November 30, 2011
Reason.tv: California vs. The Feds on medical marijuana
Is “innovation” today’s buzzword equivalent of “excellence”
Stephen Gordon thinks that the term “innovation” is well on the way to being just another way of saying “corporate handout”:
The theory of economic growth includes roles for such well-defined concepts as investment, human capital, research and development, productivity, and technical progress. I don’t know where innovation fits into this. My guess would have been that innovation is another name for R&D, but apparently there’s an ineffable distinction between innovation and R&D.
There are well-known policy instruments at the government’s disposal for increasing investment in human and physical capital and for increasing R&D activities. (Their relative effectiveness is another question.) But so far, the only proposals I’ve seen for an innovation policy consist of programs in which governments give money to deserving firms. This is problematic on a couple fronts.
Firstly, there are already many — too many — ‘economic development’ programs whose purpose is to channel public money to companies that enjoy the favour of the government. It’s hard to believe we need more of them.
November 29, 2011
Stephen Gordon: Governments should favour consumers over producers
In his latest post at the Globe & Mail‘s Economy Lab, Stephen Gordon points out that governments get the entire prosperity thing wrong:
The next time a political party vows to defend the interests of the producers in a certain industry, you should ask why it isn’t choosing to defend the interests of consumers instead. Because the contribution of an industry to the public good is not its ability to provide large incomes to those who work there; it is its ability to produce things that people want to buy.
Business groups may give lip-service to the benefits of competitive markets, but their heart isn’t in it; they know that their real interests are best served by providing reduced output at high prices. And that’s exactly what we get whenever governments set policy in order to benefit producers: see, for example, our dairy industry.
The motives of producers who call for special treatment in the name of consumer protection are equally suspect. Producers are not in business for their health, and they definitely are not in it for your health. So when producers call for regulations in the name of protecting consumers, you can generally assume that the real and intended effect is to exclude potential competitors: see, for example, our dairy industry.
Megan McArdle: Barney Frank will be missed
Yeah, read that title again. She’s not kidding at all:
Guess which Democrat now becomes the ranking member on the financial services committee? That’s right, none other than our favorite batty aunt, Maxine Waters. The woman who, during a major hearing with the cameras on her, asked the heads of Goldman Sachs and State Street bizarre questions about how they set the limits on their consumer credit cards*. She asked Ken Lewis, the head of Bank of America, a question about “offshore loss mitigation caps” (a term of which I — and also, clearly, Ken Lewis — had never heard) that was so bizarre — and garbled — that he was flummoxed into silence; he sat there squirming like a third grader being picked on by the teacher.
When he finally got the courage to ask what she meant, it became clear that Maxine Waters had no idea what she meant; I assume she’d either taken hasty and incomplete notes when her staffers briefed her about what to ask, or had flubbed reading the question, and couldn’t bring herself to admit on C-SPAN that she hadn’t really bothered preparing for the hearing to the extent, of, say, familiarizing herself with the institutions whose heads she was grilling, or actually bothering to understand the questions she was going to ask. It was kind of hilarious, until you realized that this was her job, and that she voted on critical financial regulatory questions.
Nor is this an isolated pattern; every time I see Maxine Waters at a hearing I know that the questions are going to be bizarre, and that Congresswoman Waters will make them even stranger with garbled readings and off-topic follow-ups.
* If I actually have to tell you this, these financial institutions do not really deal with consumers, much less their credit cards. I’m not picking on you — you have an excuse. You’re not a member of the financial services committee.
European democracy is now “the preserve of right-wing populism”
Frank Furedi on the urge to omit democracy from European government:
Over the past month, it has become clear that the European Union doesn’t simply suffer from a democratic deficit; rather, it has decided that in the current climate of crisis and uncertainty, the institutions of government must be insulated and protected from public pressure. In Brussels, and among an influential coterie of European opinion-makers, the idea that ordinary people have the capacity to self-govern is dismissed as at best a naive prejudice, and at worst a marker for right-wing populism.
As we shall see, this desire to renounce the politics of representation is by no means confined to EU technocrats. To no one’s surprise, many businesspeople and bankers also prefer the new unelected governments of Greece and Italy to regimes that are accountable to their electorates. And such elitist disdain for nations’ democratic representative institutions is also shared by sections of the left and the intelligentsia, too. So in his contribution on the crisis of democracy, Jürgen Habermas, the leading leftist German philosopher, writes off national electorates as ‘the preserve of right-wing populism’ and condemns them as ‘the caricature of national macrosubjects shutting themselves off from each other’.
Indeed, it isn’t the old-fashioned conservative detractors of the multitude who are at the forefront of the current cultural turn against democratic will-formation — no, it is liberal advocates of expert-driven technocratic rule who are now the most explicit denouncers of democracy. The current political attack on the principles of representative democracy is founded on three propositions. First it is claimed that the people cannot be trusted to support policies that are necessary for the preservation and improvement of society. Secondly, it is suggested that there is an important trade-off to be made between democracy and efficiency, and that in a time of crisis the latter must prevail over the former. And finally, anti-democratic ideologues believe that governments, especially democratic governments, have lost the capacity to deal with the key problems facing societies in today’s globalised world.
November 27, 2011
China to address the surplus of unemployable university graduates
No, not the old fashioned way of “re-education”, but by reviewing the university programs and eliminating the ones that produce the largest number of graduates who cannot find jobs:
Much like the U.S., China is aiming to address a problematic demographic that has recently emerged: a generation of jobless graduates. China’s solution to that problem, however, has some in the country scratching their heads.
China’s Ministry of Education announced this week plans to phase out majors producing unemployable graduates, according to state-run media Xinhua. The government will soon start evaluating college majors by their employment rates, downsizing or cutting those studies in which less than 60% of graduates fail for two consecutive years to find work.
The move is meant to solve a problem that has surfaced as the number of China’s university educated have jumped to 8,930 people per every 100,000 in 2010, up nearly 150% from 2000, according to China’s 2010 Census. The surge of college grads, while an accomplishment for the country, has contributed to an overflow of workers whose skillsets don’t match with the needs of the export-led, manufacturing-based economy.
November 23, 2011
QotD: How the sequester is a symptom of political cowardice
Those who can do. Those who can’t form a supercommittee. Those who can’t produce a majority vote in a supercommittee sequester. Those who can’t even sequester are telling the world something profound about American inertia.
As Veronique points out [. . .], the “automatic” sequestration cuts would over the course of ten years reduce US public debt by only $153 billion. Which boils down to about a month’s worth of the current federal deficit.
Yet even slashing a pimple’s worth of borrowing out of the great oozing mountain of pustules will prove too much for Washington.
Mark Steyn, “Happy Sweet Sequester’d Days”, National Review Online, 2011-11-21
Tim Harford on credit rating agencies
I think it’s safe to say that he’s not over-impressed with the organizations involved in doing credit risk assessments:
What are rating agencies again?
They are private companies that express opinions about the likelihood that, for example, Italy will pay the money it owes bondholders. Sometimes they express opinions about how much money people will get back if Italy defaults on its loans. One way or another they’re providing opinions about the risks that creditors face.
That’s it? Just a bunch of opinions?
Basically, yes. And there are plenty of other opinions out there from journalists and particularly from people who put cash on the line and buy and sell these bonds. But the rating agency opinions have real-world significance in a way that a bloke in the pub doesn’t. Many investment funds promise their investors that they will only hold assets with ratings above a certain level. If a rating is downgraded, those funds have to sell, even if they think the asset is a bargain. Ratings are also hard-wired into regulatory rules, with similar effect. And another thing: unlike most opinions, they’re quantified.
Quantified on a scale of 1-10?
No, quantified on a scale of D through CC+ and BBB- all the way to AAA. Or alternatively, au choix, from C through Caa2 and Ba1 to Aaa. Depending on which agency you’re looking at.
Why?
For ABSOLUTELY NO GOOD REASON.
November 22, 2011
QotD: Our Charter of “rights” and “freedoms”
On the evening of January 12, 1981, justice minister Jean Chrétien sat in front of the special parliamentary committee on the Constitution. “I am proposing that Section 1 read as follows: The Canadian Charter of Rights and Freedoms guarantees the rights and freedoms set out in it subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society,” he said.
“This will ensure that any limit on a right must be not only reasonable and prescribed by law, but must also be shown to be demonstrably justified.” Translation: “This will ensure that even though we pretend the public has rights that are fundamental to any free and democratic society, we can take them away at will, so long as we can convince a judge that such measures are justified.”
The language used by Mr. Chrétien would eventually become Section 1 of the Charter, which gives government the constitutional cover to infringe the supposedly “fundamental freedoms” that follow it. In order to figure out when such infringements are in fact justified, the Supreme Court came up with the Oakes test.
Using this two-step process, laws that violate our Charter rights must have a “pressing and substantial” objective, and the means of effecting the limit must be reasonable and proportional. The infringement has to be connected to the law’s objective; it has to be as minimal as possible; and it must balance the consequences of such a limitation, with the objective that is being sought.
Jesse Kline, “Freedom shouldn’t come with caveats, but it does”, National Post, 2011-11-22
Another case where “spending cuts” still mean increased spending
No, not the US government, even though the media will be talking up the “savage” spending cuts coming because of sequestration (which will only reduce the rate of increase, not actually reduce spending). In this case it’s Britain:
Why is Britain growing more slowly than other developed nations? Why have we been outperformed over the past 12 months by every EU state except Greece, Ireland, Portugal and Romania?
Let’s start by dismissing the Labour-Guardian-BBC explanation: the idea that the economy is shrinking because of ‘the cuts’. As this blog never tires of pointing out, net government expenditure is higher now than it was under Gordon Brown. We are set to borrow at least £122 billion this year. Spending is above 50 per cent of GDP. How much more ‘stimulus’ do critics want?
What the international league tables show is that the countries which decreed the biggest bailouts experienced the sharpest contractions. Far from ‘stimulating’ the economy, these various programmes have taken money out of the productive sector. If stimulus spending worked, the Soviet Union would have won the Cold War.
November 20, 2011
How is a member of the Joint Chiefs of Staff like a used car salesman?
Answer: when he uses the latest technology to get the Defense Secretary to a meeting on time.
Defense Secretary Leon E. Panetta shoved his head into a snug aviator helmet topped with goggles one September morning and swooped into Lower Manhattan on a V-22 Osprey, a $70 million aircraft that Marines use for battlefield assaults in Afghanistan.
“How’d you like that gizmo?” Mr. Panetta said after landing at the Wall Street heliport in the Osprey, which takes off like a helicopter, flies like an airplane — and has been responsible for the deaths of 30 people in test flights.
Defense Department officials say the hybrid aircraft was the fastest way to get Mr. Panetta and his entourage to New York that day. But anyone who has followed the tortured history of the Osprey over the past quarter-century saw the persistent, politically savvy hand of the Marines in arranging Mr. Panetta’s flight — and another example in what has become a case study of how hard it is to kill billion-dollar Pentagon programs.
“At a car dealership, what the salesman wants to do is get you inside the vehicle,” said Dakota Wood, a retired Marine lieutenant colonel and defense analyst. “You take the test drive and wow, it’s got a great stereo, it feels good, it has that new-car smell.”
That flight with Mr. Panetta, he said, is “an insurance policy against future defense cuts.”
November 19, 2011
Three reasons not to bail out student loan borrowers
November 16, 2011
Stop the attempt to nationalize the internet (for the US government)
If you don’t already associate SOPA with evil, Michael Geist explains why you should:
The U.S. Congress is currently embroiled in a heated debated over the Stop Online Piracy Act (SOPA), proposed legislation that supporters argue is needed combat online infringement, but critics fear would create the “great firewall of the United States.” SOPA’s potential impact on the Internet and development of online services is enormous as it cuts across the lifeblood of the Internet and e-commerce in the effort to target websites that are characterized as being “dedicated to the theft of U.S. property.” This represents a new standard that many experts believe could capture hundreds of legitimate websites and services.
For those caught by the definition, the law envisions requiring Internet providers to block access to the sites, search engines to remove links from search results, payment intermediaries such as credit card companies and Paypal to cut off financial support, and Internet advertising companies to cease placing advertisements. While these measures have unsurprisingly raised concern among Internet companies and civil society groups (letters of concern from Internet companies, members of the US Congress, international civil liberties groups, and law professors), [. . .] the jurisdictional implications demand far more attention. The U.S. approach is breathtakingly broad, effectively treating millions of websites and IP addresses as “domestic” for U.S. law purposes.
The long-arm of U.S. law manifests itself in at least five ways in the proposed legislation.
The gender wage gap won’t go away
Kay Hymowitz explains that even with the best will in the world, the wage gap — often referred to as the 75-cents-on-the-dollar phenomenon — between men and women will persist:
Let’s begin by unpacking that 75-cent statistic, which actually varies from 75 to about 81, depending on the year and the study. The figure is based on the average earnings of full-time, year-round workers, usually defined as those who work 35 hours a week or more.
But consider the mischief contained in that “or more.” It makes the full-time category embrace everyone from a clerk who arrives at her desk at 9 a.m. and leaves promptly at 4 p.m. to a trial lawyer who eats dinner four nights a week — and lunch on weekends — at his desk.
I assume, in this case, that the clerk is a woman and the lawyer a man for the simple reason that — and here is an average that proofers rarely mention — full-time men work more hours than full-time women do. In 2007, according to the Bureau of Labor Statistics, 27 percent of male full-time workers had workweeks of 41 or more hours, compared with 15 percent of female full-time workers; just 4 percent of full-time men worked 35 to 39 hours a week, while 12 percent of women did. Since full-time men work more than full-time women do, it shouldn’t be surprising that the men, on average, earn more.
The other arena of mischief contained in the 75-cent statistic lies in the seemingly harmless term “occupation.” Everyone knows that a CEO makes more than a secretary and that a computer scientist makes more than a nurse. Most people wouldn’t be shocked to hear that secretaries and nurses are likely to be women, while CEOs and computer scientists are likely to be men. That explains much of the wage gap.
But proofers often make the claim that women earn less than men doing the exact same job. They can’t possibly know that. The Labor Department’s occupational categories can be so large that a woman could drive a truck through them. Among “physicians and surgeons,” for example, women make only 64.2 percent of what men make. Outrageous, right? Not if you consider that there are dozens of specialties in medicine: some, like cardiac surgery, require years of extra training, grueling hours, and life-and-death procedures; others, like pediatrics, are less demanding and consequently less highly rewarded. Only 16 percent of surgeons, but a full 50 percent of pediatricians, are women.
