Archive for December, 2012

Last year, the Pileus bloggers made some forecasts about 2012. How did we do? Here are my predictions:

1. “Sudan and South Sudan will go to war. Both countries will also experience internal armed conflicts with at least 25 battle deaths.” Sudan and South Sudan fought a brief war in March and April of 2012. Fortunately, the war was short, and the conflict has been partially resolved. I have not been able to find a source for fatality estimates for the internal conflicts in Sudan and South Sudan, but it seems likely that over 25 battle deaths occurred in both countries.

2. “Syria will experience a high-intensity civil war with at least 1000 battle deaths.” Unfortunately, this also came true.

3. “The intersectarian Iraqi coalition government will collapse and eventually give way to a Shi’a-dominated coalition.” Bzzt. Despite tensions, the coalition survived the year.

4. “Massive ECB intervention will continue to keep the Eurozone on life support, but this policy will become increasingly unsustainable as time passes. No country will leave the Eurozone in 2012.” Not a terribly bold prediction, but it held true.

5. “Romney will probably win the Republican nomination; Obama will probably win re-election; Republicans should narrowly win majorities in both houses of Congress; Republicans should win control of all four branches of government in New Hampshire (yes, four: the Executive Council
is really a branch unto itself).” I was right about Romney and Obama, but wrong about the U.S. Senate and three of the four branches of N.H. government.

Call it 3.5 out of 5?

Here are some calls for 2013:

1. Bashar al-Assad will no longer be in power in Syria at the end of 2013. However, the civil war will continue.

2. U.S. troops will not be sent to Mali.

3. The PPACA will suffer another flesh wound when Oklahoma wins its case against the federal exchange subsidies.

4. The sequester will not occur.

5. Scott Brown will win back a seat in the U.S. Senate in a special election.

6. An assault weapons ban will not pass the House.

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The Prologue

The protracted negotiations over the fiscal cliff suggest how difficult things will actually become once we begin to address the simple fact that existing entitlements cannot continue to exist in their current form.

The one significant reform that was proposed earlier by President Obama during his discussions with the Speaker involved using the chained CPI rather than the CPI-W to calculate the cost of living adjustment for future Social Security benefits. This change would reduce the rate at which benefits would increase in the future.  This would not solve Social Security’s problems, but it would be a movement in the right direction. There are better options in my opinion (including progressive indexing that would retain the CPI-W for low wage workers, adopt the CPI for high wage workers, and blend the two for those who fall in the middle). But adopting the chained CPI would be more palatable than other options (e.g., raising the retirement age could have devastating consequences for African American males, who have a shorter life expectancy).

But none of this matters at this juncture, since the political response was precisely what one might have anticipated. Reportedly, Senator McConnell, at one point willing to trade higher taxes for the changes in Social Security, has now taken it off the table. Democrats rejected the proposal and the majority of the GOP caucus in the Senate supported excluding it from any deal on the fiscal cliff. The GOP may find tax increases abhorrent, but the largest entitlement programs—unlike taxes—remain politically untouchable.

The Obama administration, the House, and the Senate clearly understand (or should understand) three things: (1) the largest entitlement programs are both unsustainable and the drivers of long-term fiscal instability; (2) reform is inevitable; (3) the sooner reforms occur, the less pain will be imposed on taxpayers and beneficiaries. If they don’t understand these things, they should simply turn to the reports by the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds (currently chaired by Treasure Secretary Geithner and including HHS Secretary Sebelius and Labor Secretary Solis).

From the 2012 report’s overview:

“The dollar level of the combined trust funds declines beginning in 2021 until assets are exhausted in 2033. Considered separately, the DI Trust Fund becomes exhausted in 2016 and the OASI Trust Fund becomes exhausted in 2035.”

The projected unfunded liabilities have grown considerably in the past few years:

“The open group unfunded obligation for OASDI over the 75-year period is $8.6 trillion in present value and is $2.1 trillion more than the measured level of a year ago.”

Of course, there are many options for reform identified by the Trustees, including increases in the payroll tax (from 12.4% to 15.01%), reduction in benefits “equivalent to an immediate and permanent reduction of 16.2 percent,” or a decision to draw on general revenues. This last option is not a real option given the magnitude of our deficits and debt.

Medicare, which is projected to grow from 3.7 percent GDP (2011) to 5.7 percent of GDP (2035) is even more of a challenge. According to the Trustees:

“The Medicare HI Trust Fund faces depletion earlier than the combined Social Security Trust Funds, though not as soon as the Disability Insurance Trust Fund when separately considered.”

“The drawdown of Social Security and HI trust fund reserves and the general revenue transfers into SMI will result in mounting pressure on the Federal budget. In fact, pressure is already evident. For the sixth consecutive year, the Social Security Act requires that the Trustees issue a “Medicare funding warning” because projected non-dedicated sources of revenues—primarily general revenues—are expected to continue to account for more than 45 percent of Medicare’s outlays, a threshold breached for the first time in fiscal year 2010.”

The Trustees strongly support immediate action:

“Lawmakers should not delay addressing the long-run financial challenges facing Social Security and Medicare. If they take action sooner rather than later, more options and more time will be available to phase in changes so that the public has adequate time to prepare. Earlier action will also help elected officials minimize adverse impacts on vulnerable populations, including lower-income workers and people already dependent on program benefits.”

One wishes that the Obama administration and Congress had used the self-imposed fiscal cliff as a window of opportunity to address the unsustainability of our long-term entitlements. There were some early indications that they were moving in this direction. But short-term incentives prevailed. Is anyone surprised?

In the next few days (or at most, the next few weeks), Congress will find a fix for the fiscal cliff without addressing the long-term drivers of our fiscal problems. At best, the drama of the past few weeks will be little more than a prologue to the far more significant battles in the future.

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Quite often feminist critiques of popular culture are insightful, but sometimes they are simply insufferable.

The latter description is apt when describing the comments of Princeton theater professor Stacy Wolf regarding the musical Les Miserables.  I happened to see the new cinematic depiction of the popular musical this past week and was moved, as I always am, by this magnificent work.  The story of the saintly Jean Valjean is inspiring on many levels. And the female characters in the musical are as strong and compelling as the male characters, though the story is mostly about Valjean’s redemption.

Wolf, on the other hand, sees “outdated gender roles” and “old stereotypes.”  In her view, “the female characters are there only for the men to save, pity or forget…They don’t actually do anything.  Instead, they emote, propelling others to action.”

So, in Wolf’s eyes, sacrificing oneself for one’s child, as Fantine does, is just “window dressing” and not really “doing” anything.  And poor Eponine, who bravely fights and dies alongside her fellow revolutionaries, isn’t actually doing anything, either, I guess.  This is feminism? Given the world in which they lived and the constraints they faced, are not their actions incredibly heroic and laudable?  Wouldn’t any reasonable person—a category that academic feminists apparently do not belong to—see them as true heroines, as great as any in literature, historical or modern?

Consider the following from Professor Wolf:

The female stereotypes in “Les Miz” are deeply embedded in our culture — the mother who sacrifices herself to the death, the two women who love the same man, and the woman who desires a man in a different class. These characters are readily available, always recognizable and appealing in their familiarity.

Two points are crucial here.  First, are not the fathers who sacrifice to the death for their children, or two men who love the same woman, or the man who desires a woman of a different class, also stereotypical in our culture?  Is Wolf’s vision so obstructed by her feminist blinders that she fails to see these types among men as well?  True, the primary protagonist and antagonist in this particular story are male, but any honest critique sees heroes and villains among both genders here.  These stereotypes Wolf mentions are no more female than male.

Second, even if they were female stereotypes, do they deserve this derision?  Fantine was so desperate that she was driven into prostitution.  Wolf writes off Fantine as a “hooker with a heart of gold,” as if she were merely a 19th century version of Julia Roberts in Pretty Woman.  In reality, Fantine does everything she can to avoid this fate.  There is no romance or charm about it.  It is hideous.  And Fantine realizes this more than anyone.  Wolf, though, does not seem to get it.

A value of feminist criticism, it seems to me, is to point out how traditional roles than women have played—sometimes by choice, sometimes by force—have tremendous social value and that that value is often negated and diminished by a male-dominated world.   To value women’s work and women’s choices is not to condone the oppressive social structures that shape that work or that constrain the choices women may have in a given society.  Wolf diminishes women far more than Cameron Mackintosh ever has.

Fantine sacrifices her body, soul and, life for the benefit of her child.  Her choices were dreadful because her options were dreadful.  Many mothers and fathers would be willing to make such a sacrifice, and Valjean makes tremendous sacrifices of his own on behalf of Cosette, his adopted daughter, and would clearly give his life for her.  But to the extent that such self-sacrifice is more typical of mothers than fathers, isn’t this something that women deserve praise and credit for, rather than the contempt that Wolf heaps upon them? That Wolf sees Fantine as someone who doesn’t do anything but provide window dressing is a stunning commentary on the morally bankrupt state of academic feminism.  No one in the story, including Valjean, does anything more noble or more worthy of respect than what Fantine does.  And this isn’t because she is a woman playing a stereotypical role.  It is because she is a strong woman making a terrible sacrifice. Wolf’s dismissive attitude towards her (and, it bears mentioning, towards Eponine) is hardly better than that shown to the prostitutes by their unfeeling clients.

Wolf closes her piece by identifying characters from modern pop culture that are apparently worthy of her respect.  Almost unbelievably, these include the trashy characters in the film Bridesmaids, who “dare to be outrageous, funny, and obscene…These women are strong, clever and, yes, vulnerable,” according to Wolf.  So, this is the strange, feminist universe that Wolf resides in. Just because female characters can now debase themselves in the latest self-indulgent vulgarity from Judd Apatow equally as well as the male characters, we consider them “brave?”  Amazing.

I know very little of 19th century French political history and have no idea whether I would have admired the real-life versions of the revolutionaries portrayed in the musical.  But I don’t really care about that.  The fictional story is about fighting for a better world where neither men nor women face the type of misery depicted in the story.  If those revolutionaries had been able to see the brave new world envisioned by Wolf, one wonders if they might not have bothered.

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From a recent Wall Street Journal article:

Bruce H. Lee, president of a real-estate company, and his wife, a schoolteacher, together earn more than $250,000 a year. Their accountant told them to prepare for higher taxes on their capital gains and dividends as well as a possible rate increase.

Mr. Lee lives in Kensington, Md., a Washington suburb, and said his income doesn’t stretch very far in a major metropolitan area. He doesn’t enjoy the perks of a superrich lifestyle, such as a vacation home. He is prepared to cut back on discretionary spending, mainly vacations and eating out, when his tax bill goes up.

“Why they’ve singled out this $250,000 number is beyond me,” he said. “I feel like it’s an attack on the middle class.”

Bruce Lee certainly may “feel” like it’s an attack on the middle class but let’s go to the numbers.  Median household income in the United States in 2011 (the most recent year reported by the US Census Bureau) was $50,054.  So, the Lee’s earn at least 5X what the median household does.  But that doesn’t provide the killer blow to Lee’s “feeling.”  This, from the Congressional Research Service, does:

Of the 121,084,000 households with income in 2011, only 2.3% had incomes of at least $250,000.

Of course, as that CRS report points out, “there is no official government definition of who belongs to the middle class, and the terms means different things to different people.”  However, it is absolutely absurd to imagine that someone in the top 2.3% is “middle class” – at least in terms of earnings (more on this below).    And this is even borne out by a VERY generous conclusion from income data married to social class identification surveys.  As the CRS report concludes, doing so yields the following conclusion: “the middle class may refer to households with income levels in 2011 that ranged from $38,521 (the bottom of the middle quintile, 20%, of households) and extended into the top quintile (households with income of $101,583 or more)—perhaps including households with incomes somewhat over $200,000.”  Here is the distribution of annual household income based on 2010 estimates:


Now one (perhaps Prof. David Henderson of the Naval Postgraduate School given what he’s written before on income vs. wealth) might insist that it is hard to know if Mr. Lee isn’t really in the middle class given that income can fluctuate and household income figures don’t take into account actual wealth.  Moreover, one could argue that blunt household income doesn’t take into account the cost of living where one lives.  Let me take these on one at a time.

In terms of the first, Henderson and others have a point.  If I’m a below average football player and make the league minimum ($390,000/year for a rookie), I could make a lot this year but then see a rapid decline in income for the rest of my career should I be cut from the team after one year.  It is unlikely that the one year high salary would matter too much to my lifelong wealth depending on what I did with it.  However, in the case of Mr. Lee and many others, the high income is likely to be the product of high human capital that will continue to see high returns on investment for some time (assuming that capital doesn’t become obsolete due to creative destruction, et al).  My guess is that Mr. Lee has had a high income for a long time and will continue to do so.  This year over year advantage over the median household will only make his relative position better.  Thus he is probably not only high income but wealthy (or soon to be so) - and thus hardly middle class.  Or – if he’s spent a lot of that high income – he’s not middle class in terms of past consumption.  This should not be forgotten when looking at classes, since it is hard to believe that the family who makes 50K a year with savings of 10K and expenses of 40K (including taxes) is in the same class as the family that makes 250K a year with savings of 10K and expenses of 240K (including admittedly higher taxes) even though their wealth will technically be the same (assuming those consumption goods aren’t real capital).  The latter family has probably taken winter trips to Vail, summer trips to Montana, and consumed a heck of a lot more on things that the first family can’t afford (like the SAT prep courses, technology, and other things for the kids).

In terms of the geographic cost of living issue, this is also a bit of a red herring.  While Mr. Lee certainly has to spend more on basic things like housing than someone in Topeka, Kansas, he probably gets a lot of consumption value for that extra cost.  He is closer to a lot more high paying jobs, the school system is probably better than many others around the country, and he is close to a lot of amenities.  This is why the house costs so much in the first place — it is highly desired by others!  But even worse in terms of relative gains, Mr. Lee can use his relatively high salary to buy a relatively expensive house – in Kensington, MD, the average sales price is $515,000 according to Trulia — and live in it until he decides to move or retire.  At that point, he can take the product of his high salary  – which is partly a product of geography too – that he has captured in his house and move to a lower cost of living area and live like an absolute king.  Again, this is not what the truly middle class can do.

So rather than feeling too glum about the attack on the Middle Class, Mr. Lee ought to feel great that he’s f&^king rich among the highest income earners in the US.  Congratulations!  Assuming he is providing value to his clients and isn’t involved in rent-seeking (or the beneficiary of rent-seeking behavior), he should be very proud of himself.  Of course, it is a shame that the government is trying to tax his productive behavior so highly.  And I feel glum that the government not only attacks creators of real value but enriches the parasites that have grown up around government.  But let’s not allow our “feelings” to cloud our thinking about whether we are really part of the middle class!

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The fiscal cliff debates seem to be at a standstill as we approach the end of the year.  On the spending side, the proposal to change the indexing for Social Security seems to be quite positive. The use of the CPI-W has fueled growth in the real value of benefits and the substitution of a more realistic measure of inflation (or some kind of progressive indexing) is a change that could make a significant difference over time.  Republicans are likely correct in their dissatisfaction with tax increases today in exchange for significant cuts in the future since no Congress can effectively bind the hands of a future Congress.

The tax side is particularly interesting, and I wonder if the GOP understands what a victory any agreement would be that made the Bush tax cuts permanent for the vast majority of the population. Regardless of whether the taxes increase for households making $250k, $400k or some other number, the overwhelming fact is that the significant tax cuts introduced under George W. Bush are likely to become permanent. For the GOP, this is no less a victory than the 1996 elimination of AFDC, which essentially consolidated many of the reform efforts of the past 15 years.

Zachary Goldfarb (Washington Post) has an interesting article reinforcing this position. A few excerpts:

R. Glenn Hubbard, dean of the Columbia Business School and an architect of the Bush tax cuts, said it is “deeply ironic” for Democrats to favor extending most of them, given what he called their “visceral” opposition a decade ago. Keeping the lower rates even for income under $250,000 “would enshrine the vast bulk of the Bush tax cuts,” he said.

And, due to the progressivity of the US tax system, even the wealthy would continue to reap benefits when compared with the expiration of the tax cuts when taken as a whole.

The first $250,000 earned by even the wealthiest families is subject to lower rates. For this reason, Obama noted last month that under his proposal, “every American, including the wealthiest Americans, gets a tax cut.”

For instance, an individual taxpayer earning between $200,000 and $500,000 a year would pay an average of $515 more in taxes next year if the Bush tax cuts for the wealthy expire, according to the nonpartisan Tax Policy Center. But if all the Bush tax cuts were to vanish and the rich had to pay higher rates on all their income, their tax bills would shoot up by an average of $6,000. The very richest — the top 1 percent of earners — would pay much higher taxes if solely the upper-income tax cuts expire, because the savings from extending the rest of the rates would be relatively negligible.

Bottom line: regardless of where you draw the line on taxes for upper income earners, the proposed deal on the fiscal cliff locks in the Bush tax cuts—a clear victory for the GOP, particularly given the poor Republican performance in the 2012 elections, candidate Obama’s commitment to reversing the Bush tax cuts,  and the fact that the Democrats are firmly in control of the White House and the Senate.

Of course, I would not argue that a victory for the GOP is a victory for the nation given the long-term fiscal imbalances. In my view, we need higher taxes (let’s begin with the elimination of all tax expenditures, beginning with those that lavish subsidies on the top two quintiles). We also need significant reductions in expenditures, particularly in our largest entitlements, the defense budget, and various forms of corporate welfare (including agricultural subsidies).

But there is little question that the Obama administration is willing to hand the GOP a significant victory. It only has to accept the gift.

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For God so loved the world

I enjoy learning about different moral philosophies.  Few questions are more important, it seems, than this basic one: what ought we to do?


Here is a Christmas snow sculpture from my family to yours.

Every philosophical theory has to start with some conception of what is it about human beings that really matters.  Given philosophers’ penchant for reason, it is no surprise that so many through the ages take as a starting point the autonomous nature of man and his ability to reason, though I’m not sure I would privilege reason over many other important capacities  (if artists created philosophy, our moral framework might start with the human capacity to experience and created beauty, for instance).  Others emphasize the capacity for pleasure and pain, and the ancient Greeks still have a lot of relevance with their emphasis on human flourishing, humankind’s capacity to experience what they called eudamonia.

But, though interesting, I find all these theories singularly unsatisfying and quite disconnected from true morality.  This is because they all fail to really answer the question of why the particular compounds of chemicals known as human beings should matter any more than any other compounds in the universe.  If the universe is a random, chaotic place with no intention or purpose, then do our questions or our reasoning have any import?  Indeed, in such a universe it is hard to even conceive of what “meaning” actually, well,…means.  Our reason lets us reflect on what matters but is not, in my opinion, the wellspring of moral value.

In my mind, the reason anything has value is because it is valued.  The reason our questions about what is right and our striving to do what is right have value is because we are valued.

So, at the close of this Christmas day, my message is a simple one.  “For God so loved the world….”

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I hope all of our readers had a merry Christmas today and are enjoying the holiday season.  I spent the day with a foggy head and sore body thanks to someone running a red light and causing a pretty serious accident involving me and my treasured old car on Christmas Eve.  I think I’ll survive but the car almost certainly won’t.  Fortunately, the other driver fared better than me from what I could tell.

But the reason for my post is not to relate my woes but to ask people to think about exercising their travel freedom with more personal responsibility.  The foolish behavior of the person who wrecked me caused significant costs to others that could have been a lot worse.  As it was, her free choices ruined my Christmas Eve and Christmas, caused me physical pain that could continue for some time, and imposed costs on my future time and budget since I’ll now have to shop for and buy a new/used car that I was not ready to purchase right now.  Not exactly how I wanted to spend the holidays.  It also made my children’s Christmas a lot less enjoyable — and they only get a limited number that are so purely joyous as the ones that occur between the ages of 3 and 9 or so.

Despite all this, I feel lucky compared to the many people victimized by drunk and otherwise careless drivers in our communities.  Thousands are killed every year in preventable accidents.  Please remember to drive carefully and to take your time on the roads.  I have a hard time believing that anything I’ve been driving to is so important as to risk the lives of others (or myself and the people I’m carrying).  I’m guessing the same is true for you.  And wear a seat belt!  While I have great disdain for seat belt laws (and appreciate that New Hampshire is the only state without one for adults), we here at Pileus have long-stressed that one shouldn’t necessarily exercise every freedom we enjoy nor legislate everything good for your body or soul.  My seat belt probably saved me a lot of pain and suffering.  My guess is that it will for you too at some point.

And finally, yes, I believe that scolds are probably underrated in our particular society (even as I myself chafe at certain scolds).  Their approbation and disapprobation help form the moral sentiments within us all – often for the good in a civilized society.

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Imagine a sports news jockey who accused a white athlete of trying to act black or being a traitor to his race by dating a black woman.  Simple: End of career. End of story.

Rob Parker at ESPN learned that as long you are a black person criticizing someone for not being black enough, you just get a slap on the wrist.  Parker really piled it on the supremely-talented RGBIII, calling him a “cornball brother,” which apparently means acting white by dating a white woman, being a Republican or doing other white things.

But at least ESPN has enough sense to know that Parker crossed the line.  Apparently the New York Times doesn’t have the same level of journalistic integrity.  They actually invited racist political science professor Adolph Reed to say essentially the same thing about South Carolina’s new black Senator, Tim Scott.  According to Reed, Scott is merely a “cynical token,” a tool of the GOP establishment who does not count as a real black person because, by the fact of his Republican beliefs, he does not support the “interests of black people” [one might argue that the interests of black people are best-served by establishing fiscally conservative, pro-growth policies that lift all racial groups, but I digress].  According to Reed, if someone would not win a majority of black voters, he is not a real black person, but merely a token.

During our recent and painful election, the favorite “argument”  Chris Matthews and his merry band of MSNBC-loonies were constantly making was that the Romney campaign had a strong racist undercurrent, their favorite term being “dog-whistle.”  When Romney said “We don’t want to turn into Greece,” Matthews would loose a gasket and rant something like, “there he goes referring to Obama as something foreign or other, which is just another way of attacking his race.”  [not a direct quote].  When the dog-whistle folks are after you, there is nowhere to hide, because everything is spun in racist terms.

We saw this in recent weeks with the case of Susan Rice, US Ambassador to the UN and once-potential successor to Hillary Clinton.  Over and over again we heard how she was being opposed because she was a black woman.  How, one might ask, does this make sense, since the GOP have had two black Secretaries of State, one of them a woman?  Well, this is where Reed’s logic comes into play.  Whenever black people win office as Republicans or are appointed to office by Republicans, it doesn’t mean anything because such people are, ipso facto, not really black people.  This is powerful logic.

The fascinating week ended with another mind-bending op-ed in the Times.  Another professor (sometimes my profession is so embarrassing), Carolyn Chen, laments the discrimination Asian-Americans face in college admissions, comparing the apparent quotas of Asians in elite private universities with quotas that existed some years ago to limit the enrollment of Jews in places like Harvard.  One might wonder why quotas that hurt the chances of high-achieving Jewish kids are terrible, but those that work against whites in general are OK, but Chen never raises that question.  Obviously, privileging anti-Jewish bias over other types of bias needs no defense, at least in the Times.   Chen is on safe ground, though, because her color-coded approach to Affirmative Action is that blacks and Hispanics should still be beneficiaries of Affirmative Action, but Asians and whites should be put on a “level playing field.”  Dang, I guess all of us white racists were so busy hating blacks and Hispanics that we forgot to hate those pesky Asians, and now they want all of our spots at Harvard.  Racists policies that hurt middle-class white kids: OK.  Racist policies that hurt Asians: Not OK.  Go figure.

Chen goes on to further reveal the Times racial standards: Asians, as a group, do better than whites because of the”work ethic and faith in a good education” that they inherited from their parents, she says.  Surely, there are some pretty strong cultural explanations for why Asians do so well [just think what could be accomplished if we spent more time trying to understand and replicate the success achieved by Asian immigrant groups, rather than complaining about the deficiencies of standardized testing].  But imagine if one were to state in print a similar reason for why whites perform better on academic measures than blacks or Hispanics.  Such a claim would certainly engender the wrath of Times editors and leftists everywhere, for don’t we all know that racial disparities are due to the racism of whites, not cultural factors?  We have been hearing for decades how standardized tests are culturally-biased.  Apparently, those racist test-writers are more clever than we thought.  They figured out how to write tests that are culturally biased against both blacks and whites!

Aaaaah, the fascinating world of post-racial politics.

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Daniel Inouye

As you all know by now, Hawaii Senator and President pro tempore Daniel Inouye passed away on December 17 at the age of 88. He is currently lying in state in the Capitol Rotunda (coverage here). Senator Inouye was a World War II veteran and received the Medal of Honor for his service. A friend sent me a brief video of Senator Inouye recounting the battle that left him severely injured.

In an age when national notoriety is lavished on individuals for the trivial, it is useful to remember that there are genuine heroes.  In the case of Senator Inouye, his sacrifice in World War II was followed by more than half a century of public service.

Daniel Inouye, RIP

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Dave Brubeck

As a long time reader of the Economist, I am frequently struck by the sheer beauty of the obituaries it publishes.  In this week’s print edition, the subject is Dave Brubeck, who died on December 5th at the age of 91. Here are a few excerpts (those who want to read the obituary in its entirety can find it here):

Give him a few bars of Beethoven, and he’d weave a jazz riff through it; but put him in the middle of a jazz set, and he would come up with classic counterpoint as strict as the “Goldberg Variations”. Sing him a tune in C, and his left hand would play it in E flat; give him a jazz line in standard 4/4 time and he would play 5/4, 7/4, even 13/4 against it, relentlessly underpinning the adventure with big fat blocks of chords. He was a jazzman who struggled to read notation and who graduated on a wing and an ear from his college music school; and he was also, in later years, a composer of cantatas and oratorios who was proud to have written a Credo for Mozart’s unfinished “Mass in C minor”.


 Whenever he sat down at the piano— an instrument as satisfying, to him, as a whole orchestra—his aim was to get somewhere he had never got before. It didn’t matter how tired he was, how beat-up he felt. He wanted to be so inspired in his explorations that he would get beyond himself. He liked to quote Louis Armstrong, who once told a woman who asked what he thought about as he played: “Lady, if I told you, your mind would explode.” In his own words, he played dangerously, prepared to make any number of mistakes in order to create something he had never created before.

Dave Brubeck, RIP.

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As a resident of Connecticut, I have followed the events surrounding the Newtown shooting with great interest and sadness. By way of full disclosure, I am a hunter. When I was a child in Wisconsin, my father took his sons to gun safety classes taught in the basement of the local police department. Both of my sons went through hunter training courses before they joined me hunting pheasants (neither really liked hunting, but at least I knew that they understood to respect firearms, use them safely, and lock them up when not in use). I have never hunted with a semiautomatic weapon. I find it unsportsmanlike.

I am sympathetic to the claim that some may want firearms for home protection (although as a friend of mine—a Marine sharpshooter and Connecticut state trooper—notes, the best weapon for home defense is a shotgun, not a semiautomatic pistol or an assault rife. Unless one is trained for combat, one loses fine motor skills under stress and is likely incapable of using these weapons effectively or accurately).

With these disclosures in mind, what to make of Newtown?

John Kingdon’s classic work Agendas, Alternatives, and Public Policies made the case quite persuasively that in the world of public policy, there are many solutions waiting for a problem to happen.  Crises can open a window of opportunity for policy change. In Kingdon’s words:

“When a window opens, advocates of proposals sense their opportunity and rush to take advantage of it.”

Often, this occurs immediately. Policy advocates know that windows of opportunity open, but they can close rather quickly.

The tragic shooting in Newtown most certainly created a window of opportunity for policy change. One could have anticipated the political response ex ante, although there were a few surprises along the way.  On Sunday’s Meet the Press, for example, one commentator noted that the shooting should give anyone pause who wants to cut Medicare and Medicaid entitlements, given the funding they provide for mental health issues (the fact that the shooter was 20 from an affluent family seemed immaterial).

It is difficult to discern what lessons one should draw from the Newtown shooting. Those who want to use the shooting to make the case for more demanding gun regulations face the problem that Connecticut already has some of the most stringent gun controls in the country and the guns were purchased legally. Those who want to restrict interstate sales and the loopholes for gun shows face similar difficulties given that neither would have prevented the tragedy. Those who want to make the argument for greater public funding for mental health treatment face the problem that the shooter was from an affluent family; the lack of public funding was not an issue.

Advocates of an assault weapon ban (similar to that created under the Public Safety and Recreational Firearms Use Protection Act of 1994) may stand on firmer ground, given that the shooter used an assault rifle (a Bushmaster .223).  But the 1994 law did not ban semiautomatic rifles (automatic rifles are already illegal for all intents and purposes) nor did it ban the .223 Remington cartridge. It did ban the manufacturing of magazines that were capable of holding 10 or more rounds of ammunition (by comparison, semiautomatic big game rifles—unaffected by the assault rife ban—have clips that hold 5 cartridges). One wonders how great a barrier such a restriction would have posed, given that the shooter was armed with two semiautomatic pistols (legal under the assault rifle ban) and smaller clips could be ejected and replaced in a matter of seconds.

In my mind, the chief lesson of Newtown is a difficult one: even when you have strict gun laws (as Connecticut clearly has) and citizens abide by those laws (the owner of the guns reportedly purchased all guns legally), tragedies can nonetheless occur.

There is little question that gun violence is a problem in the US. Although violent crime has been in long-term decline in the US, the FBI reports there were 68,720 murders between 2007-2011. Of that number, 46,313  (67.4 percent) were committed with a firearm. But of this number, 1,874 murders were committed with rifles (in contrast, 2,945 were committed with blunt objects like clubs or hammers). Handguns were the weapons of choice. With respect to handguns, most were likely acquired illegally (my guess. I am not certain that the FBI publishes that data).

Some readers of Pileus may want to make the argument that any regulation of firearms is an infringement of our Second Amendment rights. Let the comments fly. When I used to take my sons hunting, I took some comfort in knowing that anyone we encountered in the field had undergone some training on the safe use of a firearm.

If President Obama and the Congress turn to gun control in the wake of the Newtown tragedy, one can only hope that they ground policy in a broader understanding of gun violence rather than searching the events of last week for lessons that may not exist.

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Left-libertarians are dismayed at the support most libertarians and classical liberals have been giving to right-to-work laws, which withdraw recognition from clauses in collective bargaining contracts that require all employees in a workplace to pay agency fees to the union that represents that workplace. Many libertarians have supported right-to-work laws on the grounds that they “balance the playing field” somewhat or undo some of the harm caused by the National Labor Relations Act (or “Wagner Act”), which requires employers to bargain collectively with a union that achieves majority support in an organization election. But left-libertarians aren’t buying that as a rationale for laws that withdraw recognition from a particular type of private contract.

Quoth J.D. Tuccille:

[T]he distortions in human life caused by intrusive laws always raise the temptation to patch over the problems with additional legislation. That additional legislation is likely to lead to more problems … That’s why we’re always better off dumping bad laws than trying to “fix” them in a spiraling game of spackle-the-law books.

And here is Gary Chartier:

Right-to-work proponents argue that the laws they favor only help to level the playing field created by government action—by reining in special privileges granted to unions under existing labor law.

But those laws actually presuppose the restrictions inherent in that framework, while extending them further. One goal of the NLRA and later federal laws was to reduce conflict—-and in effect reduce workers’ choices—-by ensuring that just one union, moderate enough to win majority support (and therefore moderate enough to be cooperative with employers), would operate in a given workplace, while suppressing more radical unions and labor actions.

And finally here is Sheldon Richman, quoting Percy Greaves:

“Two wrongs never make a right. The economic answer is to repeal the bad intervention and not try to counterbalance it with another bad intervention. Such moves only provide the politicians with greater power over the entire economy.” In other words, the end doesn’t justify the means.

Is the “two wrongs don’t make a right” analogy persuasive here? First, let’s specify that we are looking at right-to-work laws for private-sector workers. RTW laws for public-sector workers could be viewed simply as the government’s tying its hands with respect to its own future collective bargaining negotiations, something that few would deny they have a moral right to do. Second, let’s all agree that the purpose of collective bargaining is, above all, to establish a monopoly of labor with respect to a particular employer. The union uses its bargaining power to negotiate higher wages and benefits than they could receive on a competitive labor market. That this is the primary purpose of unions, especially in the post-Wagner Act era, isn’t disputed by mainstream labor economists (see Mancur Olson’s Logic of Collective Action, among many others). Third, let’s agree as libertarians that the Wagner Act is unjust, that it wrongly forces employers to negotiate with a union and wrongly forces employees to be represented by a union even if they do not consent to such representation. Of course, non-libertarian liberals can and do disagree with this proposition.

Now, let’s consider an inflammatory analogy to the Wagner Act. Imagine that the government decides to give its official stamp of approval to Mafia protection contracts reached with shopkeepers (call it the “National Mob-Small Business Relations Act” (NMSBRA)). So long as the Mafia follows certain procedures in strongarming shop owners into agreeing to their demands, the courts will enforce contracts reached under duress. To libertarians, left and right, there is not much fundamentally morally different between the Wagner Act and the NMSBRA.

Now, suppose some of these mob protection contracts contain exclusive-supplier clauses. They state that the hapless storeowner not only must pay off the mob, but must use only mob-approved suppliers. In response, some states pass “right-to-supply” laws, which forbid the enforcement of mob protection contracts’ exclusive-supplier clauses, while leaving the basic structure of the NMSBRA intact.

Do right-to-supply laws take away freedom? After all, they interfere with “private contracts,” and it is possible, though unlikely, that some shopkeepers would want to sign exclusive-supplier contracts with the Mafia even in the absence of any threat of coercion.(*)

But surely, refusing to enforce a particular, exploitative provision of an extorted “contract” does not in any tangible sense infringe on freedom and, in fact, enhances it. By the logic of left-libertarian opponents of right-to-work, if the government ever adopted something like the NMSBRA, then “right-to-supply” laws ameliorating the oppression should be resisted as intrusions into supposed “freedom of contract.” This position reminds me of purist opponents of legal medical marijuana on the grounds that only fully legal marijuana is worth supporting.

Now, I don’t want to imply that mob protection contracts are in fact morally equivalent to union shop contracts. I am merely arguing that they are analogous. Sometimes an “extreme” analogy can help us better understand the moral principles behind our judgments. In this case, I see no intuitively appealing moral principle that could equally condemn right-to-work laws and the Wagner Act, as left-libertarians wish.

But there’s more. (more…)

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Just when I thought I’d let my subscription to the Atlantic run out, along comes an issue (December) with some actual meat in it.  Jeffrey Goldberg’s timely “The Case for More Guns (and More Gun Control)” is a valuable contribution to the debate and well-worth your time.  It was a bit unexpected given the source, both in terms of the magazine and the author.  And Goldberg hasn’t backed down in light of the recent tragedy in Connecticut, writing Friday:

People should have the ability to defend themselves. Mass shootings take many lives in part because no one is firing back at the shooters. The shooters in recent massacres have had many minutes to complete their evil work, while their victims cower under desks or in closets. One response to the tragic reality that we are a gun-saturated country is to understand that law-abiding, well-trained, non-criminal, wholly sane citizens who are screened by the government have a role to play in their own self-defense, and in the defense of others (read The Atlantic article to see how one armed school administrator stopped a mass shooting in Pearl Mississippi). I don’t know anything more than anyone else about the shooting in Connecticut at the moment, but it seems fairly obvious that there was no one at or near the school who could have tried to fight back.

This edition also has two interesting pieces on the future of industry/manufacturing in America and a nice little autobiographical story on an actual newly opened bookstore and its owner.  And thank goodness the “What’s Your Problem” page at the end – perhaps one of the worst pages in serious journalism in some time – has been replaced by the “Cover to Cover” section on new books (though this long overdue development isn’t new to this issue).  The magazine still has its problems and hasn’t returned to its peak, but there have been some recent signs of hope (or are these dead-cat bounces?).* 

Here is my favorite quotation from the December issue in an article by James Fallows titled, “Mr China Comes to America“:

I’ll say it in every article: America’s greatest strategic advantage is its openness to an outsize share of the world’s talent, and one of its greatest self-inflicted weaknesses is needlessly turning that talent away.

* Yes, perhaps I fixate too much on the Atlantic but it has been to me what the New Yorker is for many educated (but more parochial) people.

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Pileus‘s own Jason Sorens is, among many other things, the founder of the Free State Project. The FSP is an initiative that aims to put the convictions of people who talk about individual liberty to the test. Its proposal is based on the straightforward premise that a relatively small number of committed and organized activists can effect disproportionately large political change in their communities. More specifically, the FSP suggests that if 20,000 “liberty-loving people” were all to move to a state of relatively small population, their concentrated efforts could enlarge the scope of liberty in that state, perhaps even making it a genuine home of liberty.

After a somewhat contentious vote several years ago, the FSP decided that New Hampshire—of “Live Free or Die” fame—would be their liberty mecca. (Wyoming came in second.) If you sign on to the FSP’s initiative, here is what you agree to: If and when the total signatories on the FSP’s pledge reaches 20,000,

I hereby state my solemn intent to move to the state of New Hampshire. Once there, I will exert the fullest practical effort toward the creation of a society in which the maximum role of civil government is the protection of life, liberty, and property.

Some people are excited enough about the prospects—and, no doubt, depressed and frustrated enough about the decline of liberty elsewhere—that they are not waiting for the full 20,000 signatories: As of today, 1,117 FSP pledges have already moved to New Hampshire.

Why New Hampshire? Lots of reasons. The FSP actually gives you a list of “101 Reasons You Should Move to New Hampshire (If You Love Liberty).” Here is another reason: In the most recent edition of the “Freedom in the 50 States” report, co-authored by Sorens himself along with William Ruger, and published in 2011, New Hampshire comes out on top: The Granite State ranks #2 in “economic freedom,” #11 in “personal freedom,” and yet #1 in the combined “overall” ranking.

I find the prospects of making New Hampshire the Hong Kong of America intriguing, even inspiring. When the United States is spending itself into debt oblivion—something like the Nicolas Cage character in Leaving Las Vegas, we seem to be thinking that it’s all over anyway so we might as well drink ourselves all the way to death—and when government regulation is pouring out of Washington like the Mississippi over the levees in New Orleans after Katrina, the idea of an island of freedom amid a sea of bleak oppression has its attractions.

Even supposing 20,000 liberty-loving people would move to New Hampshire, however, I have reasons to worry about the likelihood of success of the FSP. Let me list a few here. I preface them by saying that I hope I am wrong about how worrisome they are. I too want a world for my children and grandchildren in which they are not slaves to government debt and regulation.

1. I have heard whispers that in the next edition of Sorens’s and Ruger’s “Freedom in the 50 States,” which I understand is due out in the Spring of 2013, New Hampshire no longer retains its #1 overall ranking—and that it might indeed slip several spots. (Perhaps neither Sorens nor Ruger cares to confirm or disconfirm this now, but I would be happy to have them do so if they wish.)

2. In the recently released Economic Freedom of North America 2012, which includes most of the provinces of Canada along with the States of America, New Hampshire lands in a disappointing sixteenth place, behind Alaska and above North Carolina. The EFNA report scores New Hampshire particularly low (a) on Social Security payments as a percentage of GDP (NH gets a 5.1 out of a possible 10 on this, 10 being highest), (b) on total tax revenue as a percentage of GDP (5.6 out of 10), and (c) on indirect tax revenue as a percentage of GDP (a dismal 3.0 out of 10).

3. CNBC recently published its list of “America’s Top States for Business 2012,” and New Hampshire’s spot is again disappointing: nineteenth—embarrassingly, behind Oregon and ahead of Arkansas.

4. Only today I saw this report from Wired that public buses in many metropolitan systems in America are starting to install listening devices with their surveillance systems, so that they can secretly record private conversations. Which metropolitan systems? You will not be surprised that it includes San Francisco and Baltimore; more surprising, perhaps, are smaller cities like Traverse City, Michigan and Athens, Georgia; but this I found both shocking and disappointing: “Concord, New Hampshire also used part of a $1.2 million economic stimulus grant to install its new video/audio surveillance system on buses.” That is wrong for so many reasons.

I also have more general reasons to doubt the possibility of the FSP’s success that are less directly dependent on having chosen New Hampshire as opposed to any state. Perhaps I will outline them in the future.

In addition to my caution that I hope I am wrong about the chances of FSP’s success in New Hampshire, I would also hasten to add that none of these worries entails that one should not still make the attempt. Even if one is certain of failure, some causes are worth fighting for regardless. If one is not willing to fight for liberty and prosperity, even against depressingly long odds, then what on earth would one fight for? One does what one can. One fights for liberty and against oppression, whatever the odds, leaving the rest in God’s hands.

Can New Hampshire be the place?

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Theorizing Medieval Geopolitics
Theorizing Medieval Geopolitics: War and World Order in the Age of the Crusades by Andrew A. Latham (Routledge, 2012) offers a constructivist interpretation of late-medieval European states and warfare. Latham describes his approach as offering an “explanation-what” or “property” theory rather than an “explanation-why” or causal theory. He is interested in clarifying the nature of the medieval “corporate-sovereign state” and the ways in which medieval European societies conceived of and legitimized war. Rather than studying the late-medieval period merely as a staging ground for the development of the modern state, as Hendrik Spruyt does in his interesting book The Sovereign State and Its Competitors, Latham explores the logic internal to the late-medieval system, perceiving the transition from high-medieval feudalism to early-modern absolutism as a gradual one. (He therefore rejects what he calls “the Westphalian rupture” and explicitly endorses both the stateness and non-feudality of pre-Westphalian polities, whether city-states, empires, or kingdoms.)

Constructivism in international relations refers to a broad research paradigm emphasizing the roles of shared international culture, ideas, and values in constraining state actors. It rejects both the “power politics” theorizing of neorealism and the materialism of Marxism. Of course, in one sense the late-medieval period is a “most likely” case for constructivism, as one could hardly deny the role of ideas in buttressing the power of the Catholic Church or provoking the Crusades. But apparently some have tried. Latham successfully shows that realist views prioritizing interests over ideology in explaining the Crusades (e.g., opportunities for looting) are inconsistent with current historical knowledge.

At other points, though, Latham’s obdurate refusal to consider the role of interests annoyed me. In explaining why the medieval kingdom came to prevail over the city-state, the principality, the bishopric, and the city-league, his account boils down to the claim that medieval political philosophy viewed the kingdom as “more legitimate” (90-91). Technological change plays no role in the explanation, and power politics is only begrudgingly and indirectly acknowledged (96).

Latham could also be clearer about the role that his ontology of war can play in general causal theories of international relations. Defining war as an “institution” composed of “deeply embedded intersubjective beliefs” (48) does nothing to bridge the distance between this kind of project and rationalist approaches to war. Why aren’t “norms” (or if one prefers, “deeply embedded intersubjective beliefs”) best thought of as variables in a utility function? (Realists would still not be happy with this, of course.)

The first 50 or so pages of the book bog down heavily in the IR literature. For someone like me largely uninterested in the paradigm bun-fights, the more interesting part of the book comes later. I learned something about the demise of feudalism (it was remarkably early, 13th century at the latest) and something about how Thomist and other late-medieval political philosophy differed from the prior Augustinian tradition (more optimistic about the state’s ability to promote the common good). Medieval historians are unlikely to find much new here, but for political scientists, Latham’s book does a service in synthesizing the up-to-date historiographic literature on the diplomacy and warfare of the period.

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Chavismo and the Economy

Back before the collapse of the Soviet Union, there were plenty of examples of what happens once the price mechanism is suspended and decisions regarding resource allocations are assigned to the state. Fortunately, Venezuela provides us with some modern day examples. Here are a few quotes from an interesting piece by William Neuman in the NYT:

“The bottlenecks at a major port were so bad this year that Christmas trees from Canada were delayed for weeks, and when they did show up they cost hundreds of dollars. A government-run ice cream factory opened with great fanfare, only to shut down a day later because of a shortage of basic ingredients.  Foreign currency is so hard to come by that automakers cannot get parts and new cars are almost impossible to buy. And all this happened while the economy was growing…”


“Mr Chávez’s own record is mixed. After doing little to address a deep housing shortage, he has given away tens of thousands of homes, but the rush to build meant that many were plagued by construction flaws or other problems. He has used price controls to make food affordable for the poor, but that has contributed to shortages in basic goods. He created a popular program of neighborhood clinics often staffed by Cuban doctors, but hospitals frequently lack basic equipment.”

Venezuela stands at the intersection of socialism, crony capitalism, and the resource curse.  The future looks quite uncertain given the legacies of current policies, the impending recession, a stagnant oil industry, and  the intense power struggles that will arise post-Chávez.

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As policymakers look over the fiscal cliff, one can hope that their eyes fix on Afghanistan, the seemingly endless experiment in nation building. I understand that no president wants to seem the inevitable occur on his shift (consider the “optics”), but I sometimes wonder how many people would notice.  I gave a lecture on the war the other day in an introductory course and asked the students (who presumably read the assigned readings) to write down how many members of the US military had been killed in Afghanistan and report their estimates. The responses ranged from 268 to 6000, with only a  fifth of the class landing within a thousand of the correct number.

My students—at a university that is renowned for its culture of left activism—seemed relatively untroubled by their ignorance. Having a son in the Marines–a machine gunner who has not deployed–I was interested in how they would explain their lack of knowledge. Some representative comments:

  • “Its so far away.”
  • “It started when we were in grade school so we never really pay attention any more.”
  • “There is no draft so it really doesn’t impact us.”

There is an interesting piece (NYT)  for the handful of people who still pay attention to the war in Afghanistan.  It reviews some of the findings from the DOD’s “Report on Progress Toward Security and Stability in Afghanistan,” something is issues twice a year (the full report can be found here). Some takeaways:

  • Only one of the Afghan National Army’s 23 brigades is able to operate independently without support from the US or NATO
  • Violence in Afghanistan is “higher than it was before the surge of American forces into the country two years ago”
  • Insider attacks by Afghan security forces is a growing problem
  • Corruption remains rampant in the Afghan government
  • Pakistan continues to provide support for insurgents [Note: Pakistan received almost $3 billion in US aid in 2012, about $1.6 billion for security]

This is not to say that we have not accomplished anything of value  (one of my friends, a former Marine who spent a year in Afghanistan, can make a rather passionate case that we are doing much good, although he remains confident that things will return to the original position as soon as we exit).

Of course, although we appear to be facing some serious problems in getting a constitutional democracy to grow in Afghanistan, there is one thing that is growing quite well: opium. As Alissa Rubin reports (NYT): Under the watchful eye of NATO, Afghanistan has once again assumed its role as the “world’s largest producer of opium… harvesting about 80 percent of the world supply.” The Taliban used to ban opium. Now it has learned that it is far better to tax the opium crop. (“The Afghan counternarcotics minister, Zarar Ahmad Muqbil, estimated that the Taliban made at least $155 million from the poppy crop in 2012, and perhaps considerably more”). It is hard to imagine that the Taliban is going anywhere soon, with a steady stream of resources and an ineffective Afghan Army.

We are scheduled to “leave” Afghanistan in 2014. By leave, of course, we don’t really mean “leave” since some number of troops north of 10,000—and perhaps as high of 25,000 will remain in country for another decade.  At a cost of $1 million per year per troop, that remains a fairly significant commitment.

One can only hope that the fiscal cliff and the need for significant long-term spending cuts will create a moment when we can evaluate our Afghanistan policy with a clear head.

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The debate over right-to-work/forced unionism rages in Michigan where the Republican-led legislature is set to pass a right-to-work law (or what President Obama called a “so-called right to work law”).  All indications suggest that Governor Rick Snyder will sign the bill.  Unions there clearly “overreached” this past fall with their move to write collective bargaining protection into the Michigan constitution by a referendum.  This measure failed by a 58-42 margin.  Nice to see the legislature return the attempted favor.

But what impact will this move have?  One recent study from 2007 suggests one consequence will be reduced unemployment in the state.  In a piece titled, “Unions and Employment Growth: Evidence from State Economic Recoveries,” Robert Krol and Shirley Svorny find that “union power slows job growth during an economic recovery.” Therefore, removing forced unionism is likely to help Michigan recover quicker from downturns in a way that will actually benefit workers. 

Here is a graphic from the Chicago Tribune that shows the states with and without right to work laws.  Hmm…what seems to correlate with these laws? 

Right to Work States











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My sometime coauthor William Ruger has a piece in The American Conservative on Luigi Zingales’ A Capitalism for the People. He compares Zingales to early Chicago School economist Henry Simons in his willingness to consider unconventional remedies to crony capitalism, lack of competition, and “bigness” more generally:

Fast forward to today, and we see another Chicago economist, Luigi Zingales, confronting another economic crisis and likewise trying to put capitalism back on the right path in his book, A Capitalism for the People. The similarities between Simons and Zingales do not stop there. In fact, Zingales’s philippic against the early 21st century’s economic and political trends—including growing income inequality—and in favor of competition over monopoly frequently calls to mind the older Chicago tradition that Simons represented in A Positive Program.

Unlike his predecessor’s, Zingales’s reform measures are far more consistent with the tenets of a free society. In recognizing the danger of bigness—especially big business tied to big government—while hoping to meet the threat with greater respect for markets and freedom, Zingales fuses many of the best parts of the “old” and “new” Chicago Schools.

Some of his policy recommendations seem a bit contrived or poorly thought through, but others are genuinely interesting:

Zingales focuses on education as an antidote to the increasing inequality that accompanies globalization. Unfortunately, as he points out, “perhaps the most destructive cronyism that uses lobbying to extract money from the American people in exchange for a product that doesn’t meet their real needs is in the public school system.” Sounding a lot like his fellow Chicagoan, Zingales repeats Milton Friedman’s argument for publically funded school vouchers as a means to increase equality of opportunity. He adds the twist that there should be “higher-value vouchers for people who start from less privileged conditions” and “match-specific vouchers” to incentivize good schools to “rescue poorer-performing students at risk.” To allow individuals to take risks and invest in themselves “when the consequences of failure are very harsh,” Zingales also supports a safety net of forgiving bankruptcy laws, unemployment insurance, and job retraining.

Zingales wants to reinvent antitrust, with regulators focusing not just on the economic advantages of mergers but the political consequences that arise from large corporate combinations. Where the political results would likely be “welfare-reducing,” Zingales would have the government prevent such mergers or limit the lobbying those corporations can engage in. As he admits, “This would be a radical departure from the status quo”—indeed, one reminiscent of Simons’s anti-monopoly program. Further steps he recommends to revive a competitive market include better balancing our patent and copyright regime, empowering shareholders in corporate governance (even by quotas), and enacting progressive taxation on corporate lobbying.

He supports a number of other critical institutional reforms to the tax and finance system: simplifying corporate taxes, ending expiring tax provisions, applying legal rules to the government (which creates them in the first place), instituting a reward system for whistleblowers, and increasing data transparency through disclosure requirements. Financial regulation, he says, should be parceled out to three agencies, each responsible for meeting only one key goal: price stability, protection against fraud and abuse, and system stability. Zingales disapproves of using the tax system for “massive” redistribution of wealth and income. Instead, he favors Pigouvian taxes (which “correct distorted incentives”), such as levies on lobbying or on potentially destabilizing short-term debt.

More here.

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A Nanovictory for Freedom

Just another small — very small — way in which Free Staters are making New Hampshirites’ lives better: a successful bill legalizing nanobreweries was sponsored by a couple of Porcupines in the legislature.

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Rand agrees with Sven

Senator Rand Paul said on CNBC essentially what I’ve been arguing:

I have yet another thought on how we can fix this. Why don’t we let the Democrats pass whatever they want? If they are the party of higher taxes, all the Republicans vote present and let the Democrats raise taxes as high as they want to raise them, let Democrats in the Senate raise taxes, let the president sign it and then make them own the tax increase. And when the economy stalls, when the economy sputters, when people lose their jobs, they know which party to blame, the party of high taxes. Let’s don’t be the party of just almost as high taxes.

I think this is a brilliant way to not be seen as obstructionists while at the same time not being complicit.  Let the Democrats have their tax increases, just make them do it without any Republican votes.

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Yale political scientist James C. Scott is one of the more interesting scholars in America today (despite being an admitted “crude Marxist”).  And I don’t say that just because his book Seeing Like a State appeals to my own philosophical views.  His work is rich with insight and evinces a curious mind at work.  One cannot fail to learn from Scott’s work, even when in disagreement with some of his conclusions.  Indeed, I very much look forward to reading his Two Cheers for Anarchism despite the fact that I’m currently a statist (which Scott is too, really, from what I’ve read of the book [here is one review*]).

This is one of my favorite parts of the recent New York Times profile of Scott:

“The guarantees of equality in the Declaration of the Rights of Man or the Civil Rights Act, he continued, are ‘achievements of the state, but they are the achievements of the state with a pistol at its temple.’”

I also quite like that Scott is also a man in love with the land and rural life.

* What is up with the random shot at the Free State Project (or at least its members) in this review?  Any clue Jason?  And I’ve probably asked him before, but wonder if Jason studied at all with Scott at Yale.


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Another fun econ video from Econ Stories:

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This is not helpful. Erick Erickson, a man of excessive influence among conservative Republicans, is pressing Republican Speaker John Boehner to take any increase in tax rates off the table in the fiscal cliff negotiations with Democratic President Barack Obama. This is unhelpful for two reasons. First, rates will go up anyway if a deal isn’t reached, and Obama has made clear that some increase in rates is a deal-breaker. Second, every spending cut is a tax cut in the long run! The GOP should be willing, if necessary, to allow statutory tax increases, including rate increases, if they can get credible, significant spending cuts. By “credible” I mean cuts that will take effect automatically in the medium term (2-3 years from now), that are specific, and that will be difficult for Congress to overturn.

Everyone knows rates will go up eventually anyway. The US fiscal path is unsustainable. Whatever the government spends now it will have to pay back with tax dollars. Certainly, real interest rates on federal bonds are low or negative now, but that is a result of turbulence in Europe and slow growth at home. That situation won’t last forever. Large, immediate spending cuts are undesirable because the economy is still soft, but we really cannot be sure that we are not at or near the peak of the business cycle. The last recession started five years ago, and NGDP growth has puttered along at about 4% over the last two years. So spending cuts two to three years from now seem desirable.

How the tax code affects the productivity of the economy does not have very much to do with the average rate of taxation specified by statute, but the distortions brought about in the tax code (and poverty relief programs). Very high marginal rates of taxation can indeed kneecap labor supplymost of this type of distortion actually affects those with incomes under 200% of the federal poverty level. And of course, the corporate income tax code is riddled with distortionary tax expenditures (credits and deductions); getting rid of those is a free lunch: more revenue, more productivity.

Should Republicans use marginal tax rates on the wealthy as a bargaining chip to get bigger spending cuts? Of course. But that means keeping them on the table.

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In Free Market Fairness, political philosopher John Tomasi sets forth a new research program in normative political theory that he calls “market democracy.” Market democracy triangulates orthodox libertarianism and social-democratic, egalitarian liberalism and, Tomasi hopes, provides a principled moral grounding for a moderate classical liberalism that has room for both a modest welfare state and a vigorous, competitive, free-market economy. Tomasi’s book is innovative — and, I should note, more readable than most contemporary political philosophy. The arguments he develops here pose important challenges to both “left” (social democrats) and “right” (traditional libertarians), and so it should be widely read.

The book is most effective in making the case that “justice as fairness” and a robust concern for basic economic liberties are not necessarily contradictory. At the same time, the book’s sketch of market democracy–and more specifically, “free market fairness,” the justificatory edifice for market democracy that Tomasi endorses–leaves many details unexplored and is unlikely on its own to persuade traditional libertarians and Rawlsian/egalitarian liberals to abandon their long-held commitments. Tomasi views the book’s purpose as an ice-breaker, opening up new waters for exploration, and it should be read in that light, not as a comprehensive treatise.

I. Approach

Tomasi directs most of his arguments toward left-liberals, not libertarians. He aims to persuade them of two things: a) that some economic liberties are fundamental rights that every just society must guarantee to all; b) that at the level of ideal theory, market democratic regimes (he identifies two ideal types, “democratic limited government” and “democratic laissez faire”) are on a level with Rawls’ egalitarian regimes (“liberal socialism” and “property-owning democracy”) when it comes to their capacity to realize legitimate, egalitarian social goals, such as the maximization of the wealth of the representative poorest worker. Tomasi does not claim anything so facile as, “The free market is the best way to realize Rawlsian objectives.” Rather, Tomasi argues that Rawlsian objectives are flawed insofar as they ignore fundamental rights to own property and engage in exchange that are critical to authorship of one’s own life plan. Further, once we have sussed out the true requirements of justice as fairness, we find that free-market regimes can be designed plausibly so as to aim at meeting those requirements.

Tomasi also claims not to be merely splitting the difference between orthodox libertarianism a la Nozick or Rothbard and Rawlsian egalitarian liberalism (xix). On the question of methodology, Tomasi comes down firmly on the side of Rawls. (more…)

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Epic CV Line

Funniest thing I’ve seen on an academic cv in a long time:

1986 “Best Dribbler” award, Karori Swifts Wanderers Under-11 soccer team

This was placed under “Selected Prizes.”  Epic!  I’m now thinking of putting my Pinewood Derby victories on mine.

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I recently discussed the case of a Chinese family holed up in their house in the middle of a new highway.   They were protesting what they perceived as an unjust takings due to an excessively low compensation offer from the government.  The family has now accepted a compensation deal.  Apparently, they will get $41,000 - not a penny more than what had been on the table when this hit the news and well short of the $95,000 the family claimed it cost to build the house.  Not sure if they received an offer they couldn’t refuse or they realized the government wasn’t going to budge in the face of the family’s last-hold out power. 

As I noted earlier, I was more concerned about their neighbors.  Those folks had their property taken for economic development, a dubious rationale (unless you are the Supreme Court of the USA).  In this case, a highway seems like a legitimate purpose for a government taking.  Not knowing the market prices of homes in the area, I wonder if the compensation was even close to just.  Yes, a last hold-out has some leverage, but it is probably hard to beat the Chinese government in this case in terms of relative power. 

Here is the house being demolished:

China Highway House

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