculture industry certainly would attract more Americans if it paid $50,000 a year to pick lettuce in the noonday sun, but not without raising the cost of food and other things. It would be more expensive to eat out, for example, and fewer people would do so as a result, affecting the restaurant industry, among others.

Unlike some of his critics, Mr. Bush appreciates the absurdity of closing off our markets to foreign labor but not to, say, foreign capital and foreign technology and foreign goods. If a company needs financing for a second plant, we don't limit its options to American sources of capital.

Immigration, legal or otherwise (I agree with Coyote Blog, that so-called illegal immigration is not illegal), is a net positive for the United States. Not only that, but I don't think, with very few exceptions, anyone is harmed by immigration. As Cafe Hayek puts it:

Would Native Americans (not native-born Americans, but American Indians) be wealthier if they had the American continent to themselves?

Would New York City (or any other city) be richer today if it had held its population to what it was in 1850? 1900? 1950? 1980? Does the inflow of people into New York lower the wages of the people already there? Does it make them poorer? Does it matter whether rich or poor people, high-skilled or low-skilled people are the ones moving into New York?

Has rural America gotten richer as fewer people have chosen to live there? Does the smaller supply of workers increase the wages and standard of living of those people still living there?

Do population increases lower America's standard of living? Would our wages be higher if we had had zero population growth over the last century? Has the population growth of the last century reduced wages or the standard of living in America? Does population growth lower our standard of living if poor people have a disproportionate share of the new births?

Has the tripling of women in the workforce over the last 50 years reduced wages or the standard of living in the United States? Would our wages or standard of living be even higher if women weren't crowding into the work force and allegedly lowering wages?

If there were a plague that killed half of the American people, would those who were left find their standard of living rise or fall? Would it depend on whether the people who lived or died were rich or poor or high-skilled or low-skilled?

My answer to all of these questions is "no." More people means more resources for the people already here. It means more trade. More specialization. More economies of scale. It doesn't matter whether they are native born or imported. (I also recognize it means potentially more congestion and more pollution depending on our public policy choices. But those aren't necessary consequences of the increase in population. The direct impact on our wages and productivity and standard of living is positive.)

Free Speech - Not Allowed

2006-04-05T13:29:00.000-05:00

The Washington Post has decided that free speech isn't really all that important, at least when that speech is used to influence elections.

These committees [527], named after the section of the tax code under which they're established, are by definition "organized and operated primarily" to influence elections. When those elections are for federal office, it makes no sense to let such groups collect six-, seven- and even eight-figure checks to elect or defeat candidates, while candidates, political parties and political action committees are limited to receiving contributions a small fraction of that size. Similarly, corporations and labor unions -- barred by law from contributing directly to federal candidates or parties -- shouldn't be allowed to write checks to 527s, which exist for the same purpose.

Unfortunately, I believe that speech meant to be political was the precise reason for this sentence:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press.

But that sentence is only from the Bill of Rights, better to disregard.

Labor Shortages in China

2006-04-04T15:05:00.000-05:00

Matt Yglesias links to a NY Times story documenting labor shortages in China, driving Chinese wages up.

Nevertheless, just as China turns out not to have an endless supply of manufacturing workers and India turns out not to have an endless supply of routine service workers, the world as a whole is not, in fact, a bottomless pit of potential low wage labor (indeed, rapidly growing China and India plus the rich countries contain most of the world's population). Plus as Chinese incomes grow, increasing numbers of people around the world will be able to make a living selling stuff to Chinese people.

Of course Yglesias' commenters knee-jerk reaction to this is "free trade bad". But, how can it be bad to raise the standard of living for millions of people while causing very little to no harm for very few? Free trade, contrary to popular belief, actually creates American jobs by, in this case, increasing the market for American goods. I wish more people understood this and became unapologetic defenders of free trade. From the NYT:

Persistent labor shortages at hundreds of Chinese factories have led experts to conclude that the economy is undergoing a profound change that will ripple through the global market for manufactured goods.

The shortage of workers is pushing up wages and swelling the ranks of the country's middle class, and it could make Chinese-made products less of a bargain worldwide. International manufacturers are already talking about moving factories to lower-cost countries like Vietnam.
...
A few years ago, "people would just show up at the door," said Liang Jian, the human resources manager at Well Brain. "Now we put up an ad looking for five people, and maybe one person shows up."

For all the complaints of factory owners, though, the situation has a silver lining for the members of the world's largest labor force. Economists say the shortages are spurring companies to improve labor conditions and to more aggressively recruit workers with incentives and benefits.

The changes also suggest that China may already be moving up the economic ladder, as workers see opportunities beyond simply being unskilled assemblers of the world's goods. Rising wages may also prompt Chinese consumers to start buying more products from other countries, helping to balance the nation's huge trade surpluses.

"The next great story in China is how they are going to move out of the lower-end stuff: the toys, textiles and sporting goods equipment," said Jonathan Anderson, an economist at UBS in Hong Kong. "They're going to do different things."

When sporadic labor shortages first appeared in late 2004, government leaders dismissed them as short-lived anomalies. But they now say the problem is likely to be a more persistent one. Experts say the shortages are arising primarily because China's economy is sizzling hot, tax cuts have helped keep people working on farms, and factories are continuing to expand even as the number of young Chinese starts to level off.

Prosperity is also moving inland, and workers who might earlier have migrated elsewhere are staying closer to home.

Keep in mind this was the free market at work, multinational companies are not exploiting workers, workers are selling their skills for an agreed upon wage. As scarcity of these workers increases, the wages go up. Also, as the workers are employed their skills increase also forcing their wages up. The free exchange of labor and capital works better than government regulation and aid ever will. When in doubt, trust capitalism!

French Economy

2006-04-04T12:24:00.000-05:00

I sure hope Kevin Drum was joking when he wrote:

Labor laws probably don't have much impact on unemployment to begin with, and France's overall economy is in pretty good shape anyway.

If there were a sarcasm font, I don't think I would be confused, but, I think Drum really believes that the French economy is in good shape. What economic evaluation is he using?

Alienated Immigrants

2006-04-04T08:45:00.000-05:00

Immigrant Fareed Zakaria who also has a very good PBS show (with the worst theme music in history) takes up the reason American immigration (legal) works and European immigration doesn't.

Many Americans have become enamored of the European approach to immigration -- perhaps without realizing it. Guest workers, penalties, sanctions and deportation are all a part of Europe's mode of dealing with immigrants. The results of this approach have been on display recently in France, where rioting migrant youths again burned cars last week. Across Europe one sees disaffected, alienated immigrants, ripe for radicalism. The immigrant communities deserve their fair share of blame for this, but there's a cycle at work. European societies exclude the immigrants, who become alienated and reject their societies.

One puzzle about post-Sept. 11 America is that it has not had a subsequent terror attack -- not even a small backpack bomb in a movie theater -- while there have been dozens in Europe. My own explanation is that American immigrant communities, even Arab and Muslim ones, are not very radicalized. (Even if such an attack does take place, the fact that 4 1/2 years have gone by without one provides some proof of this contention.) Compared with every other country in the world, America does immigration superbly. Do we really want to junk that for the French approach?

Then his take on illegal immigration:

The United States has a real problem with flows of illegal immigrants, largely from Mexico (70 percent of illegal immigrants are from that one country). But let us understand the forces at work here. "The income gap between the United States and Mexico is the largest between any two contiguous countries in the world," writes Stanford historian David Kennedy. That huge disparity is producing massive demand in the United States and massive supply from Mexico and Central America. Whenever governments try to come between these two forces -- think of drugs -- simply increasing enforcement does not work. Tighter border control is an excellent idea, but to work, it will have to be coupled with some recognition of the laws of supply and demand -- that is, it will have to include expansion of the legal immigrant pool.

And then the question of who do we want to be, a melting pot or a tossed salad.

Beyond the purely economic issue, however, there is the much deeper one that defines America -- to itself, to its immigrants and to the world. How do we want to treat those who are already in this country, working and living with us? How do we want to treat those who come in on visas or guest permits? These people must have some hope, some reasonable path to becoming Americans. Otherwise we are sending a signal that there are groups of people who are somehow unfit to be Americans, that these newcomers are not really welcome and that what we want are workers, not potential citizens. And we will end up with immigrants who have similarly cold feelings about America.

I don't typically cut and paste more than one or two paragraphs from columns I link to, but Zakaria is an excellent writer and treats issues fairly rather than try to demagogue one side or the other. It doesn't hurt that I completely agree with him on this issue. A guest worker program without a path to citizenship is like renting your house to someone. The occupant (guest worker) is going to do things by the letter of the law, but he's not going to take care of things. The guest worker is going to feel and act (rightfully) like a 3rd class citizen, which will only fuel resentment and radicalization.

It's Baseball Day

2006-04-03T11:15:00.000-05:00

Today is the best day of every year, major league baseball's opening day. Hopefully, for me, this will be the year the Indians and Cubs (without Dusty Baker) meet in the World Series. I love baseball and follow the Phillies, Brewers, Marlins, Rangers, Indians and Cubs pretty closely, but am an Indians and Cubs fan. The Royals are dead to me, but I still know quite a bit about their organization. I wrote about my defection here and here. The winners of my loyalty were the Indians, not because they gave me anything, but because they had a couple of Shockers on the team and were generally a WSU friendly team.

My predictions for the year are:
AL East: Yankees (how can you pick against Jeter)
AL Central: White Sox (they are a complete team)
AL West: A's (great rotation)
AL Wild Card: Indians

NL East: Braves (pick them until they lose)
NL Central: Astros (pretty weak all around division, Brewers will surprise)
NL West: Padres (horrible division)
NL Wild Card: Brewers

World Series:Indians vs. Brewers

Several interesting stories to watch for the year. Will Jimmy Rollins continue his hitting streak? How good is Prince Fielder? How good is Jhonny Peralta? Will the Indians put it all together this year? Will Grady Sizemore sleep with every woman in Cleveland? Will Jeter beat the hell out of A-Rod? Will Jeter continue to be the greatest player in the game or will Ortiz overtake the crown? Will the Royals lose 110? Will the White Sox win 110? Will Thome be the comeback player of the year? Will the Stank Johnsons (my fantasy team) have enough power? Will Rob Neyer disown the Royals? Will Red Sox nation be able to cope with 3rd place in the East? Will I get fired for listening to too many baseball games on the internet (14.95 for all games this season, hard deal to beat). Will Greinke get his head together this year? Will Dusty Baker ruin Zambrano's arm before he's fired? Will the Devil Rays climb out of the AL East cellar (they'll definitely be more fun to watch)? How many guys will get the dreaded 50 game suspension? Will amphetamine use be the cause of most of those 50 game suspensions (YES!)?

Baseball is, obviously, my favorite sport. Baseball provides so many stories over the course of 6 months, that it is almost impossible to be bored by a season. Even 100 loss teams can watch young players (future of the franchise) play in September. Anything is possible as of right now and I hope it does.

French Leadership

2006-03-31T09:00:00.000-06:00

Since the French Constitutional Council ruled the Contrat de Premier Embauche (CPE) was constitutional, it's now time to see how much of a leader Chirac is. He's going to do a television address tonight to discuss the unrest and hopefully outline his reasons for signing the bill. Of course the Socialists and students aren't behind CPE.

"You can be both legally right and politically wrong," Jean-Christophe Cambadelis, a Socialist Party member of parliament, said on the French television network, LCI. The Socialists had appealed the law to the constitutional court.

"It is the responsibility of the head of state to hear the growing exasperation of the country," said Bruno Julliard, head of the national student union, which has been at the forefront of the protests. "The president has the opportunity to put an end to a very damaging crisis. If he enacts the law rapidly, it will both be a sign of disdain and an irresponsible attitude."

If Chirac signs the law, the labor unions will strike again next Tuesday. Chirac must balance the short-term harm of signing the law with the long-term benefit his country will receive. Hopefully it will be a first step for more free market reforms.

Update: Chirac is going to sign the contract but weaken it with future amendments.

Chirac said the amendments would shorten to one year the period in which youths could be fired and require employers to give a reason for dismissing them.

Hey France!

2006-03-31T08:52:00.000-06:00

Hey France, they're looking at you.

Virginia Toll Roads

2006-03-30T10:05:00.000-06:00

Count Governor Tim Kaine as one who is against leasing toll roads to private enterprises, like Macquarie Bank. A familiar refrain:

"We're cutting out the middleman," Reiley said, noting that companies would build a margin of profit into their operation of the toll road. "The millions they would be making will [now] be going directly for rail to Dulles."

I think it would be reasonable to expect the state to see more money from the lease of the road than through their operation of it.

The private-sector offers carried the promise of cash payments of several hundred million dollars, immediate fixes to the highway and, in at least one case, building high-occupancy toll, or HOT, lanes.

I really think Governor Tim Kaine is missing the boat on this deal.

I'm Horrified

2006-03-29T14:37:00.000-06:00

I actually shuddered when I read this sentence:

"I would get cards back from him with just his signature - 'Randy,' " said Heather Renee Roszell, 16, who bears a striking resemblance to her "Big Unit" father.

It's bad enough that her father won't pony up the cash to support her and refuses to be a part of her life, but it's absolutely horrific that she has to go through life resembling the Unit. I hope that Willie McGee and Ron Karkovice don't have similar situations.

Kleenex Revolution

2006-03-29T12:13:00.000-06:00

I am completely amazed at the situation in France. I was looking through the pictures from the WaPo, one of them of many protesters holding a sign that read "We will never surrender", and was shocked at the sheer numbers of people. The whole thing is funny on one level, but deeply disturbing on another. France has real fiscal problems that aren't going to be solved without some GDP growth, the 1.5% a year they currently put up isn't going to cut it. There aren't enough jobs for the young as evidenced by the unemployment rate for those under age 26 being above 20%. Unemployment simply cannot be that high. Guaranteeing job contracts for those under 26 is not going to create jobs.

I'd simply like to hear a coherent argument from the protesters about why they are entitled to a job guarantee. I'm not sure I have the capability to understand their concerns. I've worked for 15 years in at-will employment as have almost all Americans, we simply can't understand guaranteed employment. Have these young people not understood economic history, their economic beliefs have never worked. I just don't get it.

France is quickly becoming irrelevant. The fact that France is in the EU could be enough to cause the Euro to fail as well as the EU. France simply will not survive without free market reform. The more socialist and protectionist they become the quicker their demise will be. It's a shame to see, I can't believe it will happen that way. But millions of people on French streets burning cars leads me to believe they don't have the capacity to instill free market reforms.

I know I have readers in France, please comment on your feelings towards these protests and your reasons for opposing the CPE. I've read explanations in the mainstream media, but, I still don't understand how the CPE can draw so much ire that the French would burn cars. It makes no sense.

The French in Denial

2006-03-28T08:46:00.000-06:00

Robert Samuelson hits on an interesting nugget in today's takedown of the French anti-work riots.

The dilemma of advanced democracies, including the United States, is that they've made more promises than they can keep. Their political commitments outstrip the economy's capacity to deliver. Sometimes the commitments were made dishonestly. Sometimes they were made sincerely based on foolish assumptions. Sometimes they've been overtaken by new circumstances. No matter. The dilemma is the same. To disavow past promises incites public furor; not to disavow them worsens the country's future problems.

Samuelson hits on the key to government programs; they never die. Government programs create constituencies of people reliant on them. After these programs have served their purpose, they're still around and no one steps up and says we don't need this program any more. The furor over that would be extreme. Worthless programs like public broadcasting, Bureau of Indian Affairs and Tennessee Valley Authority won't die even though they serve no purpose (or no purpose that the government should be obligated to pay for them). The path of least resistance for politicians is to introduce new programs that will never go away. Who's going to repeal the prescription drug benefit? Look what happened when Bush tried to change Social Security (whether he was right or wrong, the vitriol the political establishment threw up in resistance was impressive).

Speaking of obsolete, France is coming up on some difficult problems financing their welfare state.

In a recent study, the Organization for Economic Cooperation and Development (OECD) in Paris reported:

· From 1994 to 2003 unemployment among prime-age adults, from 25 to 54, averaged 9.9 percent; for those 15 to 25, the average was 24 percent.

· In 2003 French workers spent an average of 1,431 hours on the job, the third-lowest among 26 advanced countries. Italy (1,591 hours) was 11 percent higher; the United States (1,822 hours), 27 percent; and South Korea (2,390 hours, the highest), 67 percent.

· Among those 60 to 64, only about one in six have jobs. In the United States, the comparable figure is about one in two.

This cannot continue. In 2005 France's labor force was 2.7 times as large as its 65-and-over population; by 2020 it's projected to be only twice as large. A shrinking share of France's population -- already working short hours -- would pay an increasing share of the country's rising pension and health costs. In 2004 the average retirement age was 59. Average taxes are already about 50 percent of national income; effective marginal rates (the rates on additional income) can hit 60 percent. How much higher could these go without crushing work incentives? Sooner or later France will have to adopt policies that lower unemployment, lengthen work hours, raise retirement ages and cut promised benefits.

Remember these riots are about taking a guarantee from workers in their first 2 years of work. Think of the French young people as the Major League Baseball Players Association (MLBPA), because the MLBPA is the only organization in America that would strike because their contracts aren't guaranteed. Except they allow their employer several years to decide to extend a guaranteed contract. The MLBPA is the most restrictive labor union in America and they allow this sort of treatment for their workers. In short, France's work rules are more restrictive than Major League Baseball's. France Fever. Catch it!

Why U.S. Business Is Winning

2006-03-27T10:24:00.000-06:00

Sebastian Mallaby hits one out of the park this morning. He actually wrote an article praising U.S. business and got it published in a newspaper. This is almost unprecedented.

Despite all the nostalgia for the era when GM dominated the world's car industry, the heyday of American business may actually be now.

The dawn of this heyday came in 1995. In the two preceding decades, the productivity of American workers had grown more slowly than that of Japanese and European competitors. But in the decade since 1995, U.S. labor productivity growth has outstripped foreign rivals'. Meanwhile U.S. firms' return on equity -- that is, the efficiency with which they manage the capital entrusted to them -- has pulled away from that of Japan, France and Germany, according to data provided by Standard & Poor's Compustat.

Other measures tell a similar story. Up until the 1990s, management books were crammed with Japanese buzzwords, and the early Clinton administration was in awe of Germany's apprenticeship system. But today the United States provides most of the business role models, from Starbucks to Procter & Gamble, from Apple to Cisco. The (British) Financial Times publishes an annual list of the world's most respected companies. In 2004 and again in 2005, no fewer than 12 of the top 15 slots were occupied by American firms.

Or consider the database on management quality constructed by Nick Bloom and John Van Reenen of Stanford University and the London School of Economics. This duo organized a survey of 732 medium-sized American and European companies and measured their management procedures against benchmarks of best practice. The result: American firms, including the subsidiaries of American firms in Europe, are simply better managed than European rivals. In fact, superior American management accounts for more than half of the productivity gap between American and European firms.

Now comes the tribute to free and open markets one rarely sees in the mainstream media.

Whence this American superiority? The first answer is that competition is fiercer. The United States has relatively few trade and regulatory barriers for firms to hide behind, so bad companies either shape up quickly or go bust. In retailing, for example, firms such as Wal-Mart and Target have been able to spread their super-efficient logistics systems all across the country -- at least until lately, when a perverse anti-Wal-Mart campaign has sprung up. In Europe and Japan, by contrast, a web of zoning laws entangles efficient retailers, sheltering unproductive companies that overcharge consumers.

The next explanation for American superiority is a healthy indifference to first sons. Bloom and Van Reenen report that the practice of handing a family firm down from father to oldest son is five times more common in France and Britain than in the United States. Not surprisingly, this anti-meritocratic practice does not always produce good managers. So even though the best European companies are managed roughly as well as the best American ones, there's a fat tail of second-rate firms in Europe that's absent in the United States.

Competition and meritocracy cannot explain all of America's superiority, however. The U.S. economy has always had these advantages but hasn't always trounced overseas rivals. Nor is it enough to say that Americans work harder than Europeans, since the productivity numbers show that Americans are boosting what they achieve per hour. And anyone who explains America's superiority by saying that the country is more "dynamic" or "creative" is merely relabeling the mystery we're trying to solve.

The best guess about the "X factor" is that America's business culture is peculiarly well-suited to contemporary challenges. American business is not especially good at coaxing productivity out of factory workers: The era when this was all-important was the heyday of Germany and Japan. But American business excels at managing service workers and knowledge workers: at equipping these people with technology, empowering them with the right level of independence and paying for performance. So the era of decentralized "network" businesses is the American era.

Whence this American superiority? The first answer is that competition is fiercer. The United States has relatively few trade and regulatory barriers for firms to hide behind, so bad companies either shape up quickly or go bust. In retailing, for example, firms such as Wal-Mart and Target have been able to spread their super-efficient logistics systems all across the country -- at least until lately, when a perverse anti-Wal-Mart campaign has sprung up. In Europe and Japan, by contrast, a web of zoning laws entangles efficient retailers, sheltering unproductive companies that overcharge consumers.

The next explanation for American superiority is a healthy indifference to first sons. Bloom and Van Reenen report that the practice of handing a family firm down from father to oldest son is five times more common in France and Britain than in the United States. Not surprisingly, this anti-meritocratic practice does not always produce good managers. So even though the best European companies are managed roughly as well as the best American ones, there's a fat tail of second-rate firms in Europe that's absent in the United States.

Competition and meritocracy cannot explain all of America's superiority, however. The U.S. economy has always had these advantages but hasn't always trounced overseas rivals. Nor is it enough to say that Americans work harder than Europeans, since the productivity numbers show that Americans are boosting what they achieve per hour. And anyone who explains America's superiority by saying that the country is more "dynamic" or "creative" is merely relabeling the mystery we're trying to solve.

The best guess about the "X factor" is that America's business culture is peculiarly well-suited to contemporary challenges. American business is not especially good at coaxing productivity out of factory workers: The era when this was all-important was the heyday of Germany and Japan. But American business excels at managing service workers and knowledge workers: at equipping these people with technology, empowering them with the right level of independence and paying for performance. So the era of decentralized "network" businesses is the American era.

This column is so good I can forgive the one bad thought included:

And in the midst of American prosperity, rising inequality has prevented American workers from sharing in the success of American firms.

The American worker shares in the success of American firms, of course. I think the editors may have slipped that one in. Also, isn't this plagiarism? I've read this in every article about the economy since Bush took over.

Competition, meritocracy and specialization have made the U.S. the strongest business economy in the world (dare I say it, the history of the world). It's about time someone recognizes that fact.

Macquarie Bank

2006-03-26T13:35:00.000-06:00

I'm a bit of a fan of Macquarie Bank based in Australia. Bloomberg has a nice story about how Macquarie's success has spawned some competition.

``The Skyway deal has helped focus attention on the opportunities for municipalities to realize underperforming assets,'' Moss says.

Moore, 47, says competition from Wall Street firms may even help his 500-strong public works team. ``When Goldman and the other major players now go out to sell an infrastructure fund, it validates our story,'' he says. ``It makes it a lot more credible from the point of view of investors.''

Macquarie is an unusual amalgam. While it contains elements of a conventional investment bank, it also acts like a private equity operator, venture capitalist, hedge fund, mutual fund and exchange-traded fund.

``They are like an incubator; their wheelers and dealers go look for projects, then they take them on the balance sheet,'' says Jason Teh, 32, who helps manages A$5.5 billion in Australian stocks at Sydney-based Investors Mutual Ltd. ``They then consolidate all those assets and try to lift them off into a vehicle in the market.'' Investors Mutual owns no Macquarie shares.

French Road Deal

One secret of Macquarie's success was Moss's idea that he could take public works and make them profitable private companies. Macquarie's first such venture came in 1996, when the New South Wales state government called for bids to operate a new toll road.

Moss, who had been named Macquarie CEO three years earlier, and his team came up with the idea of financing the road through an initial public offering on the Australian Stock Exchange. Later that year, Macquarie set up what's now known as Macquarie Infrastructure Group, the bank's largest listed fund, with a market value of A$8.7 billion.

Macquarie has made one acquisition after another since then. The biggest: the 7.1 billion-euro ($8.4 billion) purchase of Europe's third-biggest toll road operator, Societe des Autoroutes Paris-Rhin-Rhone SA, in partnership with French construction company Eiffage SA, a deal that was cleared by the European Commission on Feb 16.

I think these deals are win-win situations. Municipalities win because they make money selling items off their balance sheet and Macquarie wins by being able to turn a profit on those assets. Clearing the balance sheet is a great unexplored, for the most part, opportunity for governments to generate revenue. Generating revenue by selling things means the government doesn't have to raise taxes. Unfortunately, governments typically increase their balance sheet assets with revenue and are not able to operate them at a profit (profit = bad , in government speak). But the absence of that profit means the investment in the asset is basically worthless.

Unfortunately also, with the new economic patriotism (see the Dubai Ports World controversy), it may be harder for Macquarie to buy U.S. assets. There was some controversy on the Indiana toll road, but in the light of the Ports deal, that controversy in the future will be about foreign ownership of infrastructure.

Immigration and Citizenship

2006-03-26T12:11:00.000-06:00

Wow, a lot of media bandwidth this week has been focusing on immigration, illegal and otherwise. Tamar Jacoby writes in today's WaPo what's needed is a path to citizenship for immigrants.

The conventional wisdom is all but unanimous, so much so that even those who hold the opposing view pay homage to it. Sure, some people dispute even the notion that we need foreign workers to keep the U.S. economy growing. But among those who recognize the necessity of a continued flow of immigrants to do dirty, unskilled jobs that educated Americans increasingly no longer want to do, the mantra goes unquestioned: What's needed is a guest worker program to deliver this labor in a timely, efficient way.

But the conventional wisdom is wrong, and as the Senate debates immigration in the weeks to come, members would do well to reexamine the assumption. The last thing the United States needs is an inflexible guest worker plan.

Count me as one who believes that a guest worker program perpetuates the problems we have with illegal immigrants; undergound economies.

The problem with the guest worker idea starts with practicality: Appealing as it sounds to some, a time-limited program will not work. The adage is true: There is nothing more permanent than a temporary worker. Many of those who come to the United States for short stints will want to stay on when their visas expire, perpetuating the underground economy that the program is supposed to eliminate.

This isn't just speculation -- look at the reality today. True enough, many young foreign workers initially come to the United States for what they think will be a short visit, and many do go home after a few years. But unlike past such workers, an increasing number are now staying on. This is partly a result of U.S. policy: Our efforts to fortify the border have made it harder for people to travel back and forth. But other, deeper forces are at work. The traditional flow of migrant farmworkers -- truly seasonal laborers, usually single men -- is giving way to a more diverse stream: both men and women, often with families, less rooted at home and more open to the lure of life in America.

Meanwhile, growing immigrant communities have made settling here a more attractive choice. Of some 11 million illegal immigrants in the United States, only 2.4 million are single men, while nearly half are couples and many have children. Legal migrants are even more rooted.

The bottom line: It won't help to bring our quotas more into line with the size of the immigrant flow if we don't also craft a policy in keeping with the way these workers behave -- and today that means accepting the reality that many will want to settle permanently in the United States.

What we want instead is immigrants who want to assimilate into U.S. society and stay in the U.S. to work. Our greatest resource is the people in this country. To boot, a diverse workforce allows us to capitalize on many opportunities because of the meshing of cultures. The melting pot aspect of America is something not found in too many countries. The melting pot comes about because of open citizenship.

But that's not all. Admitting foreign workers on a strictly temporary basis would also violate American traditions -- our democratic values and our history as a nation of immigrants -- and it would be deeply unpopular with the voting public.

The Manhattan Institute and the National Immigration Forum recently conducted a series of focus groups testing two contrasting options: a guest worker program or a more traditional immigration plan based on the idea of citizenship. The results ran sharply counter to the expectations of policymakers in Washington. Democrats and Republicans alike overwhelmingly preferred the citizenship model for reasons of both principle and practicality. It might make sense initially, these voters said, to admit workers on a provisional basis. It might also make sense to create incentives for the more transient to go home at the end of their work stints. But if they worked hard, put down roots and invested in their communities, wouldn't we want to encourage them to stay? Don't we want immigrants to assimilate? Don't we want to attract the kind of hard-working, committed folks who plan for the future and invest?

The answer is, of course, that we do. This isn't just the American way, it's also the antidote to many of our worst fears about immigration: Sojourners with no stake in the future are going to be much less likely to learn English or buy their own homes or make an effort to move up on the job.

Sure, a citizenship plan looks like a bigger gamble; like the workers, the changes that come with it will be permanent. But surely it would be better to face up to that change and shape it in a way consistent with our values. Rather than a one-size-fits-all guest worker program, we need a system that leaves room for workers to choose, welcoming those who feel they belong and who work their way up and make our country stronger as they do.

The competitive advantage of America is our ability to accept those of a different race, culture and religion. Sure we have some problems along the way, but we have mastered the melting pot better than any other country in the history of the world. Closing our borders and closing citizenship opportunities only will harm us.

Immigration and Wages

2006-03-25T16:06:00.000-06:00

Emily Messner takes up the issue of illegal immigrants depressing wages. She points to an Op-ed from last year by Sebastian Mallaby taking up the issue.

Start by knocking down the dumb arguments on both sides. It's implausible to claim that poor immigrants generally do jobs that Americans won't do. Mexicans mow all the lawns in Southern California, but it doesn't follow that largely immigrant-free suburbs in Pennsylvania are choked with waist-high grass. According to the 2000 Census, 82 percent of New York taxi drivers are foreign-born. But there are still cabs to be hailed in Detroit and Cincinnati, where more than 90 percent of taxi drivers are U.S.-born.

Then there's the opposite dumb argument: that immigrants push unemployment up. Setting aside swings in the business cycle, the level of unemployment in an economy is determined by the flexibility of the labor force, not by how many people are in it and certainly not by what passports they hold. Every economy has something called the NAIRU -- the non-accelerating-inflation rate of unemployment -- and the central bank's job is to keep the monetary taps open until the jobless rate falls to that level. If the rate falls below the NAIRU, the shortage of workers will push wages up faster than output. The resulting inflation will force the central bank to jack up interest rates, slowing the economy and halting job growth.

So if you're worried about unemployment, you have to worry about the NAIRU -- about how you create a workforce that's flexible and motivated, so companies can find people to hire at sustainable wages even when unemployment is quite low. A willingness to relocate, retrain and reinvent oneself makes for a lower NAIRU; the growth of temp agencies, which give firms an efficient way of finding workers, has reduced the NAIRU, too. Immigrants, who tend to be extremely motivated, probably drive down the overall sustainable unemployment rate. In theory, if their presence somehow renders native-born workers less motivated, immigrants could simultaneously increase unemployment in the native-born section of the workforce. But attempts to measure this demoralization suggest that it is minimal.

The serious economic question is not what immigration does to unemployment but what it does to wages, particularly for poor workers. According to the census of 1970, 63 percent of immigrants in the United States had been born in Europe or Canada and were generally well educated. By 2000, however, 48 percent had been born in Mexico, Central America or the Caribbean, and more than one-third of all immigrants had less than a high school education. While immigrants counted for only 13 percent of the working-age population in 2000, they made up over half of those with less than eight years of schooling.

Logic suggests that if you increase the supply of certain workers, their wages will go down. Harvard's George Borjas, one of the nation's top immigration economists, has found that this logic holds in practice. By grouping workers according to education and experience and measuring rates of immigration and wage trends in each category, he concludes that between 1980 and 2000 immigration reduced the average annual earnings of U.S.-born college graduates by 3.6 percent and high school graduates by 2 percent. But natives without high school education were hit harder: Their wages were reduced 7.4 percent compared to what they would have been without immigration.

That's not the end of the story, however. Berkeley's David Card, another top authority, employs a different statistical technique and gets the opposite result. He starts from the fact that different cities experience different rates of immigration, and then he looks to see whether cities with lots of low-skilled immigrants have lower wages for laborers. He finds no wage effect whatsoever. This could be because demand for these workers increases with the supply of them: A gardening company with five Mexican workers armed with fancy electric hedge-trimmers would just as soon hire eight workers and give them manual shears if eight workers were available.

This academic debate is not conclusive. Borjas argues that Card's method is flawed because an influx of immigrants into one city drives U.S.-born workers to move elsewhere, so the downward pressure on wages can be captured only in nationwide numbers. This may be right for college graduates, who operate in a national labor market. But Card may have the upper hand when it comes to understanding low-wage workers. His latest paper shows that cities with high rates of unskilled immigration have reported no offsetting shrinkage in the number of native-born laborers.

What to conclude from this? Immigration does not cause unemployment; the wage effects may well be small. And if anyone can make a conclusive argument about some other consequence of immigration, Congress might as well listen. The debate over wages is not a slam-dunk for either side. It should not determine this issue.

Immigration's effect on unemployment is negligible, immigration's effect on wages is negligible. What's the fuss about? It's an election year and it's good election politics to pick on brown people. The best thing to do is close your ears and hope the elected idiots don't pass any legislation "fixing" immigration.

Congrats to GMU

2006-03-25T15:56:00.000-06:00

I've said it many times since Bracketbusters, George Mason is the best team the Shockers have played this season,including Illinois and Michigan State. The Patriots proved it last night in a truly impressive performance (and a wretched shooting performance by the Shocks). Congratulations to George Mason, I hope you can knock off UConn and get to the Final Four.

Liberty Lost

2006-03-24T13:20:00.000-06:00

The New Hampshire Union Leader says New Hampshire is no longer the "Live free or die" state, they're the "Live free unless legislators disapprove of your behavior" state.

On Wednesday the House voted 189-154 to ban smoking in all bars and restaurants. The state already bans smoking in restaurants with 50 or more seats. But that wasn’t good enough for representatives who felt compelled to protect citizens from their own choices.

This session House members had already voted to force all pharmacists to dispense emergency contraception and to deny parents the ability to choose where their children go to school. Last year legislators required children to wear helmets while riding bicycles (the bill originated in the House). Every year legislators, usually beginning with House members, try to erode a few more of our liberties.

Tolerant Left

2006-03-24T11:08:00.000-06:00

The left appears upset about the WaPo's decision to hire a social conservative blogger. They don't believe that he should be given a voice by a prestigious newspaper. I'm sure I would disagree with quite a bit of what Domenech will write, but I don't think he should be silenced. The WaPo still will have a fairly liberal editorial page, what's the harm? The left is just a big a fan of stifling dissent as the right is.

McCarthy Center

2006-03-23T15:34:00.000-06:00

It's sad but this story almost seems plausible.

Due to a recent rash of satirical, anti-tax web sites, the state of Missouri has rushed to open a new, state-of-the-art opinion monitoring center. “It’s important that everyone who publicly expresses an opinion, especially a political opinion, disclose their name, address, telephone number, and employer to the government. We can’t have people out there saying things we don’t like unless we know who they are,” commented Missouri governor Matt Blunt.

It's too bad this stadium proposal is going to pass. While SaveOurOwners.com is good fun, I don't think many people know about it and it's very little competition for the Don't Stop Thinking About Tomorrow commercial.

Shocker Pride

2006-03-23T15:08:00.000-06:00

Wichita has gone ga-ga over it's hometown team.

Suddenly, we have something to brag about, something to look forward to, something to talk about with strangers.

We're making plans to pack ourselves into sports bars on Friday night. We're mounting flags on our porches and cars. We're fielding congratulatory calls from friends and family all over the country -- as though we had anything to do with the Shockers' success.

And those among us who two months ago couldn't have named a single member of the basketball team are surprising even ourselves with our excitement.

"I just think it's great to have something to celebrate about our city instead of the BTK thing and everyone arguing about casinos and the downtown arena," said Suzanne Drazil, a football fanatic who's never been remotely interested in basketball.

Until now.

More signs of city unity are showing up every day.

At El Patio, a Mexican restaurant at 424 E. Central, owners posted a hand-scrawled sign on a sheet of yellow construction paper.

"Go Shockers!"

At Tuesday's City Council meeting, council members dressed in WSU T-shirts and listened as spokesman Van Williams opened the meeting.

"Good morning, and go Shockers."

A portable sign outside the Centerworks Pilates Studio at First and Washington reads "Go Shocks Go."

And a giant, shockingly bright billboard above the Starbucks at Central and Rock Road congratulates the team on making the Sweet 16.

Jay Banasiak is noticing the city's collective enthusiasm.

As general manager of Wichita Transit, he decided last week to add the phrase "Go Shockers" to the LED screens mounted on the front of the city's buses.

The excitement Wichita is feeling reminds me of 2003 when the Royals got off to a great start and everyone was suddenly a fan. I could go to the mall and see Royals gear being worn by a majority of people when, normally, you rarely see someone wearing Royals gear.

I hope this becomes an annual tradition.

Hayek

2006-03-23T14:46:00.000-06:00

In honor of F.A. Hayek's death on this day 14 years ago I give youThe Road to Serfdom in cartoon form. Enjoy.

Uniformity Over Quality

2006-03-23T09:58:00.000-06:00

The Florida Supreme Court recently ruled that where the state constitution says, "uniform, efficient, safe, secure, and high quality system of free public schools that allows students to obtain a high quality education", the key word is uniform. I guess uniform is listed first.

The effect of this ruling is to send 733 children from quality private schools to failing public shools (in most cases). George Will takes this ruling down here.

The title of this post, I believe, is really well put. Striving for uniformity is not what this country should be about. However, all of us being taught the same things in public schools is exactly what we seem to be doing. At least there are 50 different state education systems. But, with the Federal government increasingly getting involved with education, those 50 systems will get increasingly similar. Then we will have uniformity, but, probably not quality. This is a case of misplaced priorities; uniformity over quality.

Globalization Woes

2006-03-22T11:21:00.000-06:00

Harold Meyerson tackles the woes of globalization in today's WP. As expected, he comes down on the protectionist side of the debate.

"The total number of current U.S. service-sector jobs that will be susceptible to offshoring in the electronic future is two to three times the total number of current manufacturing jobs (which is about 14 million)." As Blinder believes that all those manufacturing jobs are offshorable, too, the grand total of American jobs that could be bound for Bangalore or Bangladesh is somewhere between 42 million and 56 million. That doesn't mean all those jobs are going to be exported. It does mean that the Americans performing them will be in competition with people who will do the same work for a whole lot less.

The threat of globalization and the reality of de-unionization have combined to make the raise, for most Americans, a thing of the past. Between 2001 and 2004, median household income inched up by a meager 1.6 percent, even as productivity was expanding at a robust 11.7 percent. The broadly shared prosperity that characterized our economy in the three decades following World War II is now dead as a dodo.

Of course there's no discussion of the benefits; lower prices of consumer goods, increased wealth around the world etc., only discussion of the perceived bad. The New York Times recently wrote:

While 2 to 3 percent of American jobs in the field migrate to other nations each year, new jobs have thus far more than made up for the loss.

When you read an article like Meyerson's today, it's easy to be alarmed, and many people are. However, there is never any discussion of the jobs created because of globalization.

I do believe, however, that globalization has brought labor costs down in the United States. The increased competition and supply of labor drives US wages down. But, increasing labor unions will only hasten the pace of jobs leaving the country. Why would a company choose less flexibility and higher labor costs when they can choose to be flexible? Why would the US government see that as a benefit? For evidence of this decreased flexibility look at the news from GM today. Quite simply GM got bloated because of negotiations with the UAW over the years and has to cut deals to pay off the union so it can compete. Never mind GM's underfunded pensions and healthcare, they simply can't afford to pay all these benefits to their workers and the union only stifles their ability to be flexible.

More Fair Trade Coffee

2006-03-20T13:20:00.000-06:00

The New York Times piles on on Fair Trade goods.

TransFair USA and 19 similar nonprofit agencies in other countries collect licensing fees on each product that uses the Fair Trade label. All of them answer to an umbrella group, the Fairtrade Labelling Organizations International, based in Bonn, which also monitors the farmers and assesses fees for fair trade participation.

TransFair describes its logo fees as amounting to just pennies on the pound. The pennies add up. Last year, it generated $1.89 million in licensing fees from companies that used the logo. It also spent $1.7 million on salaries, travel, conferences and publications for the 40-employee organization.

Some critics find such expenses excessive. "Farmers often receive very little," said Lawrence Solomon, managing director of the Energy Probe Research Foundation, a Canadian firm that analyzes trade and consumer issues. "Often fair trade is sold at a premium, but the entire premium goes to the middlemen."
...
The coffee farmer who produced the one-pound bag of coffee purchased by Mr. Terman received $1.26, higher than the commodity rate of $1.10. But whether Mr. Terman paid $10 or $6 for that fair trade coffee, the farmer gets the same $1.26.

"There is no reason why fair trade should cost astronomically more than traditional products," Nicole Chettero, a spokeswoman for TransFair USA, said. "We truly believe that the market will work itself out as Fair Trade certified products move from being a niche market to a mainstream option. As the demand and volume of Fair Trade certified products increase, retailers will naturally start to drop prices to remain competitive."
...
Each fair trade commodity has its own fair trade price, or the lowest price farmers will receive even if conventional commodity prices fall. That price is meant to allow them to cover their cost of production and improve their lives — by, for instance, providing money to be invested in their farms and in schools.

Yet a price that is fair in one country may not be in another. In Brazil, "$1.26 per pound for coffee is a fortune," said Kevin Knox, a coffee consultant in Boulder, Colo. "In the forest in the mountains of Mexico, the money barely is enough to justify doing it. Their yields are small, and the costs of production are higher."

In some cases, the individual farmers may receive less than fair trade rules require because the money goes to cooperatives, which have their own directors who decide how much to pass on to farmers.

"We did a breakdown and saw that sometimes, what they're paying farmers is only 70 cents to 80 cents a pound" for coffee instead of the entire fair trade price of $1.26, said Christy Thorns, a buyer at Allegro Coffee, a roaster in Thornton, Colo., that is owned by Whole Foods. "There are so many layers involved."

Transfair, she said, doesn't "clearly communicate that to consumers."

I've pointed out the unfairness of Transfair's licensing system and the uncompetitive prices of Fair Trade. Now the NYT points out that the farmers don't necessarily get the higher commodity price the Fair Trade certification supposedly guarantees them. The profits still go mostly to the middlemen. So what makes Fair Trade different or better than other coffees? Nothing.

Hat Tip to Cafe Hayek which has more Fair Trade analysis.

Argentinian beef

2006-03-20T09:53:00.000-06:00

I read about this economically unsound (Cafe Hayek has the economics) idea put forth by the leftist Argentinian President last week. Eat less beef to curb inflation. It reminds me of Fidel Castro calling for Cubans to spend their vacation time chopping sugar cane. Leftist economics always turns out this way; rationing to keep the economy in check.

Anyway, this struck me as funny because my old business partner spent a summer in Argentina a couple of years ago. When he got back reported to me about how much beef they ate in Argentina. Beef for breakfast, lunch and dinner. Now the President wants Argentinians to eat less beef. I just don't think that will work.

Sweet 16 Shox

2006-03-20T08:53:00.000-06:00

It sure did look an awful lot like WSU was the 2 seed and Tennessee was the 7. The Shockers cruised to a victory against the Vols. My favorite player PJ Couisinard dropped 20 and was a real disruptive force, as always, defensively.

Next up is George Mason, probably the best team we've played this year (and that includes Illinois and Michigan State). I think it's imperative we don't look at that 11 seed and assume they're overmatched. Also, it was nice to hear Nantz and Packer eating a little crow on Sunday.

Clark at ZkyWords has all the Shocker coverage.

States Win Suit to Stop New EPA Standards

2006-03-17T15:37:00.000-06:00

I was thrown off for a minute when I read this. It turns out I read it right, I'm on Spitzer's side, Which is quite weird because of this. The typical environmental fascist nonsense is included in the article as a bonus.

Shockers Win

2006-03-17T08:22:00.000-06:00

As expected, the Shockers won their first tourney game since 1981. Unexpectedly, it wasn't much of a game. Seton Hall could do nothing to stop a very effective inside-outside game and WSU's shooting was superb. I'm not sure this game validates the Valley receiving 4 bids, since I think most, except for the most jaded, would acknowledge that WSU deserved to be in the tourney. What the Missouri Valley needs is a Southern Illinois or Northern Iowa win. A Wichita State win over Tennessee will give the Valley and WSU some much needed prestige.

Income Inequality

2006-03-15T08:48:00.000-06:00

Steven Pearlstein of the WP tackles the non-issue of income inequality. He started off with some good fundamental free market analysis.

The factors responsible for the inequality -- the new technology, increased trade and immigration, deregulation, deunionization, the relentless focus on "shareholder value" -- are also the ones that have produced big gains in productivity and job growth and restored the United States as the world's most competitive economy.

Then quickly devolves into a familiar mantra.

The classic redistribution scheme would be to raise taxes on the top 10 percent of income earners, roughly those with household incomes above $125,000, who have captured the lion's share of the benefits of economic growth. The money could then be directed to the poor and middle class, whose incomes have been flat, in the form of tax cuts and increased government benefits and services.

Then Pearlstein hits a nugget that I really like.

And while Democrats love to demagogue on the reduced 15 percent rate for capital gains and dividends, they've never really made a credible case for why capital income should be taxed twice.

You know why they've never made a good case for why it should be taxed twice? Because it shouldn't. It's fundamentally unfair and provides disincentives for corporations to distribute earnings to shareholders via dividends. Then those earnings in the corporate coffers go towards growth and acquisitions, which aren't fundamentally bad, but, growth and acquisitions create the huge corporations some people (those who worry most about income inequality) love to rail against.

This is a point I though about while reading "Small Giants". The companies weren't corporations and didn't have the strong incentive to grow. Instead they could distribute their earnings as they saw fit, either as salary y for themselves or charitable work or give it to the employees. Corporations, on the other hand, have investors who are seeking a return on their investment. Since dividends are taxed every time they're distributed, investors want the company to reinvest in itself to create growth which, theoretically, produces an increased stock price. Sure, the capital gains are taxed, but, an investor has a little more discretion as to when he/she wants to take that tax hit.

In short, when Democrats argue for increasing the tax rate on dividends and capital gains, they are contributing to the perceived problem of income inequality.

Pearlstein is doing a chat today at 11 am ET on the issue of income inequality. I'll be interested to see if anybody brings up these points, or more likely, if he'll choose to select a question in this realm.

Small Giants

2006-03-13T15:16:00.000-06:00

If you've ever seen "Spanglish" with Adam Sandler, you'd know what the subject of "Small Giants" by Bo Burlingham is. In "Spanglish" Sandler was a chef and restaraunteur. After he was reviewed by the NYT and got 4 stars and called the greatest chef in America, he was worried about what would become of his restaurant. All of a sudden he was booked for 3 months and he schemed to stay 'neighborhood'. The 'neighborhood' feeling is what "Small Giants" is all about.

"Small Giants" profiles 14 small private companies that have foregone growth opportunities to maintain a manageability and 'neighborhood' feeling that agrees with the owners and employees. The companies ranged from a brewery, Anchor Steam, all the way to a records storage company, Citi Storage. Not much bound these 14 companies together except for their strong cultures, values and happiness factors instilled by their owners and employees.

Burlingham's criteria for selecting these companies was that they made a conscious choice to forego growth and increased riches by going public. As part of foregoing growth and riches they made decisions about which customers they wanted and which suppliers they wanted to deal with. I tried (and failed) to make a point last week about these companies' values and the government's assault on companies having values. These free association values are a big part of what makes these companies special and what makes customers and employees, as well as the general public, love these companies. The main common thread with the small giants was their involvement with the community in areas they were concerned about or as we called it in school, strategic philanthropy. One of the giants even matched donations dollar for dollar, no matter what the donation was for. Some of these donations were for causes the owner didn't agree with, but he felt who was he to decide what a good cause was, if the employee thought it worthy, that was good enough.

I enjoyed this book much more than I thought I was going to. I was initially intrigued because I wanted to read about the Anchor Brewery, but I found Citi Storage to be just as intriguing. I learned quite a bit about the different management styles and how they work within a culture, this would have been a great book to read for my Leadership and Motivation class last year. As the weeks go by I anticipate posting a couple of more times about some of the issues in this book. I highly recommend "Small Giants" to anyone interested in management, entrepreneurship or corporate social responsibility.

Shockers and Pirates

2006-03-13T12:31:00.000-06:00

As expected, the Shockers got the 7 seed in the NCAA Tourney. Unexpectedly, Seton Hall gets in with a 10 (and Cincinatti is out). Not a bad matchup for the Shox, getting a team that most recently lost to Rutgers and should probably not be in the tournament. From what I've read this morning, Seton Hall is a good rebounding team and good defensive team, basically a mirror image of the Shockers. They're probably a little bigger and more athletic than the Shockers.

Wichita and Seton Hall have a small basketball connection. A high school classmate of mine at Wichita East, Adrian Griffin, played basketball at Seton Hall and later went on to play in the NBA. So, I followed Seton Hall for several years so I could watch Adrian play. I think they were in the Final Four the year Adrian graduated from high school and that was the impetus for him to move from Wichita to New Jersey. I know he was recruited by the Chicken Hawks of Kansas as well as other Big 8 schools. Anyway, this week I'm no longer hoping that Seton Hall does well.

Nantz-Packer

2006-03-13T09:16:00.000-06:00

What a hissyfit Jim Nantz and Billy Packer threw during the CBS bracket telecast. According to Nantz-Packer, the Missouri Valley didn't deserve 4 teams in the tourney, when in reality they deserved 5 a lot more than they deserved 3. Air Force's inclusion left out Hofstra and Missouri State, both deserving teams, Missouri State even more so than Hofstra. ESPN analyst Pat Forde has some criticisms for their arguments.

The committee gave those conferences their chance (although the MVC will argue that Missouri State got hosed, earning distinction as the highest RPI team ever excluded; and the CAA will cry foul on behalf of Hofstra). But giving the little guys unprecedented access to the Big Dance led to a big backlash from the big network that writes the big check to the NCAA (not to mention other TV analysts who questioned whether the best 34 at-large teams were selected for the tournament field).

At least two of the complaints voiced by Nantz-Packer are poorly reasoned:

# That by giving four bids to the Missouri Valley and four to the Atlantic Coast Conference, the committee is saying the leagues are equal.

Clearly, by giving three top-four seeds to ACC teams and no top-six seeds to Valley teams, that's not what the committee is saying. The ACC is better at the top than the Valley, and everyone knows it. But the committee did say that the Valley's third and fourth teams are better than the ACC's fifth and sixth.

# Past NCAA performance by teams from power conferences dwarfs that of teams from leagues like the Valley, and should be kept in mind when issuing bids.

It's abundantly clear that teams from the ACC, Big East, Big Ten, Big 12, Pac-10 and SEC have done better than teams from the Valley, Colonial and other allegedly lesser leagues. But what Nantz and Packer left out was the fact that the best teams from those leagues always start out with higher seeds and weaker opponents.

Sure, the last six Valley entrants in the NCAAs have only won one game. They've also been seeded seventh, 10th, 14th, ninth, 11th and sixth in that time. Valley teams went 1-1 in games where it had the higher seed during that three-year span, and every loss was by single digits. If Southern Illinois losing by a point in 2003 as a No. 11 seed and by a point in '04 as a 9-seed reflects poorly on the Missouri Valley, that's a fairly merciless standard to apply.

And if Nantz-Packer had gone back to 2002, they'd see that the Valley went a combined 3-2 in the dance with teams coming from No. 11 and No. 12 seedings. (All three victories came against higher-seeded teams from power conferences, by the way.)

A metric I'd like to see is how the BCS conference schools have fared when they're seeded 8 and above. What Nantz-Packer did on that show was ludicrous and not unlike what my 1 year old daughters do when you take away their Cheeto's.

Save Our Owners

2006-03-10T15:57:00.000-06:00

Onion-esque website that jeers KC sports team's owners. My favorite headline "Downtown Ballparks Cause Cancer".