Wednesday, June 23, 2010

The 'Paralyzing Principle' -


Review & Outlook: The 'Paralyzing Principle' -


The Gulf oil spill is having all sorts of nasty consequences well beyond damage to the regional environment and economy. Not least, the resulting political panic seems to be rehabilitating the thoroughly discredited theory of regulation known as the precautionary principle.

This principle holds that government should attempt to prevent any risk—regardless of the costs involved, however minor the benefits and even without understanding what those risks really are.

[Obama White House regulatory czar] Cass Sunstein's insight is that there are risks on all sides of a question—doing nothing can be dangerous, but acting might be more dangerous—so the only rational way to judge regulation is to quantify the costs and benefits. If the Food and Drug Administration took a harder line in approving new medicines, it might protect the public from a future thalidomide disaster. But it could also deprive the public of cures for disease or expose it to serious peril, like having no recourse in a pandemic.

In a 2002 book, Mr. Sunstein pointed out that the best way to prevent automobile pollution would be to eliminate the internal combustion engine. Should the EPA ban that too? "If these would be ridiculous conclusions—as I think they would be—it is because the costs of the bans would dwarf the benefits. Pollution prevention is not worthwhile as such; it is worthwhile when it is better, all things considered, than the alternatives."




Wednesday, June 16, 2010

David Souter vs. the Constitution -

This historical example illustrates that law should mean what it says, not what some justices think it should say or mean.  If a law is outdated, than we should change it, not just impose “new realities” thru judicial dictat.


John McGinnis and Michael Rappaport: David Souter vs. the Constitution -


The former justice's logic would justify Plessy v. Ferguson.

At the recent Harvard commencement, retired Supreme Court Justice David Souter attacked what he regards as the "simplistic" model of giving the Constitution a "fair reading." A judge, he said, must determine which of the conflicting constitutional values should become our fundamental law by taking account of new social realities. His remarks were a thinly veiled assault on those who think the Constitution should be interpreted according to its original meaning.

Justice Souter actually provided a primer on how not to be a judge. He made up a Constitution that never was to justify a kind of judicial power that was never intended.

We should reflect on the great suffering and injustice that a failure to follow the original meaning of the 14th and 15th Amendments caused to so many for almost a century. While we believe that an originalist reading of the Constitution also supports Brown, the salient point here is that Brown would not have had such central importance had the Reconstruction-era amendments been enforced according to their original meaning. The greater economic and voting power that enforcement would have ensured would likely have prevented the caste system of public education in the South.

Justice Souter recognizes that his method of interpreting the Constitution is indeterminate, but he argues that it is necessary to put our trust in justices to reach just results. The historical reality is that this interpretive method permitted justices to create a Constitution of their own contrivance in the service of injustice.




Tuesday, June 15, 2010

Obama's Political Oil Fund -

Obama's Political Oil Fund -

The BP oil spill is already a calamity for the Gulf Coast ecosystem and economy, but now that Washington is looking to deflect all political blame it could also became a disaster for the rule of law. Exhibit C is the new White House demand that BP pay into an escrow account controlled by government to pay for the economic costs of the spill.

The idea is for BP to turn its assets over to a fund administered by an "independent" trustee who would decide what are legitimate damage claims from Gulf residents and businesses.

The White House knows it has no legal authority to demand such a corporate ATM card, but it is counting on public anger to coerce BP to go along. The White House also knows BP is currently operating under the Oil Pollution Act, a piece of legislation passed in 1990 by a Democratic Congress.

The bill made polluting oil companies responsible for all containment and clean-up costs. The law also established a claims process, which requires that companies compensate businesses or individuals harmed by oil spills.

BP has more than 600 claims personnel working to pay fishermen and others that have suffered economic damage. It has vowed to pay all "legitimate" claims and has worked through 20,000 of 42,000 submitted so far…

By contrast, a government-administered fund more or less guarantees a more politicized payment process. The escrow administrator will be chosen by the White House, and as such would be influenced by the Administration's political goals. Those goals would include payments to those harmed by the Administration's own six-month deep water drilling ban. That reckless policy will soon put thousands of Gulf Coast residents out of work, but the White House knows that BP isn't liable under current law for those claims. The escrow account is an attempt to tap BP's funds by other means to pay the costs of Mr. Obama's own policy blunder.

Offshore drilling, even in shallow water, is coming to a stop as the entire industry considers the additional political risks of operating amid a political panic in which even the President of United States seems oblivious to the rule of law. We hope BP resists Mr. Obama's demands to put a political actor in control of its Gulf payments—both for the sake of legitimate Gulf claims, and to vindicate the U.S. as a nation that doesn't discard the law for the sake of political retribution.



Thursday, June 10, 2010

Are You Smarter Than a Fifth Grader? -

Before you read today’s article, test yourself by answering the following questions AGREE or DISAGREE, based on your understanding of basic economics:

1)      Restrictions on housing development make housing less affordable.

2)      Mandatory licensing of professional services increases the prices of those services

3)      Overall, the standard of living is higher today than it was 30 years ago

4)      Rent control leads to housing shortages

5)      A company with the largest market share is a monopoly

6)      Third World workers working for American companies overseas are being exploited

7)      Free trade leads to unemployment

8)      Minimum wage laws raise unemployment

It’s too bad basic econ isn’t actually taught in 5th grade, or 12th grade for that matter.  Perhaps our country would be in a better financial situation if it were.


Daniel Klein: Are You Smarter Than a Fifth Grader? -

Who is better informed about the policy choices facing the country—liberals, conservatives or libertarians? According to a Zogby International survey the answer is unequivocal: The left flunks Econ 101.

How did the six ideological groups do overall? Here they are, best to worst, with an average number of incorrect responses from 0 to 8: Very conservative, 1.30; Libertarian, 1.38; Conservative, 1.67; Moderate, 3.67; Liberal, 4.69; Progressive/very liberal, 5.26.

Americans in the first three categories do reasonably well. But the left has trouble squaring economic thinking with their political psychology, morals and aesthetics.

Adam Smith described political economy as "a branch of the science of a statesman or legislator." Governmental power joined with wrongheadedness is something terrible, but all too common. Realizing that many of our leaders and their constituents are economically unenlightened sheds light on the troubles that surround us.



Wednesday, June 9, 2010

Does the Internet Make You Smarter? or Dumber? -

A pair of articles today.  I found the implications of both articles worth the time spent reading, and I don’t think they made me dumber.

Does the Internet Make You Smarter? -

Every increase in freedom to create or consume media, from paperback books to YouTube, alarms people accustomed to the restrictions of the old system, convincing them that the new media will make young people stupid. This fear dates back to at least the invention of movable type.

What the 16th-century foes of print didn't imagine—couldn't imagine—was what followed: We built new norms around newly abundant and contemporary literature. Novels, newspapers, scientific journals, the separation of fiction and non-fiction, all of these innovations were created during the collapse of the scribal system, and all had the effect of increasing, rather than decreasing, the intellectual range and output of society.

We are living through a similar explosion of publishing capability today, where digital media link over a billion people into the same network. This linking together in turn lets us tap our cognitive surplus, the trillion hours a year of free time the educated population of the planet has to spend doing things they care about. In the 20th century, the bulk of that time was spent watching television, but our cognitive surplus is so enormous that diverting even a tiny fraction of time from consumption to participation can create enormous positive effects.


Does the Internet Make You Dumber? -

The picture emerging from the research is deeply troubling, at least to anyone who values the depth, rather than just the velocity, of human thought. People who read text studded with links, the studies show, comprehend less than those who read traditional linear text. People who watch busy multimedia presentations remember less than those who take in information in a more sedate and focused manner. People who are continually distracted by emails, alerts and other messages understand less than those who are able to concentrate. And people who juggle many tasks are less creative and less productive than those who do one thing at a time.




Monday, June 7, 2010

Storming the School Barricades -

"The Lottery"—an explosive new documentary about the battle over the future of public education opening nationwide this Tuesday.

The Weekend Interview with Madeleine Sackler: Storming the School Barricades -


A new documentary by a 27-year-old filmmaker could change the national debate about public education.

Finding out that the teachers union had hired a rent-a-mob to protest on its behalf was "the turn for us in the process." That story—of self-interested adults trying to deny poor parents choice for their children—provided an answer to Ms. Sackler's fundamental question: "If there are these high-performing schools that are closing the achievement gap, why aren't there more of them?"

Some parents in the film do not know what exactly a charter school is. And the truth, as the film implicitly points out, is that such technical designations don't much matter. What these parents know is that they desperately want their children to have the best possible education, and to have opportunities that they themselves could only imagine. Winning a spot in Harlem Success Academy—or another high-performing school—is critical to reaching that goal.

"The public education system is at a crossroads," Ms. Sackler says. "Do we want to go back to the time when children are forced to attend their district school no matter how underperforming it is? Or do we want to let parents choose what's best for their kids and provide a lot of options? Sometimes those options might fail. But . . . I don't see how you could choose to settle for what we've been doing for half a century when it's been systemically screwing over the same kids—over and over and over."




Thursday, June 3, 2010

The West's Wrong Turn on Natural Resources -


Joseph Sternberg: The West's Wrong Turn on Natural Resources -


For all that talk about a new knowledge economy, things still matter a great deal in this world. And whether it's the steel beam holding up the floor of your office, the gasoline you put in your car or the circuitry in your new iPad, "things" mean natural resources. So it's worrying that one of the major policy trends emerging in recent days is that the capitalist West is cutting itself out of the resource game.

The danger is that if [democracies] won't supply minerals to the world on market principles, others—like China—will step into the gap with other ideas.

Without giving too much credence to China alarmists, it is still possible to say the world is better off if resources are in the hands of transparent companies that will trade on market principles free of the risk of excessive government interference. The third and worst alternative is to stay on the current track of crippling Western resource reserves while also blocking capital from the willing investors that remain.

Yes, companies will continue to extract resources in the West even under the taxes (though the outright drilling ban is another story). But those bad policies will make a major difference at the all-important margins of the market, which drive pricing decisions. The choice for Western policy makers now is simple: They can clamp down on their resource industries for domestic political reasons and hand pricing and supply power to nonmarket and nondemocratic governments. Or they can allow their own companies to run a truly global resource market capable of meeting the world's need for things.



Wednesday, June 2, 2010

The New Cannery Row -


Review & Outlook: The New Cannery Row -


Hidden inside the latest Democratic spending bill is an $18 million taxpayer handout to American Samoa. How did that get in there? Read on for another lesson in the uncreative jobs destruction of the minimum wage.

When Democrats in Congress increased the minimum wage in 2007, the U.S. territory of 65,000 in the South Pacific pleaded for its traditional exemption from the wage law to prevent job losses. But Democrats followed union orders and said that if multinational companies like StarKist, one of Samoa's largest employers, could pay its CEO millions it could afford to pay workers $7.25 an hour. So they raised the minimum wage for low-skilled Samoan workers from $3.26 an hour to $5.25 today and by 2015 it will rise to the current U.S. minimum of $7.25.

Job losses have followed the way that any economics 101 student would expect. Last September Chicken of the Sea closed its tuna canning operation in the territory, leaving more than 2,000 Samoans jobless.

Then last month StarKist announced it will lay off as many as 800 workers, bringing its work force there from 3,000 before the minimum wage hike to 1,200 by 2011. StarKist explained that because of the minimum wage hike Samoa is no longer competitive with other tuna canning countries. American Samoa's unemployment rate, which was less than 10% in 2003, has climbed to some 30% or more today. Sorry, Charlie.

We've rarely seen a more devastating real world indictment of the impact of the minimum wage. Congress could simply lower the minimum wage to bring the jobs back, but instead taxpayers get to shell out $18 million to undo the damage that Congress's economic illiteracy has caused. Please remember this the next time a Member of Congress says the minimum wage helps "working families."