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Archive for July, 2010

The release of the terminally ill Abdelbaset al-Megrahi, convicted of involvement in the Lockerbie airplane bombing, is in the news again, due to the oil spill, of all things. The U.S. Congress wants to know whether there was a quid pro quo: whether BP lobbied the Scottish government to release Megrahi so that Libya would conclude a deal allowing BP to drill in its offshore waters. Having followed the Megrahi situation since 2008 because of its relevance to the Nationalist government in Scotland, whose policies and performance I have been following, I have some little expertise on this question. In my view, the posited quid pro quo is the least likely explanation for Megrahi’s release. Consider the following facts:

1) The evidence against Megrahi is less than rock solid. The case against him was built on the testimony of a single witness, later found to be unreliable. Later allegations of prosecutorial misconduct provided a foundation for appeal. In the event, his illness allowed the Scottish government to release him on compassionate grounds instead.

2) Releasing Megrahi allowed the Nationalist government of Scotland, which favors independence for Scotland, to flex its powers on the international stage. Scotland has less autonomy than an American state, but the current government has been trying to make the most of it.

3) Releasing Megrahi allowed the Scottish National Party to burnish its left-wing, peacenik credentials, important given that they have seen an electoral challenge on their left flank from far-left nationalists Solidarity and the Scottish Socialist Party, and given that the SNP’s main electoral rivals are the Labour Party. The SNP has consistently tried to make inroads into the vote-rich Labour constituencies of Scotland’s Central Belt.

4) There was no reason for the SNP or the Scottish government to want to please BP or the British government, who did engage in diplomacy with Libya over the Megrahi issue. If anything, the British Labour government’s desire to release Megrahi would have given the Scottish government some opportunity to twist their tail over the issue and do the reverse.

Unfortunately, media coverage here in the U.S. has done little to elucidate the context behind the decision, which is likely to leave Americans to conclude that skullduggery was involved.

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Rants and Raves

1. The state government of Massachussets is engaged in a brinksmanship battle over gambling: how many casino resorts to allow, how many slots-only casinos, etc.  Why is this up to the state government? I don’t think there is any compelling state interest here. If the owners of the relevant property, which is apparently properly zoned already, want to build casinos, why shouldn’t that be up to them? And if people want to patronize the casinos—or not—why shouldn’t that be up to those people as well?

2. I recently heard a professor of rhetoric lecturing her students about proper argument form. Her example was: The Arizona immigration law is morally wrong because it was motivated by “bias and bigotry.” I don’t presume to know what was in the hearts and minds of the people who support that law, though they are almost unanimous in denying that bias and bigotry are what motivates them. Putting that aside, I don’t think her example argument works. A law or policy might be morally right or wrong regardless of the motivations of the people who support or believe in it. People might support a good law for either the right or the wrong reasons; similarly, they might support a bad law for either as well. In fact, I would say that people’s motivations should be irrelevant to our judgment of the law: the law is good or bad all on its own—and that’s quite enough to let us judge it, without requiring us to engage in ad hominem speculations.

3. It turns out that Americans have recently been cutting back on their use of health services, apparently because they are worried about rising costs and their effects on their household budgets. Good for them! They are recognizing, as rational agents should, the price signals, relating them to their subjective schedule of values and the relative scarcity of their resources, and adjusting their behavior accordingly. If we let people be exposed to more of the costs of their own health care, similar rational allocations would further take place. Remember a couple years ago, as oil was heading north of $100 per barrel, and there was apocalyptic talk about what would happen? Then, people, as if led by an invisible hand, began spontaneously reducing their consumption. They started giving up their SUVs, buying higher-mileage vehicles, reducing their unnecessary trips. People respond to incentives. That is why markets work, if only we let them.

4. Finally, one of the most depressing and disheartening articles I have read in a long time is the cover article in the July/August issue of The Atlantic, entitled “The End of Men.” The article details just how thoroughly women are coming to dominate life in the United States, in everything from earning the majority of college degrees to dominating most aspects of family life. That’s perfectly fine by me. What I find so distressing about the article is its further claim that men are therefore increasingly irrelevant—as fathers, as breadwinners, as protectors, as moral exemplars, as defenders of honor. Men are accordingly increasingly lapsing into listlessness, immaturity, and lassitude, exactly what one would expect from a group of people who have no real purpose in life. 

Some of the choicer passages from the article:

Fathers, roughouse all you want. But we, gatekeeper moms, are in charge of the rest. We could give you detailed instruction, and you still couldn’t possibly do it as well. [...] The bad news for Dad is that despite the common perception [that he is necessary or at least important to the family], there’s nothing objectively essential about his contribution.

The increasing expectation of male incompetence is, the article alleges, leading to the increasing reality of male incompetence. This is from a female college admissions officer:

Maybe these boys are genetically like canaries in a coal mine, absorbing so many toxins and bad things in the environment that their DNA is shifting. Maybe they’re like those frogs–they’re more vulnerable or something, so they’ve gotten deformed.

That is a particularly offensive claim, I think. Men are “deformed”? The article’s author, Hanna Rosin, adds helpfully:

But again, it’s not all that clear that boys have become more dysfunctional—or have changed in any way. What’s clear is that schools, like the economy, now value the self-control, focus, and verbal aptitude that seem to come more easily to young girls.

Why are men dropping out and, as the article puts it, simply “drifting away’? The answer, I think, is embedded in this line from the article:

The women don’t want them as husbands, and they have no steady income to provide. So what do they have?

What indeed. How have we come to this sorry state? Not all is lost, of course, but growing numbers of pointless and purposeless men is bad for everyone—men, women, and children. As one of those men, and one who believes and wants to believe his life has meaning and purpose, I cannot but greet an article like this with a combination of outrage, offense, and even foreboding about the future.

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In 2006, Speaker-elect Nancy Pelosi (D-CA) famously pledged to “drain the swamp” of corruption” and to “turn this Congress into the most honest and open Congress in history. That’s my pledge — that is what I intend to do.”  Time for an update on Operation Drain the Swamp.

Following the resignation of Rep. Eric Massa (D-N.Y.) and the just announced  trial deal with Rep. Charlie Rangel (D-N.Y), Politico is reporting that the  Ethics Committee’s next stop is Rep. Maxine Waters (D-CA).

Following the recent flurry of ethics problems, one might assume that the Speaker is feeling the strain of Operation Drain the Swamp. But, sounding a bit like Yoda, Speaker Pelosi proclaimed at this week’s press briefing: “Drain the swamp we did, because this was a terrible place.” (WaPo)

My guess: the Swamp is still full. If the events of the past decade are any guide, this is anything but an issue of partisanship—if you have any doubt, just ask  Rep. Jim Traficant (D-OH),  Rep. Tom DeLay (R-TX), Rep. Nick Miller (R-MI), Rep. Candice Miller (R-MI), Rep. John Conyers (D-MI), Rep. Jim McDermott (D-WA), Rep. Tom Feeney (R-FL), and Rep. Curt Weldon (R-PA).

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Recovery Summer Update

The Summer Recovery Tour has just completed its scheduled stop at Yellowstone National Park, as the touching account on the White House Blog informs us.

Meanwhile…

  • The Beige Book, released yesterday, “underscored the Fed’s view that the recovery, while still moving forward, is progressing at a slower pace than earlier in the year.” (BusinessWeek)
  • James Bullard, president of the St. Louis Fed, warned yesterday “that the Fed’s current policies were putting the American economy at risk of becoming ‘enmeshed in a Japanese-style deflationary outcome within the next several years.” (NY Times)

If the AP survey  of economists is correct, VP Biden may have to extend the tour, since the real recovery summer may be  scheduled for 2010 2011…2015?

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Well, it looks like an Atlas Shrugged movie is going to get made after all.  Reason TV has a short clip with the director and the actor playing Hank Rearden here.  In case you haven’t heard, the plan is for this to be a trilogy – so we’ll only get the first 127 pages in Part I.

I have mixed feelings about this particular attempt.  I’ve heard the budget is relatively low and the project was put together quickly - which are red flags for such an epic story (especially one in which a crumbling America could be depicted in an interesting way with modern but likely expensive movie techniques).  I’m also not quite sure that this interview with the director lends a lot of confidence (but it is only 5 minutes, so I’ll cut him some slack).  It would be a shame if fans of Shrugged had to wait 53 years for a movie version that doesn’t match the grandness of the novel.*   

On the other hand, wouldn’t it be great if this turns out to be more like Star Wars I than, say, Starship Troopers (yeah, I know, it is really Star Wars IV I am talking about but I don’t wear Yoda ears nor do I dress up to be Darth Vader for kicks – though I do a pretty mean Vader voice/breathing for my kids)?  I also think it is a good sign we are not seeing big names playing the main characters.  Like with Star Wars, this will allow us to lose ourselves in the story rather than thinking about whether Angelina Jolie is right as Dagny or seeing her other characters on the screen instead of Dagny.  And maybe Big Hollywood is right:

No one, including the “Atlas” producers, can predict how a project will ultimately turn out, and that’s true whether your budget is $5 million or $200 million. And no one would argue that the challenges involved in bringing such an ambitious and epic story to the screen aren’t made that much more difficult with limited resources, including taking a chance on a director making his theatrical feature debut. However, from all we’ve seen and from our discussions with the producers, director, and cast, there’s no doubt that everyone involved is passionate about telling this story and most importantly, dedicated to remaining true to Ayn Rand’s philosophical vision — which would’ve likely have been compromised bigtime by a major studio.

* Before I hear from the many Rand critics out there, I am not an Objectivist nor do I think Shrugged is literary excellence of the first order.  However, I do think it is an enjoyable, wonderfully told story (at least up to the Galt speech where it turns into a long-winded Randian philosophy lesson) that is underrated by its critics.  Moreover, it provides a much-needed moral defense of capitalism.  It is at least as good as a lot of the books we are told we ought to admire.

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As commentators begin to read the Dodd-Frank Wall Street Reform and Consumer Protection Act, they are discovering some hidden gems. The most recent discoveries:

Diversifying the Portfolio (via Carrie Budoff Brown at Politico):

Congress gives the federal government authority to terminate contracts with any financial firm that fails to ensure the “fair inclusion” of women and minorities, forcing every kind of company from a Wall Street giant to a mom-and-pop law office to account for the composition of its work force.

Maintaining Transparency (via Ed Morrissey at HotAir):

Under a little-noticed provision of the recently passed financial-reform legislation, the Securities and Exchange Commission no longer has to comply with virtually all requests for information releases from the public, including those filed under the Freedom of Information Act.

Controlling the Market in “Conflict metals” (via Michael Tennant at NewAmerican):

it includes language compelling American-listed “companies to certify whether their products contain minerals from rebel-controlled mines in Congo and surrounding countries.”

Since gold is on this list of “conflict metals,” conspiracy theories are beginning to blossom.

What readers will NOT find: reforms of Freddie Mac and Fannie Mae, the two government sponsored enterprises that were embroiled in the financial meltdown (see Colin Barr, Fortune). Not to worry…hearings are scheduled.

Meanwhile…

Congress, in its infinite wisdom, is prepared to provide  the Financial Crisis Inquiry Commission an additional $1.8 million to continue its work. Daniel Indiviglio (the Atlantic) wonders why, given that Congress leapfrogged the commission:

At a time when both sides of the aisle are worried about excessive government spending on waste, it’s hard to justify providing more funding to a commission whose purpose has become questionable, at best.

Michael Smallberg and Rick D’Amato (the Project on Government Oversight) are concerned about the burdens that the new rules and mandated studies will place on regulators:

we’re concerned that Congress may be burdening regulators and watchdogs with unnecessary studies, rather than putting hard-and-fast rules in place. Many of these studies will simply provide another avenue for the financial services industry to exert its influence on the process, and in the meantime, the studies could impose a significant burden on regulators and watchdogs that are already short on funding, staff, and resources.

Of course, one man’s burden is another’s opportunity. The new regulations this should provide a great source of employment opportunities, thereby contributing to the ongoing success of Recovery Summer. As Julie Steinberg notes:

With the passing of the financial reform bill, the SEC, CFTC and FDIC are all on the hiring warpath. The new CFPB and the beefed-up OCC are also expected to join hiring fray once they figure out staffing needs. The creation of at least 1,343 jobs across two of the agencies has already been announced (SEC and CFTC), and more hiring announcements are expected to follow.

Undoubtedly, there will be thousands of more jobs to come. Ms. Steinberg provides useful information on how to snag a job as a regulator.  What is unclear is whether currently unemployed Census workers will have a suitable skill set. If they do, the last month of Recovery Summer may fulfill the administration’s promises.

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I don’t remember that much from my public finance class in graduate school except one thing: all taxes (except politically irrelevant lump-sum taxes) cause market distortions.  In other words, they all cause dead weight losses.  This is true of payroll taxes, consumption taxes, income taxes, capital gains taxes.  Indeed, a popular exercise in public finance is playing with models to show the basic equivalence of different types of taxes.    I support a regime based primarily on consumption taxes because I think that the less we tax labor and investment, the more of it we get in the long-run, and the more we grow.  I favor growth over the fool’s errand of trying to massage business cycles.  But in the end, all taxes are distortionary, and it is not clear one type of tax is vastly superior to another.  What I like most is low taxes and low spending.

So, if I were a political consultant, my message to the GOP would be this: soak the rich.  Republicans are trying to convince people that we have to continue the Bush tax cuts to the rich because we need to grow.  Why not take this issue (which almost cost Bush the election against both Gore and Kerry), combine it with the populist feelings out there, and generate support among voters who will decide this (and future) elections: middle-class independents?  This group is not doing well, is angry at both parties, and is unlikely to be convinced by arguments that lowering taxes on the rich will make the lives of the ordinary Joe better off.

If I were a Republican politician, I would do the following:

  • Mostly extend the Bush tax cuts for upper-income people (a sharp increase in their marginal rates at this time is bad idea–both politically and economically). This is not the time for that. Actually, there is no time for that.  Point out that Democrats are in favor of this very bad idea.  Even an honest Keynesian wouldn’t recommend a sharp increase in marginal tax rates for anyone, even the rich, at this point in time.
  • Completely extend the tax cuts to the rest of the country and even add a few highly visible ones targetted at increasing labor demand among small businesses and at letting working people keep a little more of their earned income (something like a series payroll tax holiday for both firms and workers).
  • Argue for structural change in the long-term deficit picture that would fall mostly on the rich, such as a modest means-testing of Social Security and Medicare.  This is going to have to be done eventually because these programs are unsustainable otherwise.  And such a change now is particularly advantageous because Democrats hate means-testing.  They want to maintain the illusion these programs are “social insurance” funded by “contributions”  rather than ordinary entitlements funded by coercive taxes.   Making the Democrats publicly oppose having the rich pay more puts them in an uncomfortable position.  Ross Perot got some mileage from this issue.  The GOP could, too.

Something big, like shifting to a consumption-based system, isn’t in the cards.  But trying to shed the label as the party of the rich would have great benefits in both the short and long term.

During the Bush years, Republicans lost their street cred on being the party of fiscal responsibility with extravagant pork, expensive wars, and no real attempt at fiscal discipline.  Whereas Democrats remain the party of “tax and spend,” Republicans have become the party of “don’t tax, but spend anyway.”   So why not turn the tables on the Democrats and steal one of their issues?

I think (I welcome support or refutation of this claim) that the rich have mostly-hardened political opinions.  These changes won’t move many opinions among the rich.   Yes, you will make part of your base–the part that gives you a lot of money, I know–pretty ticked, but their numbers are small and you will also neutralize a key Democratic issue and regain many of the independents that abandoned you for Obama last time around.

Conservatives don’t like penalizing those who create wealth and economic growth.  I don’t either.  In the long run we need to have pro-growth policies and cut back government spending.  But we also need to keep politics in mind.  And the lesson every revolutionary has to remember is there are more of us than there are of them.

The adage that a rising tide lifts all boats is generally true, economically speaking.  But I’m OK if we sink a few yachts along the way.

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Democrats heaped praise on the Congressional Budget Office during the health care debates (remember SpeakerPelosi’s  breathless excitement over the “scoring” from the “bipartisan” Congressional Budget Office?).  The CBO’s newest “Long-term Budget Projections” have not engendered the same level of attention…but it should. The report was released about a month ago and my guess is that it fell under the radar screens of loyal Pileus readers. So here are a few highlights for your consideration (the entire document is available here, and CBO Director Elmendorf’s brief presentation to the National Commission on Fiscal Responsibility and Reform is available here).

The CBO begins with a cheery review of recent events:

Recently, the federal government has been recording the largest budget deficits, as a share of the economy, since the end of World War II. As a result of those deficits, the amount of federal debt held by the public has surged. At the end of 2008, that debt equaled 40 percent of the nation’s annual economic output (as measured by gross domestic product, or GDP), a little above the 40-year average of 36 percent. Since then, large budget deficits have caused debt held by the public to shoot upward; the Congressional Budget Office (CBO) projects that federal debt will reach 62 percent of GDP by the end of this year—the highest percentage since shortly after World War II.

Yes, I know, we are in the greatest recession since the Depression. The CBO recognizes that budget deficits will likely decline markedly in the next few years. Nonetheless, the CBO notes: “over the long term, the budget outlook is daunting.” The retirement of the baby boomers (assuming any of us can retire) will drive entitlement spending. “Without significant changes in government policy, those factors will boost federal outlays sharply relative to GDP in coming decades under any plausible assumptions about future trends in the economy, demographics, and health care costs.

The CBO develops its projections under two scenarios: an extended-baseline scenario and an alternative fiscal scenario.

The extended base-line scenario, is based on current law and the assumptions that (1) the health care legislation will have the anticipated effects on revenues and spending, the Bush tax cuts will expire as scheduled, and the alternative minimum tax (ATM) will cover a growing percentage of tax payers. Under this scenario, total revenues will increase to 23 percent of GDP by 2035 and grow substantially thereafter. On the spending side, “government spending on everything other than the major mandatory health care programs, Social Security, and interest on federal debt—activities such as national defense and a wide variety of domestic programs—would decline to the lowest percentage of GDP since before World War II.” In other words, the US would be primarily involved in the provision of insurance and the payment of interest on the debt. Debt held by the public would increase from 62 percent this year to 80 percent in 2035 while interest payments would increase from a current level of 1 percent of GDP to 4 percent of GDP by 2035 (essentially one-sixth of federal revenues).  (page x)

The alternative fiscal scenario—in my mind, the more reasonable one—assumes that some of the Bush tax cuts will be extended, the ATM will cover about the same percentage of taxpayer as today, Medicare reimbursements for physicians would increase gradually, and spending under the alternative scenario, and “spending on activities other than the major mandatory health care programs, Social Security, and interest would fall below the average level of the past 40 years relative to GDP, though not as low as under the extended-baseline scenario.” Under this more realistic scenario, debt would hit 87 percent of GDP by 2020. “After that, the growing imbalance between revenues and noninterest spending,  combined with spiraling interest payments, would swiftly push debt to unsustainable levels. Debt as a share of GDP would exceed its historical peak of 109 percent by 2025 and would reach 185 percent in 2035.” (page x-xi)

Indeed, under this scenario, in 75 years, revenues would reach 19.5 percent of GDP, expenditures would constitute 28.2 percent of GDP, leaving a fiscal gap of 8.7 percent of GDP (Table 1-3, p. 15).

In a sobering qualification (p. xi), the CBO states:

In fact, CBO’s projections understate the severity of the long-term budget problem because they do not incorporate the significant negative effects that accumulating substantial amounts of additional federal debt would have on the economy:

  • Large budget deficits would reduce national saving, leading to higher interest rates, more borrowing from abroad, and less domestic investment—which in turn would lower income growth in the United States.
  • Growing debt would also reduce lawmakers’ ability to respond to economic downturns and other challenges.
  • Over time, higher debt would increase the probability of a fiscal crisis in which investors would lose confidence in the government’s ability to manage its budget, and the government would be forced to pay much more to borrow money.

The CBO elaborates on the fiscal crisis scenario (pp. 20-21):

higher debt could raise the probability of a fiscal crisis in which investors would lose confidence in the government’s willingness to fully honor its obligations, and thus, the government would be forced to pay much more for debt financing.  Interest rates might rise only gradually to reflect growing uncertainty about whether government debt would be fully honored, but other countries’ experiences suggest that a loss of investor confidence could occur abruptly instead. If interest rates on government debt spiked, the value of outstanding government debt would fall sharply. That decline in value could precipitate a broader financial crisis by causing large losses for mutual funds, pension funds, insurance companies, banks, and other holders of federal debt. Experience in other countries suggests that resolving such a crisis would require fiscal policy changes that would be far more drastic and painful than if policies had been adjusted sooner to avoid a crisis.

One might suppose that such dire predictions would force a response from the White House or Congress.  Peter R. Orszag, OMB Director, used the occasion of the release to celebrate the role of the Affordable Care Act in helping to enact “substantial, long-term deficit reduction.” To be fair, he devoted a line at the end of his comments to the long-term scenario. In Congress, the majority broke from the practice of presenting a five year budget plan and presented a one-year budget resolution, which Speaker Pelosi described as “another key step . . . in restoring fiscal responsibility.” This decision was justified by the existence of the National Commission on Fiscal Responsibility and Reform.

When in doubt, create a commission. And as the legislative history of the current financial reform legislation reveals, be certain that you do everything humanly possible to avoid its findings.

And so, we return to a central question: On the assumption that we want to avoid the bleak scenarios painted by the CBO (one that has been presented on numerous occasions in earlier years) and that whatever the benefits of growth, we simply cannot “grow our way” out of the problem,  what are the options?

  1. Dramatic reductions in the core entitlement programs
  2. Dramatic increases in taxation
  3. Some combination of 1 and 2

Will elected officials–who dance to the 24 hour news cycle and whimper in fear of voters who have been assured that they can have endless entitlements and low taxes– be able to soberly face the long-term crisis and select from the limited set of options?

Is any of this politically viable absent a significant change in the popular expectations of government’s role in society and the economy?

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A row has broken out in higher education regarding grants that the BB&T Foundation has made to some institutions, grants that typically require, as a condition of receiving the money, that Ayn Rand’s Atlas Shrugged be assigned in its entirety. The grants apparently do not stipulate what else may or might be taught, nor do they stipulate what other courses might be taught by the funded professors or departments; it appears that the sole condition is that that one—albeit long and controversial—book by Ayn Rand be in the mix.

A series of articles has appeared discussing the matter. In the July/August issue of Academe magazine, which is published by the American Association of University Professors, there are two articles decrying the grants: one written by a psychology professor at Guilford College; another by a business professor from Western Carolina University. A third article, defending BB&T and its grants, is by Jay Schalin of the Pope Center.

The personage who is fast becoming Public Enemy Number One among the offended academics is John Allison, former chairman of BB&T bank. He is a strong proponent of Ayn Rand’s works, as well as of her philosophical, moral, and economic vision, and under his leadership the BB&T Foundation has begun combing the academic landscape looking for professors or institutions willing to let her work be taught.

I think the Academe writers are making too much out of this. Richie Zweigenhaft of Guilford College, for example, writes in his Academe article:

What are our students likely to conclude about Guilford’s endorsement of Atlas Shrugged as the only book now required in our entire curriculum and as a work worthy of being included as one of the three books given to every business and economics major?

My suspicion is that the students won’t think much of it at all, and will probably hardly notice. More striking to me is the admission contained in that rhetorical question that Guilford college doesn’t require any other books in its curriculum! That is far more damning, I expect, in the eyes of students (and parents), than that they give every student a book of Rand’s. The obvious solution would seem to be not to ban Rand but to add more books. Why aren’t there ten—or twenty or thirty—books required of all students in their college?

Professor Richie goes on to charge that the college has “simply sold a chunk of the curriculum,” from which he concludes that everything “is for sale, even the college curriculum.” Well, it is only one book—which can be a “chunk” of the curriculum only if there isn’t much else in it. He laments moreover that at his college “some faculty members will have to teach Atlas Shrugged (in its entirety).” But that makes it sound as if they had no choice. BB&T did not force anyone to take the grant, and I presume no professor opposed to teaching Rand will be required to do so.

In his Academe article, Professor Gary Jones quotes University of Chicago law and philosophy professor Brian Leiter as saying:

A course on the moral foundations of capitalism might include Atlas Shrugged, though it’s not an obvious choice—it’s badly written and simpleminded. [...] There is a large contemporary philosophical literature defending markets by scholars like Robert Nozick, David Schmidtz, and Jerry Gaus. I would think at a serious university and in a serious course, you would look at this kind of work long before you get to Ayn rand.

Leiter continues that “interest in Ayn Rand is obviously self-serving rather than scholarly,” and he concludes:

The curriculum, the scholarly conferences, and the mix of students in a department should reflect scholarly judgments on the merits, not the fact that money is available for one topic but not another.

These are eminently reasonable sentiments. Yes: let decisions be made on the merits, not for self-serving, especially politically self-serving, purposes. Let only serious works and serious authors and nothing simpleminded or badly written be taught, and do not let an “ideological campaign,” as it is put later in Jones’s article, get a toehold in academia.

Yet . . . an awful lot of unserious authors, and unserious and simpleminded and badly written work, is taught right now on campuses across the nation. And there is a lot of self-serving, including politically self-serving, decision-making going on—about everything from hiring and tenure to curricula to the creation of centers, majors, and programs.

The complaints about the BB&T grants have, therefore, something of a hollow ring. If faculty wish to apply the standards Professor Leiter articulates—which I would wholeheartedly endorse—then they should apply them across the board. Open their entire curricula, all of their course syllabi, and every assigned and required work to public scrutiny; judge them all on grounds of scholarly seriousness, and revise or reject material that is self-serving, ideological, simpleminded, or badly written. 

That would require quite a measure of self-examination and scrutiny—and a lot of what goes on right now would, I fear, fail these tests. If faculty are not willing to submit to this level of scrutiny, then they might wish to reconsider just how much protesting of BB&T grants they want to make.

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Friend and sometime Pileus commenter Damon Linker has a post in the New Republic that left me unsettled.   I have to say that Linker’s usually measured conclusions are a tad unhinged.

He correctly points out that the historical norm of American journalism is not one of high-minded neutrality, but one of passionate partisanship.  Still, can the following statement really be supported?:

…today there are thousands of political bloggers, each of them vying for attention and influence by screaming into computer-amplified megaphones. The numbers are greater and the medium is different, but the style is the same: libelous exaggeration and furious passions rule the day, every day, on every side of every public dispute, drowning out the few who resist choosing sides and joining the partisan battle.

Isn’t it odd to condemn exaggeration with a statement that so wildly exaggerates (perhaps I shouldn’t say “wildly” since I would not want to exaggerate my criticism of Damon’s exaggerating about exaggeration)?  As I see it, there is a lot of muck and crap out there, but also a lot of honest, careful stuff–some of which is even produced by independent political bloggers.

According to Linker’s view, the fault for this rests with us (American citizens) because we are “especially receptive to the claim that [we] are being unjustly ruled–that all authority is arbitrary authority.”

I can forgive Damon’s hyperbole and disgust, but I think he is fundamentally wrong about the quality of news and public opinion in the pre-internet era.   As one who gets almost all his news from traditional, mainstream media outlets, I have to say that I much prefer today’s media environment to the 50s and 60s Linker idealizes in much the same way that I prefer the entertainment options available today over the 4-channel TV of my childhood (even though I watch mostly network TV).

Sometimes (often, actually) I long for some old-fashioned civility and objectivity, but I would not relish returning to the days when ordinary folks listened as Uncle Walter told them the way things were.  If they wondered if they were being told the whole story, or the best version of the story, or the most important story, or a sanitized version of the story, or even the true story.  Well, they just got to wonder.

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Given that we have a lot of new readers out there, I thought it would be useful to post together a few of our most interesting past pieces:

1.  Marc Eisner’s fiscal reality check where he explains why our fiscal situation is not going to return to the 1990′s again (even with a Republican midterm victory a la 1994).

2.  Jason Sorens on the size of the liberty bloc

3.  Jim Otteson on governing and parenting.

4.  Sven Wilson on the use of public funds for campus groups.

5.  Marcus Cole on Elena Kagan.

6.  Me on whether libertarians are necessarily anti-government.

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OK,  I’m blatantly stealing content here, but the following snip from John Fund in the “Political Diary” newsletter from WSJ.com is too much to pass by:

“Let’s not get silly here.” That was Senator John Kerry’s response Friday to questions about his new $7 million yacht, Isabel, which last week was berthed in Rhode Island rather than in Mr. Kerry’s home state of Massachusetts. In doing so, Mr. Kerry will save almost $500,000 a year in taxes.

But the Massachusetts Senator’s office says the decision to base the yacht in Newport had everything to do with “long-term maintenance, upkeep and charter purposes” and nothing to do with tax avoidance. “We pay enormous taxes to the state of Massachusetts, and there is nothing illegal here,” Mr. Kerry told a Boston TV station.

No, but there’s a smell of hypocrisy. In addition to sailing around the tax issue, Mr. Kerry chose to build his boat in New Zealand at a time when Bay State boat builders are having trouble keeping their work force employed. “I’m confident that anything constructed in New Zealand could be constructed here in the state,” Gregory Egan, who owns the Crosby Yacht Yard in Osterville, told the Boston Herald. Others noted that the Isabel was specially designed to be piloted without a crew — letting Mr. Kerry scrimp on employment costs and payroll taxes.

It sounds like a perfect storm of political controversy for Mr. Kerry. The senator is the main sponsor of a bill that would squeeze U.S. lifestyles by cutting back on carbon emissions. At the same time, he has decided to treat himself to a new yacht, built overseas and carefully berthed outside the state he represents. Mr. Kerry is lucky he isn’t up for re-election this year. An opponent anywhere near as serious as Scott Brown, Mr. Kerry’s new GOP colleague, could have given him electoral heartburn.

The really sad part is not that he has the yacht (the rich will be rich), it is that he is so out of touch that it probably never occurred to him that he would get this kind of criticism.  There is a certain level of political/ethical cluelessness that is astounding among some elected officials.

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Academic Tenure, RIP?

By way of disclosure: I have tenure at a private university. I must admit that I love the job protection, the intellectual freedom, and the lifestyle that are available to tenured professors. But I have a very difficult time making a principled case for retaining tenure as an institution. As we enter a new hiring season, I know that I will review the dossiers of a hundred or so newly minted PhDs, competing for a handful of tenure track jobs. A few of them will be successful—at least initially—but most of them will discover that their decade of abuse education will, at best, given them entry to the contingent academic labor force.  With the skyrocketing costs of higher education and the human costs noted above, I am searching for a defense of the institution that has given me so many benefits.

The task of defending tenure is made even more difficult after reading a recent post by Megan McArdle and a NYT forum entitled “What if College Tenure Dies?”

Tyler Cowan at Marginal Revolution provides a partial defense of tenure, but I am still unconvinced that tenure deserves to survive.  My only hope is that it survives as long as I do, since I plan on having the janitors remove my remains from my office a half-century from now.

Can anyone—tenured, untenured—make a credible case for retaining the institution of tenure?

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This story about Obama’s entourage at the 2009 G-20 is evidence of what I was talking about earlier in terms of how our leaders have assembled trappings and habits more appropriate to monarchs.  Indeed, it strikes me as a bit obscene:

Obama arrived with 500 staff in tow, including 200 Secret Service agents, a team of six doctors, the White House chef and kitchen staff with the president’s own food and water.   And, according to the Evening Standard, he also came with “35 vehicles in all, four speech writers and 12 teleprompters.” For sure, our president is not going to be at a loss for words. (snip)

The president is entitled to all the security, communications and support he feels necessary to do his job but surely, when we’re trying to project a more restrained, humble image to the world, the president’s huge retinue could be scaled back to something less than the triumphal march from “Aida.”

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This book looks very, very funny – and depressingly true – at least from what I could read for free on Amazon.  Just look at the table of contents!

Surviving Your Stupid, Stupid Decision to Go to Grad School by Adam Ruben.

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Apropos of North Korea’s bluster, the following from Kenneth Waltz – the arch realist – in his co-authored book The Spread of Nuclear Weapons: A Debate:

Deterrent strategies lower the probability that wars will begin.  If wars start nevertheless, deterrent strategies lower the probability that they will be carried very far.  Nuclear weapons lessen the intensity as well as the frequency of war among their possessors.  For fear of escalation, nuclear states do not want to fight long and hard over important interests – indeed, they do not want to fight at all.  Minor nuclear states have even better reasons than major ones to accommodate one another and avoid fighting wars.  Worries about the intensity of war among nuclear states have to be viewed in this context and against a world in which conventional weapons have become even costlier and more destructive.  (page 37)

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A tasty market outcome

As I write this, the NYTimes.com’s front page story is on an attempt to “corner the market” in chocolate.  Given that cocoa is grown and processed in lots of places (and eaten almost everywhere), cornering the market seemed like a highly improbable economic outcome.  But, hey, how could the “paper of record” be misleading?

According to Julie Werdigier and Julie Creswell, a jolly-looking trader by the name of Anthony Ward is considered by some to be “a Bond-style villain [apparently referred to as 'Chocolate Finger' by some] bent on taking over the world’s supply of chocolate” and has “all but cornered” the market.

After closer inspection, the key words in the story are the words “all but.”  Turns out that Mr. Ward controls 7% of the market.  True, that is a big chunk for any one person to control in such a huge market, but still this: 7%!

The Julies claim that this is enough to “sway prices” and that “has helped” drive chocolate prices to a 30-year high.

Let me repeat: 7%

Mr. Ward apparently knows a lot about chocolate, and he does actually seem to be trying to manipulate prices and gain a windfall.  But is buying and selling in an open futures market really villainous?

I say cheers to Mr. Ward. As long as his methods consist of lawfully obtaining information, he isn’t bribing anyone, and he isn’t using other people’s money without their knowledge, I say let him buy and sell until his heart is content.  And if he can do it right under the nose of the Times, all the better.  Indeed, the fact that his actions are transparent enough to be covered in this story likely means they aren’t nefarious enough to be worried about.

Maybe the Julies are just worried about paying more for a secret indulgence?

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Barnett is one of the most interesting voices on the law out there.  I wonder what my fellow blogger Marcus Cole thinks about his work….

Here is a discussion with Barnett about Obamacare from the Wall Street Journal.   It includes an interesting discussion of the mandate as a “commandeering of the people”:

“What is the individual mandate?” Mr. Barnett says. “I’ll tell you what the individual mandate, in reality, is. It is a commandeering of the people. . . . Now, is there a rule of law preventing that? No. Why isn’t there a rule of law preventing that? Because it’s never been done before. What’s bothering people about the mandate? This fact. It’s intuitive to them. People don’t even know how to explain it, but there’s something different about this, because it’s a commandeering of the people as a whole. . . . We commandeer people to serve in the military, to serve on juries, and to file a return and pay their taxes. That’s all we commandeer the people to do. This is a new kind of commandeering, and it’s offensive to a lot of people.”

One point that needs to be partially corrected, however, is that the U.S. doesn’t quite commandeer people to serve in the military anymore.  We have an All-Volunteer Force (AVF) within a Selective Service framework.  Of course, the government mandates that males 18 and over register in keeping with the requirements of Selective Service and reserves the power to reintroduce conscription – something repugnant in a free society.  I think conscription ought to be forbidden since forced military service is a form of slavery.  Moreover, a healthy republic with a virtuous citizenry fighting a war in the national interest should not require conscription.

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Even though the President should have been able to claim some political credit for the financial regulation legislation (regardless of its ultimately efficacy), defeat was once again snatched from the jaws of victory. The  White House became embroiled in the USDA’s firing of Shirley Sherrod, losing control of the news cycle. As WaPo noted:

Remember that old adage that the secretary of agriculture is meant to be seen but not heard? (You know that one, right?).Tom Vilsack broke that rule this week with his dismissal of, doubling down on dismissal of, apology to and attempted rehiring of (it reads like the 12 stages of grief) a midlevel Department of Agriculture employee named Shirley Sherrod.

Ah the drama! This is precisely the kind of story the media likes—oh those “teachable moments”–and so much time to reflect on “what has happened to the news,” the evils of Glenn Beck, the possibilities for a national dialog on race…..zzzzzz.

Administration embarrassment and amateurishness aside, the story drew attention away from FinReg, one of the two key achievements of the Obama administration thus far. The news cycle on July 21st focused on FinReg. The next day, Vilsack’s firing of Sherrod  and the ongoing saga quickly displaced it (as seen by these story counts from Google).

As the White House is finding it difficult to extract much in the way of political gold out of FinReg, we are beginning to witness the slow drip of “unintended consequences” stories.  Daniel Indiviglio  (the Atlantic) provides one example with rating agency liability:

Only a few days old, the financial reform bill is already making trouble for the markets. One new provision holds credit rating agencies liable for their ratings. Scared about future lawsuits, the agencies have forbidden issuers from putting their ratings in official bond offering documents this week, which shut down the asset-backed securities market.

At 2,315 pages—likely all of which have never been read by a single human being—we can assume that the unintended consequences will continue for some time to come.

Have  a great weekend!

Stories: financial regulation

Stories: Sherrod firing

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Peter Suderman at Reason discusses the latest budget horror story news.  And before Republicans get too smug, Peter reminds us that they are part of the problem too!

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Senate Majority Leader Reid has declared cap-and-trade dead (for now). As the Christian Science Monitor notes:

In a bid to win Republican support, Democrats will drop proposed controls on greenhouse gas emissions in favor of more limited measures that have attracted bipartisan support in the past. These include: lifting the liability cap to hold BP accountable for the Gulf oil spill, decreasing dependence on foreign oil, boosting incentives to create up to 400,000 green jobs, and expanding funding for land and water conservation.

If Reid can’t get sufficient support now, one can imagine that it won’t be forthcoming after the mid-term elections (assuming that the GOP doesn’t snatch defeat from the jaws of victory).

But wait!

As Daniel Foster (National Review) and John Fund (WSJ ) suggest, there might be another strategy at work: pass a scaled down energy bill now (loaded up with enough green pork to attract a majority) and postpone the conference report until after the November elections, at which time there will be an opportunity during the lame duck session to  slip cap-and-trade into a conference report.

An interesting question to ponder this weekend: Is cap-and-trade DOA, or will it rise from its  grave in the waning days of the Congress?

The answer may be more complicated than one might suppose. There is an assumption here that Democrats would support cap-and-trade as the preferable response to global climate change. In reality, many on the Left have never been all that happy with cap-and-trade when compared to a carbon tax or more statist alternatives. For many, there is an elemental abhorrence to market mechanisms at the core of cap-and-trade and various plans seem to provide far too many concessions to corporations (e.g., in the distribution of credits, the cost containment components, the definitions of what constitute offsets).

As Jesse Jenkins (Huffington Post) suggest, we should be happy to see cap-and trade die for some of these reasons.  In his words:

the proposed cap and trade bill was riddled with so many loopholes and cost containment mechanisms–most notably the availability of up to 2 billion dubious carbon offsets–that the effective price on carbon was too low to effectively spur clean energy innovation and adoption and the “cap” on carbon was rendered effectively non-binding.

Far preferable for many is a green industrial policy focusing on clean energy.  In Jenkins words: “the most reliably successful driver of new innovation and transformative technology changes has been an active partnership between private-sector entrepreneurs and innovators and a public sector acting as both an initial funder and demanding customer of new, cutting-edge technologies.”

My guess is that some form of cap-and-trade remains the most likely scenario, although less likely than in the early days of the 111th Congress.

Update: A further complication emerges…Obama would likely veto legislation promoted by coal state Dems limiting the EPA’s authority to promulgate climate rules. (For anyone who is familiar with the politics of acid rain as they evolved in the 1970s and 1980s, this has a familiar feel). http://www.politico.com/news/stories/0710/40174.html

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I recently wandered upon a few “best non-fiction books of the 20th century” lists, such as this one from National Review and this one from ISI.  What surprises me most is that Robert Nozick’s Anarchy, State, and Utopia is not on either of these lists.  So, no Nozick but Kenneth Starr’s Starr Report makes the NR list?  Huh?!  Does this tell us something about the erudition of the modern conservative or where libertarianism stands in relation to the broader “right” or both? 

But what are the best classical liberal books?  Here is one answer.  Liberty gave this list of the best of the 20th century (not available on-line):

  • Hayek, The Road to Serfdom
  • Rand, Atlas Shrugged
  • Mises, Human Action
  • Milton Friedman, Capitalism and Freedom
  • Hayek, The Constitution of Liberty
  • Rand, The Fountainhead
  • Nozick, Anarchy State and Utopia
  • Mises, Socialism
  • David Friedman, The Machinery of Freedom
  • Isabel Paterson, The God of the Machine
  • But if you had to pick one 20th century classical liberal text as the best or your favorite or the one you’d most recommend or the one you’d take if stranded on a desert island, what would it be?   

    For my desert island, I’d go with Nozick since it is the most stimulative of other ideas, and one you could read over and over again.  For young budding classical liberals, I’d probably recommend Capitalism and Freedom despite its lack of philosophical depth.  Not sure what the best is or what my favorite is.  But it is hard to imagine that one of the works by Nock or other Old Right writers wouldn’t cross my mind just for the sheer pleasure of reading these folks even if I probably wouldn’t pick one as the best or my favorite. 

    So, what would you choose?

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    Ready, Fire, Aim

    Doesn’t the Shirley Sherrod controversy speak to the wisdom of taking a moment before we fire people?  I appreciate the importance of punishment and forcing people to take responsibility for their actions/misdeeds.  However, I would argue that any boss or executive out there should think very long and hard before firing someone since it has so many negative repurcussions on the life and career of the dismissed, not to mention the health of the organizations to which they belong.  Responsible leadership necessitates that we think dispassionately and prudentially about the big decisions.  It also requires a sense of perspective about any potential fireable transgression. This includes thinking about the act in the context of the whole person under fire.  Rashness is no virtue in the corner office.

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    According to press reports, British Prime Minister David Cameron flew commercial to Washington for his meetings in the U.S.  I’m sure that there was a strong element of politics here, but I’ll fall for it and note that this was great to see.  I especially enjoyed the comment from No. 10:  “When we are asking the country to tighten their belts as much as we are it’s very hard to justify hiring big jets to swan around the world.  It may make his travel a little harder, but the PM believes it’s up to him to set an example.”

    It is also worth noting that this is a greener way to fly (hey, Al Gore and other hypocrites so-called greens, take note).

    It also allows me to imagine a time when our political leaders didn’t outfit themselves like a a cross between 18th century monarchs and 20th century mob bosses.  Yes, I know the world is a dangerous place for heads of state, but shouldn’t a solid democratic spirit suggest that the trappings of office be a bit more modest than we’ve seen of late?

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    Reason has produced about 20 posts/articles/tweets just this month on the John Stagliano trial   For those who don’t read Reason’s blog as religiously as I do or who aren’t into adult films pornography, Stagliano is a big name in both the porn world and the libertarian world.  In terms of the latter, he is a financial supporter of libertarians and libertarian causes, including the Reason Foundation (and in the past he has been a donor to both Ron Paul and the Cato Institute).  The reason Stagliano is in the news so much lately is that he faced obscenity charges in Federal court and could have been sentenced to decades of jail time if he had lost.  Fortunately, the state failed on all counts and Stagliano is free to live his life as he pleases – which I’m sure he’ll do. 

    On the policy issue, I agree with Reason‘s Jacob Sullum that “no one should be threatened with prison for distributing pornography produced by and for consenting adults.”  Individuals might or might not want to watch what Stagliano produces, but everyone should be free to watch, make, produce, and distribute anything that doesn’t violate the property rights of others.  Indeed, shocker here…I even think bakers should be allowed to work overtime if they so choose (not so random Lochner shout out) – and for any wage they agree upon with bakery owners!     

    But when does covering an admittedly important story go too far?  Did Reason need to cover it as if it were the trial of the century?  When does coverage of a story about principle move into celebration of its star figure and the business he is in?  And is Stagliano personally worthy of celebration even if his First Amendment cause is just?  I’m not saying Reason was wrong in its coverage, but I think these are questions worth thinking about. 

    And by the way, I’m not that prudish about sexuality.  I just think there is a happy medium between prudishness and the celebration of people who while satisfying the preferences of their customers, are not exactly redeemable characters.  I’ll defend the right of fully-consenting adult sex workers to employ themselves as they see fit but please don’t try to tell me that their work is morally equivalent to every other service professional.  Or that the cause of pornographers is more important than that of the many, many Americans whose rights are being violated on a continual basis in this country. 

    So kudos to Reason for bringing Stagliano’s case to our attention.  But let’s have some perspective and spend more time reporting on other cases even if they don’t generate as many eyeballs to one’s site (I would argue that satisfying the demands of readers is only one of the responsibilities of  journalism).  Moreover, in order for libertarianism to be broadly attractive, we need to break the perception that its adherents are mostly interested in “sex, drugs, and rock and roll.”  There are times when some libertarians exemplify rather than defy such stereotypes.

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    The President is scheduled to sign the 2,315 page Dodd-Frank Wall Street Reform and Consumer Protection Act at the Ronald Reagan building today, July 21, 2010.

    His prepared remarks read:

    These reforms represent the strongest consumer financial protections in history. And these protections will be enforced by a new consumer watchdog with just one job: looking out for people – not big banks, not lenders, not investment houses – in the financial system. Now, that’s not just good for consumers; that’s good for the economy.

    In case you find the full legislation to be too demanding, the White House blog has presented what it refers to as “the online attention-deficit version.” I am always pleased to see elected officials raising the level of policy discourse.

    Of course, the 2,315 pages is only the beginning. As MarketWatch reports:

    The Securities and Exchange Commission is expected to begin shortly an “extremely labor intensive” and “logistically challenging” effort to write a large number of regulations based on sweeping bank-reform legislation on the verge of approval, agency chairwoman Mary Schapiro said Tuesday in prepared remarks at a hearing on Capitol Hill.

    Meanwhile…the Financial Crisis Inquiry Commission continues its investigation, hoping to provide its final report to Congress on December 15, 2010 (as mandated by the Fraud Enforcement and Recovery Act of 2009).

    Given that the basic regulatory architecture will have been put into place and agencies will be embroiled in rulemaking, one can predict that the final report  will have minimal impact. Thankfully, understanding the core causes of the financial crisis is immaterial to designing a solution.

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    I have been working through the stack of books I have accumulated in the wake of the global financial crisis.

    One of the best, completed on a rather long set of plane rides (thank you Delta for serial delays) was Carmen M. Reinhart and Kenneth S. Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton University Press, 2009).

    There is much to their analysis. It is heavily data driven and provides a great overview of existing scholarly research.   I don’t intend to present an overall summary or critique here.  But here is a sobering passage from page 224, where they note that “financial crisis are protracted affairs. More often than not, the aftermath of several financial crises share three characteristics:

    • First. Asset market collapses are deep and prolonged.  Declines in real housing prices average 35 percent stretched out over six years, whereas equity price collapses average 56 percent over a downturn of about three and a half years.
    • Second, the aftermath of banking crises is associated with profound declines in output and employment.  The unemployment rate rises an average of 7 percentage points during the down phases of the cycle, which lasts on average more than four years.  Output falls (from peak to trough) more than 9 percent on average…
    • Third…the value of government debt tends to explode; it rose an average of 86 percent (in real terms, relative to precrisis debt) in the major post-World War II episodes. …the biggest driver of debt increases is the inevitable collapse in tax revenues that governments suffer in the wake of deep and prolonged output contractions.”

    The “Second Great Contraction” (the authors’ term for the current crisis) may be more significant than other postwar contractions because “the global nature of the recent crisis has made it far more difficult, and contentious, for individual countries to grow their way out through higher exports or to smooth the consumption effects through foreign borrowing.” (239)

    My take: All of this suggests that we have a long way to go before we can celebrate “Recovery Summer”  and job growth. To the extent that  economic chaos carries political ramifications, we may be in for a prolonged period of instability in electoral politics the impacts of which may not be limited to one or another of the two parties. Indeed, as I read the current polls, there is grave dissatisfaction with both parties.  Even if there is growing skepticism regarding Obamanomics,  the Democratic majorities in the House and Senate, the direction the nation is heading, etc., the news for Republicans is no better (perhaps a product of the dearth of ideas, perhaps a decision to draw a line in the sand over the extension of unemployment benefits).

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    There is a lot of talk these days about the need for enlightened and educated people to help guide—nudgeif you will—people’s choices. Academics especially have a penchant for believing it their right, perhaps even their humanitarian duty, to protect others from their own bad decisions.

    Albert Jay Nock called this a “monstrous itch” to run other people’s lives, and he argued that, although adorned with benevolent language and intentions, this itch can lead to enforcement with totalitarian ferocity. There seems no end to what people will do, no moral lines or boundaries or principles they will not cross, if they believe they are doing it “for your own good.” Hence “monstrous.”

    As an academic I encounter this impulse regularly, but it was not until I came to live and work in the New York City area that I fully appreciated it. Here is how the conversation often goes:

    Enlightened Person: “We know that [fill in the blank---activity x, y, z] is bad [good] for people, so we have to help people who aren’t educated to make the right choices.”

    Me: “What do you mean by ‘help’ them?”

    EP: “We have to educate them to make good choices.”

    Me: “What if they still make the ‘wrong’ choices after you’ve ‘educated’ them?”

    EP: “We owe it to them to help them.”

    Me: “Do you include yourself in that?”

    EP: “What do you mean?”

    Me: “Do you think people should ‘help’ you make the right choices, out of fear you might make the wrong ones?”

    EP: “Oh, no, I’m already educated. I mean the uneducated people.”

    Me: “Who do you have in mind?”

    EP: “Like people in the South.”

    The discussion then usually continues with a tale of horror at what the Enlightened Person has read about or seen on TV happens in the South: the things they’d teach in school if left to their own devices, the things they teach in their churches, the food they eat, the guns they own, and so on. This is a Backward People, the EP is sure, and they are sorely in need of the benevolent guidance.

    I am in an unusual position to appreciate this attitude. I grew up in the Chicago area, where the attitude is far less common, and I spent ten years living in Alabama—which is really the belly of the beast, the lowest of the low, for New Yorkers. Indeed, it is for some people in Alabama too: the University of Alabama, where I used to teach, had—and I presume still has—a fair number of faculty who came to UA specifically to bring, as they saw it, enlightenment to these backward, benighted bigots. The people in the state of Alabama, who pay a large portion of the budget of the university, usually had no idea in what contempt many of the faculty hold them.

    So I have been struck at how much elitism there is in the New York area, and how much condecension there is toward—well, toward just about all non-New Yorkers—but especially toward the South. The South occupies its own special plane of low in the eyes of New Yorkers, filled, as they are sure it is, with all the worst dregs of humankind, a veritable cess pool of racism, ignorance, troglodytic tastes, barbaric impulses, and destructive vice.

    Yet for all that I think the New Englanders need the Southerners—and especially those New Englanders who have that “monstrous itch” that Nock talked about. The reason: the South is always the ready-to-hand example of why enlightened people need to rule. One look at the South will show you that the EPs are obviously, and desperately, needed.

    I call this argument form the reductio ad Nascaram: Individual liberty is fine and excellent, but only for those fit to enjoy it properly; just as parents must limit the choices of their children, so too must the enlightened limit the choices of the benighted. So individual freedom should be respected until we get to the point on the human continuum where intellectual development is so lacking that it compromises personhood. Locke said that point was when the people we are talking about are children, madmen, or “ideots”; for contemporary enlightened persons, it is when the people we are talking about are Southerners.  

    As long, then, as there are people, like those in the South, who continue to make such horrendously bad choices, there will be a need for others, like us, to guide, nudge, even require or restrict, them to make good choices—for their own good.

    What would so many of the enlightened people do if it were not for the South? There is so much work still to be done, so many nudges yet to be made, so much work for the philosopher kings. Thank God for the South!

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    Doug Bandow on the U.S. – South Korea alliance

    I think what these types of pieces about particular alliances suggest is that we reallly need to have a broader discussion of our overall grand strategy and how any particular relationship fits (or does not fit) into it.  And everything should be on the table for that discussion, including NATO.

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    A three part series in the Washington Post (“Top Secret America”) should prove quite interesting.  Dana Priest andWilliam Arkin are exploring the security state that has emerged in the wake of 9/11. The lead quote:

    The top-secret world the government created in response to the terrorist attacks of Sept. 11, 2001, has become so large, so unwieldy and so secretive that no one knows how much money it costs, how many people it employs, how many programs exist within it or exactly how many agencies do the same work.

    This security state is comprised of some 1,271 government organizations and 1,931 private companies.  Around the Beltway, “33 building complexes for top-secret intelligence work are under construction or have been built since September 2001. Together they occupy…about 17 million square feet of space.” Priest and Arkin go on to present a tale of redundancy, waste, and a dearth of oversight (including little information on how much of our resources the new security state is consuming).

    None of this should come as a surprise. As scholars as ideologically diverse as Charles Tilly (Coercion, Capital and European States) and Robert Higgs (Crisis and Leviathan) have long noted, security and economic crises are the mothers of state expansion (those who are interested, might also consult  my book, From Warfare State to Welfare State).

    Depression, war and the preparation for war have driven state-building. As Higgs documented in his fine book, Crisis and Leviathan, there is a ratchet effect in state expansion. That is, expansion is justified by a crisis but, post crisis, things never return to their pre-crisis levels.  In part, this is a story of the ideological changes that accompany a crisis. Invariably, ideology shifts to support a more expansive role for the state and once these changes occur, they take on a certain permanence. In part, this is a public choice story.  Interests that secure transfers as a result of state expansion form close and enduring relationships with vote-maximizing politicians and budget-maximizing bureaucrats. In part, this is a story of bureaucratic permanence (as Reagan once quipped, there is nothing more permanent than a temporary program).

    One can only imagine the aggregate long-term impact of 9/11 and the global financial crisis. If history is any guide–and it usually is–the changes forged under conditions of crisis may well become permanent.

    The next few installments of the Washington Post story should prove interesting.

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    Jacqueline Novogratz in The Blue Sweater discussing microfinance as an alternative to typical development aid:

    By lending women money instead of giving hand-outs, we would signal our high expectations for them and give them the chance to do something for their own lives rather than waiting for the “experts” to give them things they might or might not need.

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    In the WSJ yesterday, Peggy Noonan argued that President Obama might have been well served if he had had some “adult supervision”—someone, that is, older and wiser who could have advised Obama to steer away from issues that appealed to him out of his youthful but naive enthusiasm and toward issues that mattered more for the country. She suggests such a person could have told him to hold off on health care reform and concentrate on the economy instead.

    Noonan is going in the right direction, but she did not get to the heart of the matter. It is not, as she says, that “youth has outlived its usefulness,” but rather that the adults are acting like children.

    I was recently having yet another discussion with one of my children about cause and effect. Decisions lead to actions, and actions have consequences. When the consequences of decisions are good, you generally get positive feedback, which is the signal that your decisions that led to them were good ones; by contrast, when consequences are bad, the negative feedback is the signal that the decisions leading to them were bad. A good parent gradually allows a greater range of decisions to be made by the child as she gets older, and at the same time the parent gradually exposes his child to more and more of the consequences of her decisions so that she can develop the judgment required to one day be an adult and navigate a complicated world on her own.

    It struck me, as we were talking, just how close the conversation we had matched the kind of discussion so many American adults, including in particular many of our political leaders, need to have. When the ten-year-old blows his lunch money on gumballs and Silly Bands, his parents can, after a stern lecture, bail him out. From this, however, he might get the idea that money comes from “somewhere else” (his parents), and that when he needs it, there’ll always be more there. He may have no notion of wealth production, of the complicated and delicate institutional and cultural mechanisms required to allow for the production of wealth, of the fact that wealth is limited, or of the fact that wealth comes only from the productive labor of actual individual human beings.

    The “money comes from Dad” theory of economics is understandable, and even a bit charming, in a ten-year-old. Like the “milk comes from the grocery store” theory of production, it is false and fantastical on all the important points, but the full story is complicated and unnecessary for children to master—until, that is, they become adults. As adults they will need to take responsibility for the budget of their own family. They will therefore need to understand about the scarcity of resources, about the relation between decisions and consequences, about the tradeoffs involved in spending their time, talents, and treasure in one way rather than another.

    The good parent gradually exposes children to more of these realities as they mature, to help prepare their powers of judgment for the rigors of independent and free—but also responsible and thus accountable—adulthood.

    Therein lies the problem, I think, for much of our culture today. Too many adults have been sheltered from too much of this reality for too long. Their powers of independent judgment have suffered commensurately. Through more expedients than one cares to count, governments at all levels and many other institutions have conspired to sever the link between decisions and consequences, and thus to prevent the feedback from reality that is necessary to develop adult judgment. This is all done with the best of intentions: we wish to diminish the pain from bad consequences. But like so many good intentions, this one can, when taken too far, issue in unintended bad consequences. Those consequences may be unintended, but they are real; and a growing population of adults with juvenile worldviews and immature judgment is very real, and very worrisome, consequence.

    The story I tell here is abbreviated, of course, but I think it has more to it than one might initially suppose. Many of our political leaders today are either academics or career politicians. Whatever else one might say about those two lines of work, neither is conducive to the production of worldviews or judgment informed by the rigors of reality. Both worlds in fact take enormous pains to insulate themselves from those rigors—in both cases, one supposes, to free their members to ascend intellectually to apprehension of The Good, which is, as Plato explained, necessary to rule well. We might debate whether either group is actually apprehending The Good, but there is much less debate, I think, about whether such people are fit rulers.

    Consider just this one question: What economic worldview is likely to be adopted by people who have spent their entire lives in academia? Who went from kindergarten to grade school to high school to college to graduate school to the professoriate, never having taken part in the economy’s productive sectors? Everything seems easy and simple to someone who knows nothing about it, and people who are smart, as academics and politicians usually are, can be easily led to believe that they need no experience with something to understand it well enough.

    To come back, finally, to where we began: It should not surprise us that our political leaders do not understand wealth production, do not appreciate how difficult it is to run a general store let alone an industry, do not let their ignorance stop them from boldly undertaking to manage them anyway, and will be shocked, shocked when things do not turn out as well as they had imagined they would. This is exactly what happens when adolescents try for the first time to run their own finances. Just imagine what would be the result if you put your adolescent in charge of your family’s entire household economy.

    Unfortunately, we do not have to imagine it.

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    As an American, I owe a tremendous debt of gratitude to many, many people who have risked and given their lives to defend our liberty. But as I reflect on the recent Supreme Court decision in McDonald v. City of Chicago, I thought I should take a moment to mention four Americans who have made a relatively uncelebrated contribution to the freedom I cherish and enjoy. I owe a special debt to four black men, and one gun.

    The most important of these men, to me, was my father. When I was a boy, he and my mother moved our family of six from the Terrace Village public housing projects in Pittsburgh’s Hill District to a predominantly white neighborhood. While many of our neighbors welcomed us, we were not welcomed by all. I recall a brick through the front window, and other incidents. But burned into my memory is the Sunday evening when my father was beaten with a tire iron on the street in front of our home, and in front of us, his four little children. Those three young white men were never caught.

    When my father, with his surgically reconstructed eye socket and jaw, was released from the hospital, he did something he never once considered when we lived in the projects. He bought a gun.

    Every evening after that, before going to bed, I and my siblings would go out onto the front porch to say goodnight to my father as he sat in his chair, shotgun across his lap, with its black barrel glistening under the porch light. I never once felt unsafe. I never once had trouble sleeping. My sense of security did not come from the Pittsburgh Police, or from the law. My sense of security came from my father, and his gun.

    There were no more incidents, at least not any that I can recall, after my father exercised his Second Amendment right.  It was his contribution to “non-violence” in our neighborhood.

    Just like the millions of children of our nation’s police officers, we were instructed to never touch my father’s gun. And like those millions of children, we did not touch it. My father believed that it was his first responsibility to protect his family, and that it was reasonable for him to avail himself of a firearm to do so. But so many black men before him have been denied this basic right, and it is important to thank the other black men who have made important contributions in preserving it.

    Foremost among these, in my mind, is Frederick Douglass. The self-educated runaway slave turned abolitionist newspaper editor and orator, Douglass was alarmed at the unaddressed violence unleashed on black people in the wake of the Civil War. As Douglass pointed out in his autobiography, black Americans could not count on the government to protect them; they had to defend themselves against the rash of lynchings committed by the Ku Klux Klan and even state and local authorities. Citizenship, according to Douglass, rested upon three boxes: “the ballot box, the jury box, and the cartridge box.”

    As Tim Sandefur of the Pacific Legal Foundation recently pointed out, Douglass was wise to realize that black Americans needed to rely on themselves for their own safety and security. Douglass argued that the post-Civil War Amendments, the Thirteenth, Fourteenth, and Fifteenth, were written to protect the freed slaves from a backlash by the Southern states. The 14th Amendment’s Privileges or Immunities Clause says that: “No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States.” Douglass urged the federal government to enforce the Constitution as written, to secure for black Americans, indeed for all Americans, the “privileges or immunities” of full citizenship.

    Douglass’s plea fell on deaf ears. In 1873, the Fourteenth Amendment’s “privileges or immunities” clause was gutted in The Slaughterhouse Cases, where the Supreme Court upheld the State of Louisiana’s decision to close down butchers competing with a politically-well-connected private monopoly. The Court ruled that this clause only protected rights of national scope, such as the right to access foreign embassies or the right to protection while traveling the high seas. This was, as Georgetown Law Professor Randy Barnett recently noted, “a preposterous interpretation — these were hardly the rights congressional Republicans in the aftermath of the Civil War were most concerned to protect in the wake of the terrible abuses of free blacks and white unionists by Southern states.”

    Nevertheless, the “privileges or immunities” clause was dead. Moribund, as the constitutional law scholars like to put it. It has been dead for one hundred and thirty two years.

    But the “privileges or immunities” clause is still there in the Fourteenth Amendment to the Constitution, still in the actual document. A handful of scholars have kept up the fight to get these words noticed again. These scholars are not ones you will have heard of, especially if you have a law degree from a top law school. Most of these scholars toil away in think tanks, since the doors of many law schools have been shut to them. In fact, if you have attended a top law school, your first reaction is likely to have been, “don’t you mean ‘privileges and immunities’ clause?” While you may have been exposed to the “privileges and immunities” clause of Article IV, your con law professor is unlikely to have mentioned the “privileges or immunities” clause of the 14th Amendment.

    This reaction is understandable, because constitutional law scholarship in most law schools has become a closed, insular conversation among both liberal and conservative law professors who have, in their own ways, become completely at ease with the sweeping scope of government power in a world devoid of the “privileges or immunities” clause.  Liberals dislike the “privileges or immunities” clause for fear that it might legitimate the kinds of unenumerated rights they hold in contempt, like the rights to property and freedom of contract.  It is not a coincidence that these are precisely the rights that the Reconstruction Congress sought to protect with the Civil Rights Act of 1866.  Likewise, conservatives, including the plurality in McDonald, are uncomfortable with the “privileges or immunities” clause because it legitimates unenumerated rights, like the right to privacy recognized in Griswold v. Connecticut and Roe v. Wade.  Justice Alito demonstrated his discomfort with economic liberty too, when he asked in oral argument whether the “privileges or immunities” clause included the right to contract, clearly hoping that the answer was “no.”

    The top constitutional law scholars were completely caught off guard when a third black man, Justice Clarence Thomas, reinvigorated the “privileges or immunities” of citizenship in McDonald v. City of Chicago two weeks ago. In McDonald, the court struck down a Chicago ordinance banning handguns. Justice Thomas had been reading the scholarship on the “privileges or immunities” clause over the last several decades. He read it and understood it. And while this scholarship did not matter in the opinion of many of our nation’s top constitutional law professors, it did matter in an opinion that, itself, matters a lot.

    In his concurrence to the four other justices in the 5-4 majority, Justice Thomas refused to stretch the 14th amendment’s “due process” clause to guard the right to bear arms. Instead, he bravely read the constitution the way it was written, with little regard for how his opinion would be attacked from both the left and the right. His opinion acknowledged that the right to bear arms was clearly one contemplated by the framers of the “privileges or immunities” clause. Justice Thomas stood with Fredrick Douglass, and stood up for a black man trying to protect himself and his family in a city where the police admittedly cannot.

    Otis McDonald is that black man, the fourth to whom I owe so much. As I attempt to raise my two sons to be strong, confident and secure Christian men, I am grateful that this 76-year-old grandfather fought for my right to protect them from those who might try to do them harm.

    I purchased a gun several years ago, when I became concerned for the safety of my young family after receiving a verbal racial assault in our 21st century Northern California neighborhood. Perhaps I am the only Stanford Law professor who owns guns, including the one that once graced my father’s lap on that porch forty years ago. As an American, I am grateful for that gun. I am also grateful for the four black men who have made it possible for my sons to sleep at night, secure in the knowledge that I, and it, will do what is necessary to protect them.

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    This week saw the passing of George Steinbrenner.   As a kid, I loved the New York Yankees.  I remember watching the World Series game in which Reggie hit three home runs.  Steinbrenner made this possible.  Steinbrenner was also a jerk.  Not a garden-variety, see-one-everyday type of jerk, but a jerk of monumental proportions.  He was consistently abusive to everyone who worked for him and many people who didn’t.

    We have also been witness this past week to the movements of many free agents in the NBA, chief among them the exodus of Lebron James from Cleveland to Miami.  His former owner (in a Steinbrenneresque fashion) slammed James as someone who quit on his team in the playoffs.  Meanwhile James talks about how he was willing to give up money in order to win.

    NBA players are frequently chastized for caring only about money, for having no loyalty, for not caring enough about winning.  Such critics should be pleased with James (notwithstanding the tasteless and immature manner in which he made his announcement).  He clearly wants to win.  All the sports stories this week are about money and the desire to win.

    Frankly, I’m tired of both.  What I’d like to hear more about is that fact that we are talking about games.  Yes, we are also talking about people’s livelihoods, about jobs, about a lot of things.  But above it all is the fact that basketball and baseball and tennis and soccer are games.  Just games.  I’m a sports fan.  I like my teams to win.  A lot.  But can’t people have some perspective?

    If you are lucky enough to make a very nice living playing a game, shouldn’t that mean you have the decency not to be a jerk?  Can’t one leave it all on the playing field or the court and walk away after the buzzer sounds as a good person?  I think lots of athletes are both good competitors and good sports, but I’m tired of all the “the important thing is winning” quotes that everyone feels obliged to parrot.

    I’m often asked if I think that capitalism would work if people were motivated more by virtuous motives (I’ll leave the definition of “virtuous” to you, the reader) and less by profit, greed, and the like.  My answer has always been that of course it would work.  Measured GDP might not be as high, but no economist worth anything cares that much about GDP.  We care about human well-being.  In order to maximize welfare, we need free exchange.  We don’t need to equate welfare with market-based outputs.

    A few days ago I saw a story in the NY Times about the challenge professional women golfers have to stay at the top of their sport and have a family (OK, I admit, this is probably the only story about women’s golf I have ever read that is not about Michelle Wie).  I know that male golfers never have to consider this tradeoff, which is not fair, but I didn’t make the rules of reproductive biology!  I can understand the desire to succeed at a sport, and I realize that not all women want to be mothers, but I finished the story wanting to shout, “Don’t you realize that this is a freakin’ game you are talking about?”  If someone can live comfortably without professional golf  (these women are not choosing between golfing and working at WalMart), isn’t the sacrifice of a family in order to spend MORE time hitting a little white ball around far too big? (Fortunately, many women think it is, including some of the best.)

    A few days ago I had a really crappy, stressful day at work.  Later that evening my five-year-old came up to me and said, “I love you more than 1,208 galaxies!”  It isn’t unusual to get this outpouring of affection from him, but it helped re-tune my perspective.   Last night he told me, “If you get fired, we’d have to live in the park.”  He seems to understand the basics pretty well.  Loving your family: good; having to live in the park: not good.

    Maybe he can own a sports team one day.  That would make for one less jerk in the public eye.

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    Reason magazine recently hosted a debate in its pages over “where do libertarians belong?” The question was really whether libertarians ought to continue a tactical alliance with Republicans and the right, embark on a “liberaltarian” project, or disassociate themselves from both sides. The Cato Institute’s Brink Lindsey had previously argued in favor of the “liberaltarian” course (indeed coining the term), but after lack of constructive response from the left and the record of the Democratic Party in power has come to the view that libertarians should see themselves as occupying the center of the political spectrum, occasionally throwing their support to one side or the other. Jonah Goldberg argues in favor of the traditional libertarian-conservative alliance, while Matt Kibbe wants libertarians on board with the Tea Party.

    The main critique of Lindsey’s argument is that the U.S. political system simply does not allow libertarians to be represented in office as such. To get elected, libertarians will have to don either the Democratic or Republican label. Moreover, the “center” of the political spectrum is really not libertarian, but a David Brooks-ish, pragmatist mish-mash (Pileus on Brooks).

    My response to the whole debate is, Why do we have to choose? Libertarianism is by its very nature a diverse, nonhierarchical, individualistic movement. We can retain a concept of ourselves as a movement while nevertheless working both sides of the aisle. I know elected libertarian state legislators (on whose campaigns I worked, no less) who are both Democrats and Republicans. Now, the Democrats come under much more pressure from party leadership to compromise their principles. It’s a harder row to hoe. But the Democrats have a history in this country of being something of a catch-all party, and their electorate still reflects that to some extent. There are lots of “weak Democrats” out there who are very much open to liberty-based solutions.

    At the state and local level, at least in smaller states where state politics has not been professionalized, it’s particularly easy to work within both parties, because the primary campaigns are less high-profile and ideological and more centered around name recognition. Libertarian political activists need to think outside the LP box, start holding their noses, and get involved in their local Republican or Democratic parties. At the federal level, of course, the only constant is that things keep getting worse. Every time you think that there can be nothing worse than the federal Democratic Party, the Republicans take over and prove you wrong, and vice versa. The best we can hope for there is gridlock and widespread disillusionment and mistrust of incumbents. We have no interest in defending virtually any incumbents at that level. (There are a few people I would make an exception for, like Ron Paul and Tom McClintock.)

    Where do libertarians belong? Everywhere!

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    Depending on how you calculate the numbers (which is trickier than it seems), the ratio is anywhere from 1:11 to 1:510.  Here is a discussion of such calculations from Politifact, a neat service of the St. Petersburg Times and the Miami Herald:

    Using 105,000 total USDA employees and the BLS figure of 1.2 million farmers and farm workers — you get a ratio of 1 employee for every 11.4 farmers.

    If you exclude Forest Service employees (who have very little to do with farming) in the same calculation, there remains 1 USDA employee for every 17.6 farmers.

    But if you count just the Farm Service Agency, the main agency that works with farmers, the ratio becomes 1 Farm Service Agency employee for every 235 farmers under the BLS numbers or 1 employee for every 510 farmers under using the Department of Commerce figure [Senator] LeMieux cited or 1 employee for every 373 farmers using the other Commerce figure Crutchfield provided.

    If you use LeMieux’s 2.6 million figure and count all USDA employees, the ratio is about 1 employee for every 25 farmers.

    Regardless of the ratio, the most important issue is whether the Department of Agriculture should actually exist.  Does it perform duties authorized by the U.S. Constitution and consistent with a limited government?  Even aside from the bigger issue, clearly some pruning is due given the Department of Agriculture’s vast array of unnecessary programs, agencies, and offices.  I’ve highlighted the most egregious agencies that should be eliminated or cut substantially and whose tasks should be conducted in the private sphere (many of the others probably could be too, but there might be something legitimate about them).   

    Agricultural Marketing Service (AMS):  AMS facilitates the strategic marketing of agricultural products in domestic and international markets while ensuring fair trading practices and promoting a competitive and efficient marketplace. AMS constantly works to develop new marketing services to increase customer satisfaction.

    Agricultural Research Service (ARS): ARS is USDA’s principal in-house research agency. ARS leads America towards a better future through agricultural research and information.

    Animal and Plant Health Inspection Service (APHIS): APHIS provides leadership in ensuring the health and care of animals and plants. The agency improves agricultural productivity and competitiveness and contributes to the national economy and the public health.

    Center for Nutrition Policy and Promotion (CNPP): CNPP works to improve the health and well-being of Americans by developing and promoting dietary guidance that links scientific research to the nutrition needs of consumers.

    Economic Research Service (ERS): ERS is USDA’s principal social science research agency. Each year, ERS communicates research results and socioeconomic indicators via briefings, analyses for policymakers and their staffs, market analysis updates, and major reports.

    Farm Service Agency (FSA): The Farm Service Agency implements agricultural policy, administers credit and loan programs, and manages conservation, commodity, disaster and farm marketing programs through a national network of offices.

    Food and Nutrition Service (FNS): FNS increases food security and reduces hunger in partnership with cooperating organizations by providing children and low-income people access to food, a healthy diet, and nutrition education in a manner that supports American agriculture and inspires public confidence.

    Food Safety and Inspection Service (FSIS): FSIS enhances public health and well-being by protecting the public from foodborne illness and ensuring that the nation’s meat, poultry and egg products are safe, wholesome, and correctly packaged.

    Foreign Agricultural Service (FAS): FAS works to improve foreign market access for U.S. products. This USDA agency operates programs designed to build new markets and improve the competitive position of U.S. agriculture in the global marketplace.

    Forest Service (FS): FS sustains the health, diversity and productivity of the Nation’s forests and grasslands to meet the needs of present and future generations.

    Grain Inspection, Packers and Stockyards Administration (GIPSA): GIPSA facilitates the marketing of livestock, poultry, meat, cereals, oilseeds, and related agricultural products. It also promotes fair and competitive trading practices for the overall benefit of consumers and American agriculture. GIPSA ensures open and competitive markets for livestock, poultry, and meat by investigating and monitoring industry trade practices.

    National Agricultural Library (NAL): NAL ensures and enhances access to agricultural information for a better quality of life.

    National Agricultural Statistics Service (NASS):  NASS serves the basic agricultural and rural data needs of the country by providing objective, important and accurate statistical information and services to farmers, ranchers, agribusinesses and public officials. This data is vital to monitoring the ever-changing agricultural sector and carrying out farm policy.

    National Institute of Food and Agriculture (NIFA): In partnership with land-grant universities, and other public and private organizations, NIFA provides the focus to advance a global system of extramural research, extension, and higher education in the food and agricultural sciences.

    Natural Resources Conservation Service (NRCS): NRCS provides leadership in a partnership effort to help people conserve, maintain and improve our natural resources and environment.

    Risk Management Agency (RMA): RMA helps to ensure that farmers have the financial tools necessary to manage their agricultural risks. RMA provides coverage through the Federal Crop Insurance Corporation, which promotes national welfare by improving the economic stability of agriculture.

    Rural Development (RD): RD helps rural areas to develop and grow by offering Federal assistance that improves quality of life. RD targets communities in need and then empowers them with financial and technical resources.

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    If you are bored enough to dig through my older posts, you will find the argument that a central driver of the recent financial crisis (and business cycles generally) is fear and that, unfortunately, we are lacking any kind of theory of fear.  Keynes understood it was important, but did little to explain it.

    Victor Davis Hanson has a piece today on NRO Online called “The Psychology of Recession” that attempts to tackle this issue but is ultimately unsatisfying.  Hanson goes through a discussion he had with a businessman in which the businessman had a series of reasons for why he wasn’t hiring and investing (taxes, regulations, bailouts, cap and trade, the national debt, protectionism).  Hanson points out to his businessman colleague that, in each case, his complaints don’t hold water.  He says, “Private enterprise is wary, hesitant, even frightened, but nevertheless hard pressed to demonstrate in concrete fashion how Obama has quite ruined them in just 18 months.”

    Hanson goes on to argue that even though it is hard to point to concrete Obama policies, “fairly or not, when the president talks, business people do not gain confidence that he knows, or cares, much about them or what they do.”  Obama’s action amount to a giant “jigsaw puzzle” of fear, apparently.  He concludes,

    Why is this recovery L-shaped? It is not just what Barack Obama has done, but far more what he most certainly would like to do in the future. When business people look at the confiscatory government in Venezuela, crony capitalism in Russia and China, democratic socialism in Greece, and sky-high taxes in most of the European Union, they do not see a connection between those policies and individual prosperity and freedom. So even the faintest hint that America is no longer exceptionally at odds with state-run systems, but may in fact wish to emulate them, simply stuns private enterprise into inaction.

    Even though I am bugged by all the things that Hanson is bugged by, I’m still skeptical.  That private enterprise is “stunned” by even the “faintest hint” that we are losing our traditional democratic and capitalist moorings strikes me as a bit far-fetched.  I tend to see the entrepreneurial spirit in America as more robust than that.  Wasn’t our country built on the notion of “Damn the politicians, full speed ahead,” or something like that?  And even in highly regulated welfare states, smart people can still take advantages of opportunities (like interest rates near zero and an abundance of available labor).  People might like to whine about the President, but does that mean they are going to leave money lying on the table?

    The reason that fear only rules markets in the short run is that markets correct.  Those who take the risks are rewarded, and more people are drawn in.  Perhaps Hanson is right, which could mean that the Democrats getting trounced in November (should that happen) will clip Obama’s wings and restore the confidence of business as he becomes less and less a threat to free enterprise.  We can only hope.

    [On a related note, someone is running for Congress (I think it is a US Senate race somewhere in the South, but I don’t have time to look it up).  He is being accused of making millions of dollars from shorting the housing market.  Isn’t someone who was gutsy enough and smart enough to short the housing market someone we would want in Congress?]

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    When I speak to people outside of academia about some of the things that go on inside it, they often don’t believe me. But I never lie about such things. Here is one of the stories people find hard to believe.

    I defended my dissertation in the philosophy department of the University of Chicago in the spring of 1997. The title of my dissertation was “The Unintended Order of Morality in Adam Smith and David Hume.” I had wanted to write the dissertation on only Smith’s moral theory, and I had wanted to call the dissertation “Adam Smith’s Marketplace of Morality”—what I thought was a catchy title.

    My dissertation director tried to talk me out of writing a dissertation on Adam Smith on the grounds that it could be career suicide. I appreciated his concern, but in my naivete I thought his worries were exaggerated; so I decided to write on Smith anyway. He then warned me, however, that I would never get a job having written a dissertation that had the word “marketplace” in the title. He also strongly cautioned me against writing on only Adam Smith, even if it was on his moral theory and not his economics. I was, I confess, puzzled by his cautions. Wouldn’t my dissertation be judged on its quality? What exactly did he think people might think? Still, out of deference to my director, who was—is—after all an eminent scholar, I decided to add a discussion of Hume to the dissertation, and I changed the title.

    When it came time for my public defense of the dissertation, one of the members of my committee, about two-thirds the way through the defense, asked asked me this:

    Reader: “Mr. Otteson, even historians of philosophy must eventually ask what, in what they’re studying, is true—not just exegetical questions, but what we should believe today. Wouldn’t you agree?”

    Me [with a sense of foreboding]: “Yes, I would agree.” 

    Reader: “Well, then, should I infer from the fact that you chose to write your dissertation on Adam Smith that you endorse multinational corporations selling tainted baby milk in third-world countries?”

    I was, as one might imagine, shocked at the question. I hadn’t discussed multinational or any other corporations in my dissertation; I hadn’t discussed tainted baby milk or any other product or good; I hadn’t discussed globalism or third-world countries. I had discussed what I think is Smith’s spontaneous-order conception of human morality, and I had even discussed how I think Smith makes an “invisible-hand” argument in his Theory of Moral Sentiments that parallels his invisible-hand argument in The Wealth of Nations.

    But how does one go from there to inferring that I want companies selling tainted baby milk? The connecting chain of ideas I imagined might be taking place was: Adam Smith is the father of capitalism; capitalism leads to evil things; someone writing about Adam Smith must endorse Smithian capitalism; therefore Mr. Otteson must endorse the evil things capitalism allows; prehaps Mr. Otteson is himself evil. How else, I wondered, would one arrive at thinking that one should ask me that question?

    Perhaps my dissertation director, who had tried to warn me, had a point after all.

    I did not manage to come up with much by way of an answer. I asked whether the company in question knew that the milk was tainted, and then tried to muddle my way forward from there. Thankfully, however, I was rescued by another member of my committee—my lone outside reader, distinguished Adam Smith scholar Knud Haakonssen—who interrupted me and said that he didn’t think the question was fair to Mr. Otteson since he hadn’t addressed any of those issues in the dissertation. I will forever be thankful to Professor Haakonssen for that.

    That exchange has stuck with me ever since. The person who posed that question has now retired, after a long and distinguished scholarly career. I had even served as a teaching assistant to him during my time at Chicago; I learned a great deal from him and developed a deep respect for his scholarship. But that question was not fair, not fair at all; yet I fear the fact that it was asked is telling.

    Imagine this analogous exchange in a hypothetical dissertation defense:

    Reader: “Mr. ——, even historians of philosophy must eventually ask what, in what they’re studying, is true—not just exegetical questions, but what we should believe today. Wouldn’t you agree?”

    Mr. ——: “Yes, I would agree.”

    Reader: “Well, then, should I infer from the fact that you chose to write your dissertation on Karl Marx that you endorse the slaughter of tens of millions of innocent noncombatants that took place during the twentieth century in the name of Marxian ideals?”

    Though I have no evidence for it, I suspect that an exchange like the one I had is not all that uncommon; by contrast, I would be quite surprised if an exchange like the hypothetical one I describe has ever happened. Am I wrong?

    In a future post I may recount some other bizarre or shocking things that I have heard in my years as an academic. In the meantime, I invite readers to share their own.

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    The Migration Policy Institute estimates that the total stock of illegal immigrants in the United States has fallen slightly, from 12.1 to 11.9 million, between July 2008 and July 2009, due to the poor economy. (Inflows of legal migrants continue.) What’s interesting is that those numbers haven’t fallen more. The Economist argues that even in a recession, there are substantial economic gains to be had by remaining in the country. I wonder as well whether the political uncertainty surrounding immigration enforcement and the possibility of much stricter border enforcement in the future are keeping immigrants here because they fear having to try to get back over the border once the economy improves. The Economist story above also reports on a study showing the economic benefits that migrants bring back to their homelands when they return, benefits that are presumably now being foregone. So someone explain to me again: why can’t we get a broad-based guest worker program set up?

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    In a recent series of posts (finale here), I estimated the size of the liberty constituency in each state by conducting a principal components analysis of four variables: per capita donors to the Ron Paul campaign, unexplained Ron Paul primary vote share, mean Libertarian Party presidential vote share 1996-2004, and Libertarian Party presidential vote share in 2008. Then, I regressed estimates of individual freedom from the Ruger-Sorens Index on the estimate of liberty constituency size, finding that states with larger liberty constituencies have more freedom.

    Some conversations have raised the possibility of using these regression results to predict the effect of the Free State Project (see an exchange with Patri Friedman here). The idea is that I could plug in hypothetical values for New Hampshire on all the four variables above, assuming that they get 2,000, 5,000, or 10,000 more libertarian activists. In other words, given my estimate of the effect of the size of the liberty constituency on freedom, what would be expected to happen to freedom in NH if the liberty constituency in that state grew?

    To do this, I first added 2000 Ron Paul donors and Libertarian Party voters to the state, along with 4000 Ron Paul voters. (Why? Because elsewhere I’ve found that each additional Free Stater in a New Hampshire town generated two additional votes for Ron Paul. Now, of course, there probably won’t be another Ron Paul campaign, but there will be other ways in which libertarian constituencies evince themselves – remember, I’m just trying to get a reliable measure of the size of the liberty bloc; the inputs as such don’t matter.) Then I figured out how that would change the estimate of the size of the libertarian bloc in New Hampshire. The aggressive assumption behind this move is worth noting. In particular, I’m assuming that the overall ideological distribution in NH on the libertarian-populist dimension shifts as a result of these activists. In other words, the overall relationship behind number of activists and size of liberty constituency remains constant – the liberty activists don’t just become an ideological ghetto. Presumably, it will take some time for activists moving into the state to have an effect on the mindset of the people already there, so the estimates I’m giving here are for a fairly optimistic, long-run-ish view of what the FSP can accomplish. (On the other hand, I’m assuming that the state remains fairly liberal on the left-right spectrum, which might be a pessimistic assumption.)

    Now that I have a hypothetical value for New Hampshire’s future liberty constituency, I can plug that into the regression equation to see what value of freedom pops out, assuming that New Hampshire remains the same on every other variable. I do this by running 1000 simulations of the freedom regression, so that I can pull out a margin of error. When I do this, I find that New Hampshire’s expected freedom value increases by 0.37 on 0-1 scale, with a 95% confidence interval of 0.017-0.685. OK, what do those numbers mean? Well, that’s roughly the difference between New Hampshire and Nebraska today, or between Nebraska and New Jersey. That’s still pretty abstract, though.

    To get a more concrete sense of what that means, I played around with the state policy data to see what changes would correspond to that kind of increase in freedom. I cut state and local spending by 3% of personal income (from 17.3%) and state and local taxes by 1.5% of personal income, from 8.4% (these don’t match up, because federal grants cover roughly half of state spending). Then I cut government employment by 2% of the workforce, from 10.8%. Then I gave New Hampshire Alaska’s gun laws (concealed carry without a permit and removal of some other minor regulations). Then I completely privatized wine and liquor and cut beer taxes to zero. Then I completely legalized marijuana possession, legalized cultivation and sale of medical marijuana, and decriminalized cultivation and sale for recreational use. (No state is actually this good.) Then I completely deregulated homeschooling: no testing, recordkeeping, or even notice required. (No state is actually this good.) Finally, I gave New Hampshire same-sex marriage, because, well, it already has that – but it got it after our data came out. That got New Hampshire up to the expected level of freedom after having had 2000 activists move in.

    Now, there is a good bit of uncertainty about this estimate. It could be that these 2000 activists will have a much bigger or much smaller effect on freedom. The bottom end of the 95% confidence interval corresponds to just same-sex marriage, the gun law change, and medical marijuana. Not a huge deal. The upper end corresponds to everything mentioned, plus adding right-to-work, adopting the best existing occupational licensing regime in the country (Indiana’s, just 20% of the workforce licensed, compared to NH’s 23%), reducing victimless crime arrests by about 50%, to Hawaii’s levels, repealing all smoking bans on private property, abolishing cigarette taxes, legalizing prostitution, abolishing all campaign finance regulations, and cutting state and local debt burden by about a half. By that point, New Hampshire starts to look like a mix of Amsterdam and Alaska on personal freedoms and Hong Kong on economic freedom.

    What about if 10,000 activists move to NH? Well, the freedom regression model doesn’t build in diminishing returns, so the simulations yield a predicted change in freedom of 1.46, roughly five times that predicted for 2,000 activists, unsurprisingly. At that point, we’re talking about cutting government to the bone, including tax and spending reductions of 50% or more and abolishing all of the remaining petty, paternalistic restrictions on freedom that we code, from gambling laws to sobriety checkpoints, legalizing assisted suicide, and completely deregulating education, complete with a strong tax credit-based school choice program, in addition to everything previously mentioned.

    But at this point we are so far outside the range of observed politics that I strongly caution against taking these inferences all that seriously. It is possible to push a regression model much further than it can bear. I simply wish to get a sense of the orders of magnitude of change that might be possible with the FSP’s success.

    In conclusion, it appears that with 2,000 activists who are smart about educating the general voting public and do not isolate themselves, the long-term gains to freedom in New Hampshire could be fairly extensive, though not approaching what anyone would describe as a “libertarian utopia.” It’s at about 4,000 effective libertarian activists that we could reasonably expect NH to start to look like the Amsterdam/Alaska/Hong Kong hybrid.

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