I am not sure that this is a suitable subject for a blog post, probably more a project for an aspiring PhD student, but with all the discussion of conflicts of interest in the Trump cabinet, it strikes me that the most glaring conflict in the public sector is ignored: The CoI between state and local politicians elected with the support of public sector unions who then participate in compensation negotiations for the members of those unions. Here the temptation of the politicians to buy the support of the unions with public money is overwhelming. The impact of this is potentially trillions when public pension liabilities are included.
This is such an obvious conflict that I have looked to see if there are laws preventing this, but my initial research shows nothing.
It would be interesting to see if there is a statistical relationship between union support and subsequent pay rises. I would expect this relationship to be especially strong with deferred compensation (such as pensions) since this is very difficult for voters to monitor and can be easily gamed with unrealistic assumptions about, for example, investment returns.
Roger Barris, quoted by Tyler Cowen, “Understudied conflicts of interest in American government”, Marginal Revolution, 2017-01-11.
January 22, 2017
January 21, 2017
Warren Meyer on the downside of Inauguration Day for small government fans, regardless of which “team” won this time around:
Inauguration day is probably one of my 2 or 3 least favorite days in every decade. My feelings on the whole exercise are probably best encompassed by a conversation I had the other day at a social function.
A couple of my many liberal friends were complaining vociferously about the upcoming Trump Presidency. After a while, one observed that I seemed to be insufficiently upset about Trump. Was I a secret supporter?
I said to them something roughly as follows: You know that bad feeling you have now? That feeling of anger and fear and exasperation that some total yahoo who you absolutely disagree with has been selected to exercise power over you, power that offends you but you have to accept? Yeah, well I feel that after every Presidential election. Every. Single. One. At some point we need to stop treating these politicians as royalty and instead treat them as dangerous threats whose power needs to be circumscribed in every way we can find.
At Reason, Peter Suderman
can only come up with nine reasons for libertarians to be worried about Il Donalduce‘s new regime:
Here are nine reasons why libertarians should be very concerned about a Trump presidency:
1) He has repeatedly promised to deport 11 million undocumented immigrants upon taking office, relying on a “special deportation force” to carry out the task. And even in the occasional moments in which he has seemed to recognize that this task would be logistically impossible, he has continued to insist that he will deport several million people right away, and that other undocumented immigrants who are in the country will not have a path to citizenship unless they leave the country first.
2) More generally, Trump’s attitude toward immigrants and outsiders ranges from disdain to outright hostility. He has called for a ban on Muslim immigration and the closure of mosques, and he opened his primary campaign by declaring that Mexican immigrants to the U.S. were rapists and criminals.
3) Trump has also promised to build a massive, expensive wall along the southern border, and has insisted that Mexico will pay for its construction, an absurd notion that is already crumbling, as the incoming administration has asked Congress, not Mexico, to pay for the wall.
4) Trump has made clear that his administration will take a much more aggressive stance on trade as well. During the campaign, he floated the idea of a 45 percent tariff on Chinese goods, which would be deeply harmful to consumers and the U.S. economy. Since winning the election, his administration has raised the possibility of a 10 percent tariff on all imports, a policy that could spark a global recession. After winning in November, he said he would pull the nation out of the Trans-Pacific Partnership trade agreement on day one of his presidency.
On the other hand, Nick Gillespie and Veronique de Rugy are a bit more upbeat about libertarian causes in Trump’s America:
Donald Trump is nobody’s idea of a libertarian but his presidency provides a tremendous opportunity to advance libertarian policies, outcomes, and aspirations in our politics and broader culture. Those of us who believe in reducing the size, scope, and spending of the federal government and expanding the autonomy, opportunities, and ability of people to live however they choose should welcome the Trump era. That’s not because of the new president’s agenda but because he enters office as the man who will inevitably close out a failing 20th-century model of governance.
Liberal, conservative, libertarian: We all understand that whatever the merits of the great political, economic, and cultural institutions of the last 70 years — the welfare state built on unsustainable entitlement spending; a military that spends more and more and succeeds less and less; the giant corporations (ATT, IBM, General Motors) that were “beyond” market forces until they weren’t; rigid social conventions that sorted people into stultifying binaries (black and white, male and female, straight and mentally ill) — these are everywhere in ruins or retreat.
The taxi cab — a paradigmatic blending of private enterprise and state power in a system that increasingly serves no one well — is replaced by ride-sharing services that are endlessly innovative, safer, and self-regulating. Libertarian Party presidential candidate Gary Johnson’s campaign slogan — Uber everything — was the one self-evident truth uttered throughout the 2016 campaign. All aspects of our lives are being remade according to a new, inherently libertarian operating system that empowers individuals and groups to pursue whatever experiments in living they want. As one of us (Nick Gillespie) wrote with Matt Welch in The Declaration of Independents, the loosening of controls in our commercial, cultural, and personal lives has consistently enriched our world. The sharing economy, 3D printing and instantaneous global communication means businesses grow, flourish, adapt, and die in ways that perfectly fulfill Schumpeterian creative destruction. We live in a world where consuming art, music, video, text, and other forms of creative expression is its own form or production and allows us to connect in lateral rather than hierarchical ways. Pernicious racial and ethnic categories persist but they have been mostly supplanted by a tolerance and a level of lived pluralism that was unimaginable even 20 years ago, when less than [50%] of Americans approved of interracial marriages. Politics, Welch and Gillespie wrote, is a lagging indicator of where America is already heading and in many cases has already arrived.
January 15, 2017
Ted Campbell reacts to the news that corporate logos will be included at the updated Vimy Ridge Centre:
I’m not faulting Prime Minister Justin Trudeau nor Veterans Affairs Minister Kent Hehr for starting this, but they can and should put a stop to it. The business of getting the private sector to “support” public projects is not new and, generally, the public, including me, approves of it: in almost all cases it is good to have commercial sponsorships … almost all. National memorials are different […]
I don’t doubt the generosity or patriotism of Bell Canada or WalMart are anyone else, but a few things have to be sacrosanct, and our national memorials honouring our war dead must be amongst them.
Let is be very clear: it is the visitors’ centre, not the memorial itself that is being rebuilt and I’m guessing that the officials close to the project can see a very big difference between the little visitors’ centre building and the memorial, proper, but I, and many others, do not and will not; If the see even an understated, dignified sign in the visitors’ centre they will likely conclude that a corporation is, now, responsible for the whole monument. From the very first moment one sets foot on the land which France ceded, in perpetuity, to Canada it is “our” place, honouring our war dead and, more broadly, the significance of our contribution to the Great War. It is a small, $10 million, project and I am sure that officials will say that they are only trying to make the best use of their budget so that they can devote more to providing much needed care to veterans by spending less on this little building … and I would, normally, applaud them, but not on this.
January 6, 2017
December 30, 2016
Jeffrey Tucker on why it’s not just your imagination — showers really were better in the old days:
Even I, who have been writing about terrible American showers for 10 years, was shocked with delight at the shower in Brazil. Now, here we have a socialist country and an entire population that grouses about how hard it is to get ahead. And yet, step into the shower and you have a glorious capitalist experience. Hot water, really hot, pours down on you like a mighty and unending waterfall, sort of like it used to sea to shining sea.
At least the socialists in Brazil knew better than to destroy such an essential of civilized life.
But here we’ve forgotten. We have long lived with regulated showers, plugged up with a stopper imposed by government controls imposed in 1992. There was no public announcement. It just happened gradually. After a few years, you couldn’t buy a decent shower head. They called it a flow restrictor and said it would increase efficiency. By efficiency, the government means “doesn’t work as well as it used to.”
We’ve been acculturated to lame showers, but that’s just the start of it. Anything in your home that involves water has been made pathetic, thanks to government controls.
You can see the evidence of the bureaucrat in your shower if you pull off the showerhead and look inside. It has all this complicated stuff inside, whereas it should just be an open hole, you know, so the water could get through. The flow stopper is mandated by the federal government.
To be sure, the regulations apply only on a per-showerhead basis, so if you are rich, you can install a super fancy stall with spray coming at you from all directions. Yes, the market invented this brilliant but expensive workaround. As for the rest of the population, we have to live with a pathetic trickle.
It’s a pretty astonishing fact, if you think about it. The government ruined our showers by truncating our personal rights to have a great shower even when we are willing to pay for one. Sure, you can hack your showerhead but each year this gets more difficult to do. Today it requires drills and hammers, whereas it used to just require a screwdriver.
While the details are American, the Canadian market generally operates in lockstep with theirs, so when Tucker talks about the regulated reduction in both water heater maximum temperature and available water pressure, it’s probably the same here in Canada (and possibly worse, given our longer history of regulatory interference).
December 25, 2016
Not to encourage miserliness and general miserability at Christmastime, but here’s a realistic take on the deadweight loss of Christmas gift-giving:
In strict economic terms, the most efficient gift is cold, hard cash, but exchanging equivalent sums of money lacks festive spirit and so people take their chance on the high street. This is where the market fails. Buyers have sub-optimal information about your wants and less incentive than you to maximise utility. They cannot always be sure that you do not already have the gift they have in mind, nor do they know if someone else is planning to give you the same thing. And since the joy is in the giving, they might be more interested in eliciting a fleeting sense of amusement when the present is opened than in providing lasting satisfaction. This is where Billy Bass comes in.
But note the reason for this inefficient spending. Resources are misallocated because one person has to decide what someone else wants without having the knowledge or incentive to spend as carefully as they would if buying for themselves. The market failure of Christmas is therefore an example of what happens when other people spend money on our behalf. The best person to buy things for you is you. Your friends and family might make a decent stab at it. Distant bureaucrats who have never met us — and who are spending other people’s money — perhaps can’t.
So when you open your presents next week and find yourself with another garish tie or an awful bottle of perfume, consider this: If your loved ones don’t know you well enough to make spending choices for you, what chance does the government have?
December 22, 2016
L. Neil Smith on the joy-sucking use of terms like “Happy Midwinter Break” to avoid antagonizing the non-religious among us at this time of year:
Conservatives have long whimpered about corporate and government policies forbidding employees who make contact with the public to wish said members “Merry Christmas!” at the appropriate time of the year, out of a moronic and purely irrational fear of offending members of the public who don’t happen to be Christian, but are Jewish, Muslim, Hindu, Buddhist, Sikh, Jain, Rastafarian, Ba’hai, Cthuluites, Wiccans, worshippers of the Flying Spaghetti Monster, or None of the Above. The politically correct benediction, these employees are instructed, is “Happy Holidays”.
As a lifelong atheist, I never take “Merry Christmas” as anything but a cheerful and sincere desire to share the spirit of the happiest time of the year. I enjoy Christmas as the ultimate capitalist celebration. It’s a multiple-usage occasion and has been so since the dawn of history. I wish them “Merry Christmas” right back, and I mean it.
Unless I wish them a “Happy Zagmuk”, sharing the oldest midwinter festival in our culture I can find any trace of. It’s Babylonian, and celebrates the victory of the god-king Marduk over the forces of Chaos.
But as anybody with the merest understanding of history and human nature could have predicted, if you give the Political Correctness Zombies (Good King Marduk needs to get back to work again) an Angstrom unit, they’ll demand a parsec. It now appears that for the past couple of years, as soon as the Merry Christmases and Happy Holidayses start getting slung around, a certain professor (not of Liberal Arts, so he should know better) at a nearby university (to remain unnamed) sends out what he hopes are intimidating e-mails, scolding careless well-wishers, and asserting that these are not holidays (“holy days”) to everyone, and that the only politically acceptable greeting is “Happy Midwinter Break”. He signs this exercise in stupidity “A Jewish Faculty Member”.
Two responses come immediately to mind, both of them derived from good, basic Anglo-Saxon, which is not originally a Christian language. As soon as the almost overwhelming temptation to use them has been successfully resisted, there are some other matters for profound consideration…
December 15, 2016
It’s not that I don’t want smaller government. I’m a libertarian; my ideal government is about the size of one of those miniature dogs that have to wear coats all the time because they don’t generate enough body heat to keep themselves warm. The problem is, the voters don’t want smaller government. They’d like to pay lower taxes, of course, but they go wild if anyone suggests cutting any sizeable portion of the services that those taxes pay for. By and large, politicians have refused to cut spending anyway. And without doing so, you can’t have a tax cut in any real sense, because to spend is to tax (eventually).
Megan McArdle, “Trump Tax Cuts: A Bad Idea With a Bright Future”, Bloomberg View, 2016-12-01.
December 14, 2016
Published on 13 Dec 2016
This week: Matt Yglesias and Tyler Cowen in a brand new Econ Duel.
Next week: Another Econ Duel! Scott Sumner and Larry White will take on monetary policy.
You’ve no doubt heard it before: the rent is too damn high!
In major cities across the United States, rent prices have been skyrocketing for some time. As a percentage of median income, rent is much higher for those that choose city life over suburbia.
But why are rental prices in these cities so expensive, and what can we do about it?
It’s a classic case of supply and demand: lots of people want to move to big cities because of the opportunities they afford. Naturally, they demand housing. But the supply is often short due to many factors, from geography to regulations. What does economics tell us happens when there’s a lot of demand, but not so much supply? Prices rise. As a consequence, many people are priced out of pursuing the lucrative opportunities available in major cities.
Coastal cities, like San Francisco and New York, have obvious geographical restrictions on building “out.” One way to deal with this problem is to build upwards with more skyscraper housing. This often isn’t feasible due to regulations on building heights, density, parking requirements, etc. But these regulations could be lessened or removed, allowing big cities to become denser and lowering rent prices. Lifelong city-dweller Matt Yglesias discusses this approach in this Duel.
On the other side, Tyler Cowen, who has always lived in the suburbs, argues that allowing cities to become denser may only provide a short-term solution. As more people move in, the cities become more productive with higher incomes for their inhabitants. And the rents rise again.
Of course, we’ve merely skimmed over the arguments here, and you’ll have to watch the Econ Duel to get the full picture! Check it out and let us know in the comments who you think makes a better case.
December 7, 2016
… we know that ubiquitous RFID tags are coming to consumer products. They’ve been coming for years, now, and the applications are endless. More to the point they can be integrated with plastic products and packaging, and printed cheaply enough that they’re on course to replace bar codes.
Embedded microcontrollers are also getting dirt cheap; you can buy them in bulk for under US $0.49 each. Cheap enough to embed in recycling bins, perhaps? Along with a photovoltaic cell for power and a short-range radio transceiver for data. I’ve trampled all over this ground already; the point is, if it’s cheap enough to embed in paving stones, it’s certainly cheap enough to embed in bins, along with a short-range RFID reader and maybe a biosensor that can tell what sort of DNA is contaminating the items dumped in the bins.
The evil business plan of evil (and misery) posits the existence of smart municipality-provided household recycling bins. There’s an inductance device around it (probably a coil) to sense ferrous metals, a DNA sniffer to identify plant or animal biomass and SmartWater tagged items, and an RFID reader to scan any packaging. The bin has a PV powered microcontroller that can talk to a base station in the nearest wifi-enabled street lamp, and thence to the city government’s waste department. The householder sorts their waste into the various recycling bins, and when the bins are full they’re added to a pickup list for the waste truck on the nearest routing — so that rather than being collected at a set interval, they’re only collected when they’re full.
But that’s not all.
Householders are lazy or otherwise noncompliant and sometimes dump stuff in the wrong bin, just as drivers sometimes disobey the speed limit.
The overt value proposition for the municipality (who we are selling these bins and their support infrastructure to) is that the bins can sense the presence of the wrong kind of waste. This increases management costs by requiring hand-sorting, so the individual homeowner can be surcharged (or fined). More reasonably, households can be charged a high annual waste recycling and sorting fee, and given a discount for pre-sorting everything properly, before collection — which they forefeit if they screw up too often.
The covert value proposition … local town governments are under increasing pressure to cut their operating budgets. But by implementing increasingly elaborate waste-sorting requirements and imposing direct fines on households for non-compliance, they can turn the smart recycling bins into a new revenue enhancement channel, much like the speed cameras in Waldo. Churn the recycling criteria just a little bit and rely on tired and over-engaged citizens to accidentally toss a piece of plastic in the metal bin, or some food waste in the packaging bin: it’ll make a fine contribution to your city’s revenue!
Charles Stross, “The Evil Business Plan of Evil (and misery for all)”, Charlie’s Diary, 2015-05-21.
December 4, 2016
If the natural tendencies of mankind are so bad that it is not safe to permit people to be free, how is it that the tendencies of these organizers are always good? Do not the legislators and their appointed agents also belong to the human race? Or do they believe that they themselves are made of a finer clay than the rest of mankind?
Frédéric Bastiat, The Law, 1850.
December 2, 2016
Ontario’s Auditor General Bonnie Lysyk has a few mild criticisms of how Kathleen Wynn’s government spends public money on infrastructure:
Over the next decade, the Ontario government plans to spend $17 billion rehabilitating existing infrastructure, mostly on roads and bridges, and $31 billion on new infrastructure, mostly on public transit — much of the latter in the Greater Toronto and Hamilton Area. For some weary commuters, the promise of relief might be one of the few remaining attractions Premier Kathleen Wynne’s phenomenally unpopular administration has to offer — assuming, of course, they have some degree of confidence their money will be spent properly.
Page 496 of Auditor General Bonnie Lysyk’s latest report, released Wednesday, has something to say about that.
The scene: the Pickering GO station. Metrolinx was to build a pedestrian bridge across Highway 401. Not a herculean feat, one might have thought. Alas the winning bidder “had no experience in installing bridge trusses” — which is “something that a contractor constructing a bridge would be expected to know how to do,” Lysyk’s report dryly notes.
After the contractor “installed one truss upside down” — no, seriously — Metrolinx essentially took over the project. But it paid the contractor the full $19-million for the first phase of the project anyway. Then it gave the same contractors the contract for phase two — hey, it had the low bid! — and lo and behold they pooped the bed again, damaging glass to the tune of $1 million and building a stairway too wide to accommodate the planned cladding.
At this point, according to the Auditor-General, Metrolinx terminated the contract. It paid 99 per cent of the bill anyway. And later — no, seriously! — it gave the company another $39 million contract. “Metrolinx lacks a process to prevent poorly performing contractors from bidding on future contracts,” the report observes. Transport Minister Steven Del Duca said a new “vendor performance management system” would do just that, but one wonders why something so fancy-sounding was necessary to perform such a basic function. (Metrolinx spokesperson Anne Marie Aikins disputes the decision-making timeline in the report; according to hers, the contractor’s ineptitude was unknown when further work was awarded.)
Shikha Dalmia explains why Indian Prime Minister Narendra Modi suddenly decided to kneecap his country’s money supply and cause massive economic disruption:
Modi was elected in a landslide on the slogan of “Minimum Government, Maximum Governance.” He promised to end babu raj — the rule of corrupt, petty bureaucrats who torment ordinary citizens for bribes — and radically transform India’s economy. But rather than tackling government corruption, he has declared war on private citizens holding black money in the name of making all Indians pay their fair share.
Tax scofflaw behavior is indeed a problem in India. But it is almost always a result of tax rates that are way higher than what people think their government is worth. The enlightened response would be to lower these rates and improve governance. Instead, Modi is taking his country down what Nobel-winning political economist F.A. Hayek called the road to serfdom, where every failed round of coercive government intervention simply becomes an excuse for even more draconian rounds — exactly what was happening in pre-liberalized India.
About 600 million poor and uneducated Indians don’t have bank accounts. Roughly 300 million don’t have official identification. It’s not easy to swap their soon-to-be worthless cash, which is a catastrophe given that they live hand to mouth. It is heartbreaking to see these people lined up in long queues outside post offices and banks, missing days and days of work, pleading for funds from the very bureaucrats from whose clutches Modi had promised to release them.
Modi hatched his scheme in complete secrecy, without consulting his own economic advisers or the Parliament, lest rich hoarders catch wind and ditch their cash holdings for gold and other assets. Hence, he could not order enough new money printed in advance. This is a massive problem given that about 90 percent of India’s economic transactions are in cash. People need to be able to get money from their banks to meet basic needs. But the government has imposed strict limits on how much of their own money people can withdraw from their own accounts.
This is not boldness, but sheer conceit based on the misguided notion that people have to be accountable to the government, rather than vice versa. Over time, it will undermine the already low confidence of Indians in their institutions. If Modi could unilaterally and so suddenly re-engineer the currency used by 1.1 billion people, what will he do next? This is a recipe for capital flight and economic retrenchment.
The fear and uncertainty that Modi’s move will breed will turn India’s economic clock back to the dark times of pre-liberalized India — not usher in the good times (aache din) that Modi had promised.