Cafe Hayek

Politicians as Investors

Writing in today’s USA Today, Rep. John Mica (R-FL) justifies federal-government loan guarantees to airlines. He insists that

loan guarantees issued by the administration have provided a backstop for a severely damaged industry.

In the next paragraph he writes that

It is the federal government's responsibility to regulate our nation's airspace, and that becomes more urgent at a time when airlines are predicting a 10% increase in passenger traffic this summer.

If airlines’ predictions of increased traffic are accurate, then private capital markets would have been eager to lend money, without government loan guarantees, to efficient but cash-strapped carriers. So why are we to suppose that the airlines that received these loan guarantees were appropriate recipients -- firms that were efficient, smart, and right for the industry -- firms lacking only sufficient liquidity to weather the after-shocks of 9/11?

Government officials surely are not especially skilled at distinguishing good investments from bad ones. Or, at any rate, these officials are not as good at this task as are people who devote their lives and their own money to it.

Why would anyone assume that firms that can efficiently use borrowed funds will not get those funds on an unsubsidized basis from people whose business it is to lend funds? Why would anyone assume that people who specialize in getting elected to political office possess more acumen and wisdom at assessing the state of the market and the prospects of particular firms than is possessed by people who specialize in assessing the state of the market and of firms operating in markets?

Feel a Draft?

In USA Today, Julianne Malveaux offers one of the more unusual justifications for conscription: to ensure that candidates for political office all can say that they “served” their country. Here’s the crux of her argument:

Perhaps we ought to think about asking young people to give a year of service, either in the armed forces or in the Peace Corps, AmeriCorps or other national service programs. Then, a generation from now, we won't have to have debates about who served and who didn't.

Two things about Ms. Malveaux’s argument are striking. First, she ignores the value of the signal that voters obviously attach to candidates who can say that they’ve served in the military or the Peace Corp. If conscription returned, every candidate for office in future years would be able to say “I served!” Candidates would be more homogeneous – or at least one way for some candidates to signal their differences from other candidates would be lost.

Second, the government already asks young people to serve in these ways. What Ms. Malveaux really meant to say in the above quotation is “commanding” rather than “asking.” But “commanding” sounds so unappealing.

Immigration Again

The Center for Immigration Studies makes the following claim on its website:

Because immigration increases the supply of U.S. labor, it reduces wages or makes jobs more scarce for natives.

This claim cannot possibly be correct over any span of time longer than the very short run.

After all, the supply of labor in the U.S. today is greater than the supply of labor in the U.S. in 1776 by a multiple of (my off-the-cuff estimate says) about 70. Indeed, the supply of labor in the U.S. today is more than double what it was in 1950. And yet there's no serious shortage of jobs, and wage rates are immeasurably higher than they were in 1776, very much higher than they were in 1950, and, yes, higher even than they were in that golden year of 1973.

Immigration

My e-mail just brought an invitation to an event at the Center for Immigration Studies. It's a presentation by Kennedy School economist George Borjas who has, according to the e-mail, found that

when immigration increases the supply of workers in a skill category, the earnings of native-born workers in that same category fall.

One response is "of course." Straight-forward supply-and-demand analysis predicts that, all other things equal, raising the supply of something lowers the market value of that something.

But a second response is "all other things aren't equal." A greater supply of workers encourages a deepening of the division of labor -- which, over time, raises the return to work effort. The still-foundational explanation of how this process works is the first chapter of Adam Smith's Wealth of Nations.

So I'm curious about Borjas's data. (The paper isn't yet available on-line.) Does Borjas look only at the short-run consequences of higher supplies of certain kinds of labor? If so, then any finding other than the one reported in the e-mail invitation would be startling.

Or does Borjas study the wage data over time spans long enough to capture the return-enhancing effect of a deeper divsion of labor? If so, Borjas's finding would indeed strengthen the economic case against immigration -- although to stregthen a case is not necessarily to make it decisive or even very compelling.

I'm eager to read Borjas's paper when it's available.

Kerry Confused?

Nate Oman at Tutissima Cassis offers a clever -- and, I believe, correct -- follow-up to a recent blog on outsourcing and John Kerry's proposal to solve this alleged problem. Here's the heart of Oman's analysis:

As I understand it, Kerry's brilliant idea is to use the tax code to punish American businesses that outsource abroad. De facto what this means is that when an American company purchases goods or services outside of the United States it must pay a tax. This sounds like a tariff, right? Here is the cute part, though, if the American company purchases the goods and services from a foreign firm rather than from itself it pays no tax. So imagine this scenario. I am a manufacturer. As part of my final product I must use widgets. I have been producing widgets in the United States, but I find that it is less expensive to produce them abroad. If I move my widget production abroad, however, I will be hit with the Kerry tax. On the other hand, if I simply purchase my widgets from a foreign firm I will not be hit with the Kerry tax.

Read the entire post.

One lesson, as always, is beware of unintended consequences.

Are SUVs more dangerous?

Reuters reports that the roads are getting more dangerous. The headline: Highway Deaths Hit 13-Year High in 2003. I was surprised when I saw the headline. Usually the trend over time is toward more safety. What might explain such an increase? A reduction in enforcing safety or speeding laws, maybe. A change in demographic composition—more younger drivers who tend to drive more recklessly relatively to older drivers.

The article implies that the increase is due to more SUVs on the road and their propensity to roll over, interviewing Jeffery Runge, the head of the National Highway Traffic Safety Administration :

Runge, an emergency room physician, has also raised the potential dangers of light trucks sharing the road with smaller passenger cars and has addressed the propensity of SUVs to roll.

Sport utility deaths went up by 456 with more than two- thirds of victims not wearing seat belts, the safety agency said.

"A large part of the problem is keeping all four wheels on the roadway," Runge told reporters about the rollover propensity of SUVs. Some manufacturers have addressed the problem but Runge wants more safety changes. For instance, his agency is proposing a standard to improve the strength of vehicle roofs to reduce rollover deaths.

Cars have a slight edge in sales over light trucks, which include SUVs, pickups and minivans. But SUV sales rose more than 10 percent last year.

Consumer and safety groups have long targeted SUVs as unsafe, and are pressuring the government to mandate tougher design changes. SUV safety and other provisions are included in highway legislation awaiting final consideration in Congress.

"Affordable, feasible safety improvements could help prevent the rising death toll in SUVs," said Joan Claybrook, president of consumer group Public Citizen.

But earlier in the article, the real cause of the rise in highway deaths is given, though it is hidden a bit from sight:

Despite the increase in the annual death count, the fatality rate per 100 million vehicle miles traveled remained constant at 1.5 deaths because more people were on the road.

So the real cause of the increase in deaths is more people on the road. The riskiness of the roads hasn't changed at all. The roads are no more dangerous or safer than they were before. And SUVs are irrelevant to safety. SUV sales are up 10% but there's no change in the death rate. If anything, the crude data suggest that SUVs are no more dangerous and no safer than other cars.

Inequality and its Contents

One of the most insightful analysts of the welfare state is philosopher David Schmidtz. I especially like his take on income differences. (It's from page 39 of his superb book that is a point-counterpoint discussion on the welfare state with Robert Goodin, entitled Social Welfare and Individual Responsibility, published in 1998.)

The gap between the incomes of the rich and the poor seems to have widened over the past thirty years. What does it mean? Does it mean some people’s incomes have always been high, other people’s will always be low, and the gap has widened in real terms? Or does it mean people who are young and poor now have better opportunities than young people had thirty years ago – people are earning more as they age than their counterparts earned thirty years ago, thus producing a gap between poor twenty-year-olds and rich fifty-year-olds that is larger now than it was thirty years ago?

This question is vital, yet it is seldom asked. If the correct answer is the first that Schmidtz mentions, then people concerned about income inequality have a salient fact upon which to hang their concern (as well as to hang their proposals for income redistribution). But if the correct answer is the second that Schmidtz mentions -- and this is the one that Schmidtz himself believes to be correct -- the matter is entirely different. Same fact, entirely different conclusion -- for if the second answer is correct, the bulk of people in the lowest income quintile at any time are made better off by the growing gap. In this case, proposals to close this gap through tax, welfare, and regulatory policies will reduce the welfare of most people whose incomes are currently low.

Million Dollar Coaches

Both the football coach and the basketball coach at the University of Maryland will each receive more than a million dollars in compensation this year, reports the Washington Post.

"It's a goal of Maryland athletics to be competitive in compensation for highly achieving coaches," Maryland Athletic Director Deborah A. Yow said. "In that regard, the compensation that's paid to both Coach Friedgen and Coach Williams is market-driven, and it's within the norm received by their peers. . . .

"There's a philosophical question: Is any coach worth being paid seven figures? That's a separate conversation than the reality of: Are we or are we not going to be competitive? I'm not mired in that philosophical question."

I'm not mired in it either. I would have thought that coaches get paid the market rate. What's interesting is why the market rate is so high. It's high because colleges make a lot of money off of basketball and football either directly in the form of revenue or advertising. In a different world, much of that profitability would be dissipated in the form of salaries for the players, but the NCAA forbids such payments beyond tuition, room and board, books, fees and a very small stipend called laundry money. So schools compete in other ways. They build fancy stadiums and hire skilled staff to attract the best players. If you can't pay 'em, you try and find other ways to get them to come. In a different world, where the NCAA didn't restrict athlete salaries to zero, coaches would make a lot less.

Joel Cohen, a mathematics professor and the chair of the faculty senate, said the numbers are not particularly surprising, and the fact that coaches earn far more than professors long predates Williams and Friedgen. Still, he said he occasionally hears the topic discussed in faculty lounges and lunch rooms.

"I think there's still a lot of angst among faculty about what this means," Cohen said. "What does it say about the whole commercialization of the school? I think you'll find a lot of people -- not just faculty, but a lot of people, including athletic directors -- who would love it somehow if all the coaches got half as much as they're getting."

I don't think he means that the money would then be freed up to go to the students. He seems to be implying that faculty believe that somehow, the university would be a better place if coaches just made less money. I guess some faculty are mired in that philosophical issue that the athletic director has escaped. I wonder if they think the university would be a better place if faculty took a 50% pay cut.

Here's an earlier piece of mine on the peculiar world of college sports.

Giant Sighing Sound

That giant sighing sound you hear comes from the American people after hearing that some jobs will be left after India takes most of them. Here's the headline from today's New York Times article (rr):

Send Jobs to India? Some Find It's Not Always Best

Who knew? It turns out that for some (most? many? a few?) jobs, the lower wage in India doesn't justify the productivity loss:

Bladelogic, whose client list includes General Electric and Sprint, outsourced work to India within months of going into business in 2001. But it concluded that projects it farmed out — one to install an operating system across a network, another to keep tabs on changes done to the system — could be done faster and at a lower cost in the United States.

That was true even though programmers in India cost Bladelogic $3,500 a month versus a monthly cost of $10,000 for programmers in the United States. "The cost savings in India were three to one," Mr. Ittycheria said . "But the difference in productivity was six to one."

The Times story is not the first to point out that some companies are having second thoughts about outsourcing. But it does have a twist. The Times story focuses on Indian owners of American companies having second thoughts about contracting with Indians:

"For three years we tried all kinds of models, but nothing has worked so far," said the co-founder and chief technology officer of Storability Software in Southborough, Mass. After trying to reduce costs by contracting out software programming tasks to India, Storability brought back most of the work to the United States, where it costs four times as much, and hired more programmers here. The "depth of knowledge in the area we want to build software is not good enough" among Indian programmers, the executive said.

If it sounds like "Made in the U.S.A." jingoism, consider this: The entrepreneur, Hemant Kurande, is Indian. He was born and raised near Bombay and received his master's degree from the Indian Institute of Technology in that city, now known as Mumbai.

I can't figure out what to write about the presumption that it's jingoism.

Jobs, Investment, & the Trade Deficit

Robert Samuelson discusses John Kerry’s proposal to encourage U.S. firms to invest more at home and less abroad. Kerry’s idea, of course, is to appear to address the alleged problem of job “outsourcing.”

Samuelson reports data from the Commerce Department showing that the extent of “outsourcing” is vastly exaggerated. For example, in 2002 73.1 percent of U.S. multinationals’ employees were in America compared to 77.9 percent in 1977. This difference hardly amounts to a sea-change in corporate hiring practices.

But a deeper point deserves mention. Many of the same people who fret that “outsourcing” is a major trend that will dramatically reduce American living standards simultaneously fret about the trade deficit. Paul Craig Roberts leads this pack of pessimists. These frets are inconsistent with each other.

The trade deficit (more precisely, the current-account deficit) rises when foreigners spend more of their dollars on American assets and, hence, spend fewer on American exports. That is, a high trade deficit in America means that foreigners are investing heavily here. Heavy foreign investment in the U.S. signals that foreigners are optimistic about the future of the U.S. economy. More importantly such investment creates capital in the U.S. – capital that raises the productivity and, hence, the wages of American workers.

My vanity compels me to report that I have a letter on this topic in the current issue of The Atlantic Monthly.

Overeating & Sex

A very thoughtful friend of mine, who is a man of the left, does me the honor of engaging with me in an on-going e-mail conversation about various public-policy issues. We agree on a surprising number of issues (for example, that free trade is desirable and that the minimum wage is not).

In a recent e-mail he suggested that some government intervention might be appropriate to reduce Americans’ consumption of fatty, non-nutritious foods. He pointed out (correctly) that we are genetically evolved to eat a lot of fatty foods when such foods are available. This genetic disposition served us well in our evolutionary past when food was seldom abundant. But because in the industrialized west today food is always abundant, our genes propel many of us to eat in ways that threaten our long-term health prospects -- that is, to overeat and become obese.

My friend is seriously aware of the serious problems such government intervention would entail, but he remains open to the possibility that our genetic make-up might justify some such intervention.

I disagree with him here, strongly.

Here’s what I told him: “Our genes being evolved to deal with conditions quite different from those of a super-prosperous, bourgeois society does indeed cause our choices in modern society sometimes to be less-than-ideal. But be careful: if evolutionary psychology and biology are used to justify government regulation of people’s eating habits or smoking habits, watch out when conservatives get an even stronger hold on the state's regulatory levers. I can hear them now: ‘You know, our friends on the left are fond of evolutionary biology. We should respect that fondness. After all, the theory of natural selection says that men are evolved to maximize the number of sexual partners each enjoys. Such a preference for multiple partners made sense in our evolutionary past. But in today's bourgeois world, where stable families (the data show!) provide greater economic prospects for their members than do broken families, we must crack down on pre-marital sex, adultery, and divorce.’"

No Free Parking

Parking places in Boston are going for as much as $160,000 reports the AP:

The escalating cost of parking, long a premium in Boston, hit home for many when it was learned that a 180-square-foot parking spot sold last month for $160,000 at the Brimmer Street Garage in the Beacon Hill neighborhood.

As prices for some spaces exceed the cost of a single-family house in other parts of the state, even seasoned real estate agents are muttering, "Whoa."

I'm not sure what that "whoa" means. I think it's supposed to mean that things are "out of control" or can't persist. But my guess is that an 1800 square foot place in Beacon Hill sells for at least $1.6 million. So the parking space price is presumably the going rate. And the parking space does come with a valet.

My wife raises the question of property rights. What does it mean to own a space in a garage? Do you own it in perpetuity? What happens if the garage burns down? I wonder what the contract looks like.

I also wonder why you would buy a space rather than rent it. Maybe it's to maximize the value of the entire garage. Maybe you don't get your "own" space. Maybe you just get the right to park in the garage and that lets the garage sell space when people are away or to use the garage more efficiently. Otherwise, maybe a spot would be $200,000. I assume you can lease the spot you own. What an interesting way to invest in land—buy an out of town parking space and lease it to someone.

Here is a wonderful essay by Fred McChesney on how Chicagoans create property rights in parking on the street in the winter.

Spam and Pygmalion

Until recently, I felt like the good guys (that's me and you—the people who are content with our anatomy, house loans, and uninterested in helping former Nigerian leaders with their money laundering problems) were winning the war on spam. The quality of spam filters had forced the spammers into absurd spelling errors and random strings of words in their messages as a way of evading what seemed to be improved spam filters. That is a moral victory for us. While spam continues to get through, I always know it's spam. Recently, the volume seems to have escalated so I'm not so sure we're making progress.

There’s a weird tension in spam. The more annoying we find spam, the less we open it and click on those links. But as fewer and fewer of us respond, the spammers have to send out even more hooks looking for the few fish that still take the bait.

So it appears that ignoring spam is counterproductive. It just generates more spam. But eventually, if few enough people click-through, then spam becomes uneconomical and we’ll be free. So while the surge in spam I notice on my desk may be coming from technological improvement in the ability of the spammers, to reach us, I think part of it is born of despair at the low rates of return that spammers are earning on any one effort.

The lesson here is to keep ignoring those offers. Remember no matter how great your need is to lose weight while you sleep or to have those fuller lips or to get that low mortgage rates, responding to those offers is punishing the rest of us. So keep resisting. Buy your Viagra from your local pharmacist. Ignore that urgent request for help from the former Liberian Minister of Oil.

What we really need is some stigma or other punishment for people who buy from spammers. My colleague Alex Tabarrok over at Marginal Revolution suggests creating fake spam (talk about gilding the lilly or maybe it should be tarnishing the lead pipe) to find out who is responding and imposing costs on the rests of us. Alex would then publish the names of the responders as a hall of shame.

George Johnson offers a nice update in today's New York Times (rr) on spam and artificial intelligence. He gets in a reference to Pygmalion and puts spam filtering into the intellectual history of artificial intelligence and speaks very highly of Spamprobe as a successful filter. I'm going to give it a try. I have a small fear that it's a spamscam, a mole that will open up my computer to an unending stream of unwanted lunch meat. I'll keep you posted.

Who Can Speak about Trade?

Dan Drezner recently reported that readers hostile to his pro-free-trade position often kindly respond by expressing their wish that his job be outsourced.

The idea motivating such a response to those of us who defend free trade is that people who discuss trade are blinded by their personal experiences, unable to see the larger picture. Because Drezner is a college professor and, it is assumed, relatively secure in his job, he cannot speak with any legitimacy about trade and the job losses that it causes other people.

This idea is specious. To see why, note what happens when you turn it around. Arguments for protectionism are invalid if offered by someone whose job is threatened by foreign competition. So anyone whose job is at significant risk because of free trade has no right (this idea implies) to oppose free trade, for he or she is blinded by personal experience.

Of course, an argument’s validity or invalidity is independent of the identity of the person offering it. Judged on its merits - on its logic and facts - the case for free trade is robust. If protectionists wish to be taken seriously, they’d best abandon tawdry irrelevancies and instead offer rational arguments backed by sound data.

Environmental Action

In today's NY Times, Kathleen Rogers, President of the Earth Day Network, applauds Starbucks' effort on this year's Earth Day to reach

millions of people through coffee sleeves with environmental messages, including one urging people to register to vote.

I certainly don't oppose efforts get people to the polls, but it's interesting that "urging people to register to vote" is classified as an environmental message.

One assumption is that a majority of voters vote for more environmental regulation. Is this assumption correct? Perhaps. But I'll bet that if, say, more coal miners in West Virginia and Ohio go to the polls (refreshed with grande latte) they'll oppose candidates whose environmental messages threaten to raise the costs of operating coal mines.

Furthermore, what I find distressing about this classification of voting as a green action are its implicit premises that environmental action is done principally by the state -- and that the state's efforts are truly effective in making the environment cleaner and safer than it would otherwise be. Neither of these premises is correct.

PERC documents the many ways that private, non-politicized actions take place to protect the environment. And a good deal of evidence exists showing that command-and-control methods of regulating for the environment sometimes (frequently?) cause the environment to be less-clean and less-safe than it likely would have been without these statutory methods. See, for example, the nice collection of essays in this book edited by Roger Meiners and Andrew Morriss

Mind-altering substance

My friend Sheldon Richman and I were discussing Eric Schlosser's excellent op-ed, in today's New York Times, on legalizing marijuana. I like Sheldon's observation in response to those who oppose legalizing marijuana because it allegedly alters the mind:

"The most dangerous mind-altering subtance of all is: ink."

Indeed so.

Prestowitz on Global Trade

Regardless of the merits or demerits of Clyde Prestowitz's opposition to U.S. foreign policy, his skepticism of free trade continues to rest on a weak foundation.

He says:

While globalization may not automatically lead to development, it does let everybody see how others are living, thus sometimes fueling envy and resentment of our wealth.

First, the data are very clear that countries more open to trade have higher per-capita incomes. See, for example, Douglas Irwin's Free Trade Under Fire for a review of this evidence.

Second, because greater openness to trade increases prosperity, those people most likely to envy and resent the wealth of others are precisely those people whose governments most vigorously interfere with their right to participate in the global economy. The South Koreans, the Taiwanese, and the Mexicans, for example, while still noticably less wealthy than the Americans with whom they trade extensively, are not noted for suffering fits of terror-inducing envy of us.

People who are excluded by government from participating in the global economy have little choice but to be envious. Observing the greater wealth of others is not sufficient to generate destructive envy. Rather, destructive envy seems far more likely to arise in people who can observe other people's greater wealth but who are also not free to seek their own wealth by participating in the global economy.

NYC Taxi Monopoly

The New York Times reports on the glee that Victor Salazar felt upon learning of the acceptance of his bid of $299,555.55 for a taxicab medallion. In other words, Mr. Salazar must pay to the New York City Taxi and Limousine Commission a princely ransom just to be allowed to offer his services to customers -- and he's happy about it.

Imagine how happy Mr. Salazar would have been without the unjustified regulatory scheme NYC has for taxis. He would have been allowed to drive a cab without paying one cent to the Commission.

Of course, now that he owns a medallion, he has a sudden stake in the entry restrictions and price regulations vigorously enforced by the Commission. Too bad for the many aspiring cabbies whose bids to buy medallions failed. Too bad for the many aspiring cabbies who simply didn't bother to bid because the price was too steep. And too bad for New Yorkers who, as a result, pay unnecessarily high prices for inferior service.

Clean Water and Infant Mortality

Yesterday, protesters in DC complained about the IMF and the World Bank and added Bechtel into the mix, charging that Bechtel is involved in water privatization.

From the Bloomberg News story:

A group marching through the streets of downtown Washington paused in front of a building that houses the local office of San Francisco-based Bechtel to shout ``Shame, shame, shame on Bechtel!'' Protest leaders in a dark pickup truck held up a sign that said, ``The World Bank and Bechtel: Water Thieves.''

The complaint is that Bechtel aids privatization which means higher prices for water. But privatization of water can allow the poor and others to have access to clean water that was unavailable when water was given away.

The only systematic study (by Galiani, Gertler and Schargrodsky) I have seen of this issue looked at Argentina where privatization of water led to a drop in child mortality of 5-7 percent, with the with reductions of 24% in the poorest areas.

Cleaned by Capitalism II

Yesterday in his weekly radio address Pres. Bush defended his administration's record on the environment. In response, the Democrats naturally criticized this record.

While politicians debate, fence, and fume over the state of the environment, countless creative entrepreneurs and workers in the market are busy, every day, making our living environment ever more clean and sanitary. This process is so relentless that we don’t notice it. We’re accustomed to its velocity.

As the President and his opponents dueled publicly about the environment, I was in Home Depot and saw a new toilet-bowl brush. It features a disposable head that you just click off and flush away when you’ve finished cleaning the toilet. The placard that advertised it read “No More Germy Brushes!”

Another small but worthwhile step toward a cleaner, healthier environment!

More on Conscription AND Hemingway

Speaking of conscription and of Hemingway, I can't help but tie the two together. Here again is Hemingway from For Whom the Bell Tolls. The character speaking is Karkov, a Russian military leader fighting in Spain against the fascists:

But an army that is made up of good and bad elements cannot win a war. All must be brought to a certain level of political development; all must know why they are fighting, and its importance. All must believe in the fight they are to make and all must accept the discipline. We are making a huge conscript army without the time to implant the discipline that a conscript army must have, to behave properly under fire. We call it a people's army but it will not have the assets of a true people's army and it will not have the iron discipline that a conscript army needs. You will see. It is a very dangerous procedure.

Does Sen. Hagel, who recently called for a return to conscription, believe that a disciplined and well-functioning army can be easily molded out of young men and women forced to serve -- many of whom oppose the war? Or does Sen. Hagel want an army consisting of enslaved soldiers who can be made to fight effectively only through "iron discipline" rather than through the pride and self-motivation that likely is the driving force behind the typical soldier who joins the military voluntarily?

Complexity, Cows and Cars

The Washington Post reports that Washington DC has a new science museum, the Marian Koshland Science Museum.

Bessy, a cow, is one of the centerpieces at a science museum that opens today in downtown Washington. Like other cows, Bessy chews a lot of grass and creates a lot of methane. Scientists count methane as the second greatest cause of global warming.

That is why a realistic fiberglass model of Bessy and an explanation of her multiple stomachs, her diet, her chewing and emissions came to be at the new museum sponsored by the National Academy of Sciences. The Marian Koshland Science Museum aims to demystify the scientific topics of the day.

Bessy is part of a temporary exhibit on global warming:

To explain the science behind global-warming headlines, the museum uses a number of approaches. There are descriptions of volcanoes, measurements of ocean coral, explanations about the way Earth wobbles on its axis. There are a number of computer-driven displays. One panel gives visitors several options for reducing carbon dioxide emissions, which are more prevalent than the methane created by cattle. Once the visitor makes a choice -- such as planting more trees or improving commercial transportation -- the panel shows how much impact that would have.

Now I realize that this is a science museum and not a social science museum. But why would we want our children to think that by improving commercial transportation there would be a simple straightforward effect on carbon dioxide emissions? A complex set of responses would be set in motion if we were to improve commercial transportation. We don't have the faintest idea what the net impact would be on carbon dioxide. And that's just the social science. Allowing kids to dial up some amount of carbon dioxide emissions misses the complexity of the environment and treats our world like a set of solvable simultaneous equations. Both our economy and our environment are much more alive than that.

Modern Era's Most Dangerous Idea?

In For Whom the Bell Tolls, Ernest Hemingway writes of “that so mutable substitute for the apostles’ creed, the party line.” This observation reminds me of the quotation that Hayek chose as an epigram for Chapter II (“The Great Utopia”) of The Road to Serfdom. It’s by F. Hoelderlin, who wrote “what has always made the state a hell on earth has been precisely that man has tried to make it his heaven.”

Milan Kundera issued the same warning many years later when, in an interview by Philip Roth, he remarked about Stalinism that “hell is already contained in the dream of paradise and if we wish to understand the essence of hell we must examine the essence of the paradise from which it originated.”

This, then, is my candidate for the most dangerous idea of modern times: the deification of the state. By this I mean the widespread belief that a particular set of people who proclaim a selfless love of humanity and who follow prescribed rituals that take place in official temples (usually made of marble) can achieve whatever is asked of them by the laity -- if only the priests aren’t corrupt and the laity have sufficient faith and tithe generously.

Byron Dorgan, Pharmacist

The New York Times (rr) reports:

A bipartisan group of senators announced Wednesday that they had reached agreement on a bill to allow imports of lower-cost prescription drugs from Canada and some other countries.

Dorgan is the principle sponsor of the bill. Others waving it about include Kennedy, Snowe, McCain, Lott and Stabenow.

The Times article does not mention the possibility that easy imports from Canada may change the price American pharmaceutical companies charge Canadians. The Toronto Globe and Mail uses the story from the Associated Press which also ignores any possible ramifications for Canadians. Allowing drug re-importation is treated as a public service on the part of Canadians, something akin to selling Americans cheap wheat or lumber.

But Canadian drug prices aren't lower because Canadians are better at producing low-cost drugs. They are lower because the Canadian government negotiates a single price for Canadian consumers. If Americans are allowed to import drugs from Canada, American companies will change the price they charge Canada or the Canadian government will have to get very involved in how drugs are distributed in Canada.

I'm in favor of allowing drug re-importation. Not in the name of cheaper drugs, which I suspect will turn out to be a phantom. I don't think the US government should be in the business of enforcing the Canadian government's drug purchasing system or price discrimination by US manufacturers.

There's an interesting political economy challenge if the price differentials persist and if drug re-importation is not allowed. Lower Canadian prices will encourage the US government to become the single buyer here for American citizens and that is the road to ruining the US pharmaceutical industry.

Economic Development, Property Rights, and War

Two empirical studies in the current issue of the Cato Journal offer especially worthwhile reads.

The late Bernard Heitger looked at data from different countries from 1975-1995. He found that

compared with the more traditional determinants of economic growth -- such as physical and human capital accumulation and the growth rate of the working-age population -- the impact of property rights is quite remarkable.... [I]t seems reasonable to classify property rights among the ultimate sources of economic growth

In another article, John Tures finds evidence that economic liberalization reduces (but doesn't eliminate) conflict among nations.

The Draft and Risk of Death

And military conscription is also more hazardous to soldiers' health than is an all-volunteer force. The reason is that conscription permits government to treat young people as cannon fodder -- as a relatively costless source of ammunition to hurl at the enemy. Anything perceived as relatively costless will be used indiscriminately, abused, wasted.

In contrast, when government must offer soldiers a package of financial and work-condition incentives sufficient to entice them to join the military voluntarily, government will more scrupulously economize upon the precious human lives that man its military. Principally, it will invest more heavily in military hardware and technology as substitutes, at the margin, for human labor. Fewer soldiers than otherwise will be put in harm’s way – and, hence, fewer people will die.

The Great Outsourcing Scare of 2004

Here's a new piece of mine on outsourcing from the latest Hoover Digest. I look at the fears that there are a fixed number of good jobs and that every Indian with a good job means one less available to Americans.

At the heart of these fears is a theory about how nations prosper--the key is to get the good jobs. Ross Perot had a simple way of expressing it. He said it's better to make computer chips than potato chips. In this mistaken theory of how jobs affect our standard of living, wages depend on the title on your business card. If somehow the foreigners corner the computer chip market, we're left peeling potatoes for minimum wage, if we're lucky.

The problem with this theory is that, if a nation's skill level is low, making computer chips makes you poorer, not richer. It's like me at 5' 6" deciding to be a basketball player because basketball players have high salaries. Or Haiti trying to jump-start its economy by creating a domestic pharmaceutical industry sector because pharmaceuticals are very profitable.

I also explore the similarities between today and America in the early '90s when Japan was going to steal all of our good jobs.

This may be the only piece on outsourcing that gets in a reference to Pokey Reese.

Cleaned by Capitalism

On this Earth Day 2004, the Sierra Club, Greenpeace, and many other organizations and pundits complain about how polluted and toxic our world has become.

These complaints remind me of the cancer victim who, cured of his horrible disease by medical science, endlessly complains about the scar left from his successful surgery.

Industrial, developed economies do produce certain kinds of pollution that our preindustrial ancestors did not have to endure. (Although even this fact isn't as universal as you might think. A recent story in Nature detailed the high levels of lead pollution generated by medieval Celtic miners.) But the overwhelming fact -- a fact so overwhelming it goes unnoticed -- is just how incredibly clean, sanitary, and healthy our lives are compared to the lives of our pre-industrial ancestors.

We live today in houses with solid floors and roofs -- as distinct from dwellings featuring dirt floors and vermin-infested thatched roofs that were typical for most of human history (and that are still common today in undeveloped countries). Automobiles keep our streets free of horse dung and the swarms of flies attracted to it. We have several changes of clean clothes, and inexpensive laundry detergent that we use to recycle our clothing for use after use after use.

Inexpensive soaps, shampoos, and toothpastes combine with reliable running water in our homes to provide us with a daily level of personal hygiene and physical attractiveness that were out of reach for even the wealthiest nobleman of 500 or 5,000 years ago.

We have household cleaning agents, plastic wraps, and refrigeration – not to mention antibiotics – that protect us from lethal bacteria.

This list of how capitalism and commerce make our lives cleaner and healthier goes on and on. On balance, capitalism has done far more to clean our living environments than it’s done to pollute them. It’s good to keep this perspective in mind when listening to the loud complaints of unchecked pollution.

Cens@!#!ship

Pat Boone makes the case for censorship in this Washington Times story:

A healthy society needs censorship to survive, 1950s musical icon Pat Boone said yesterday. He added that he would welcome strong content restrictions governing movies and other artistic works. "I don't think censorship is a bad word, but it has become a bad word because everybody associates it with some kind of restriction on liberty," said Mr. Boone...

Yes, they do, at least if they think about it for a moment.

Mr. Boone said that if he were in charge of standards, there would be stringent controls on material. "It must be majority approved ... voluntary ... and self-imposed," he said...Self-imposed means that the majority of people say that is what we want, and it can be changed if people's attitudes change, which is how a democratic society works."

Yes, if it doesn't have a Constitution.

Mercenaries vs. Slaves

Chuck Hagel thinks we might need to reinstate the military draft.

I prefer mercenaries.

SARS & Mao

I just heard a report, on NPR's Marketplace, on SARS. The reporter introducing the story mentioned that, last year, SARS caused commerce in Beijing to come to a halt for two months. While obviously something of an overstatement, I'm sure there's much truth to this remark. But it causes me to wonder: how does SARS compare with Chairman Mao and his gang at the sport of bringing commerce to a halt? I'll bet that MAO dried up far more commerce than SARS ever will.

Misery line-up

John Kerry has revived the "misery index," pioneered during the miserable 1970s. The presidential aspirant insists that

a combination of soaring college and health care costs and stagnant incomes have battered working families during Bush's three years in office.

Financial Times columnist Amity Shlaes admirably deconstructs Kerry's use of this "index."

One of my most powerful memories of the 1970s is that, as a teenager, I waited several hours in long lines just to buy a measly five gallons of gasoline on each visit to the gasoline station -- and this when I found gasoline at all. This experience was miserable. Today, in contrast, we have none of the price controls that caused gasoline shortages (and the corresponding long queues). More importantly, there's no serious movement to reinstate such controls, despite the recent run-up in prices at the pump.

While difficult to quantify, the absence of many 1970s-style price controls makes today much less miserable than the Nixon-Ford-Carter era.

Eat poorly and prosper

The Washington Post (rr) reports on a research finding that eating very little is good for you.

A small group of people who are drastically restricting how much they eat in the hope of slowing the aging process have produced the strongest support yet for the tantalizing theory that very low-calorie diets can extend the human lifespan.

You have to scroll down a ways to find out just how drastic a restriction we're talking about here. Turns out to be something between 1100-1950 calories a day for men.

The research began with the discovery of a group called the Calorie Restriction Society.

As in all things in life, there is a tradeoff. You may live longer but along the way, some of life's pleasure is a bit diminished:

Dean Pomerleau, 39, a computer engineer from Gibsonia, Pa., cut his daily caloric intake from about 3,000 calories a day to about 1,900 more than four years ago. Pomerleau eats a highly regimented diet that consists of the same two meals daily of nothing but fruits, vegetables and nuts, with a couple of cups of non-sweetened herb tea for snacks.

I seem to have a very different concept of a "snack." When I think of a snack I think of maybe pistachio nuts or a candy bar or at least an apple. The motto of the Calorie Restriction Society is "Fewer Calories. More Life." I'd say longer, not more, but de gustibus as the saying goes.

Rather than eating less, I'd rather invest in biotech. More calories, more life.

If eating less really does extend lifespan and improve health, it's another example of the U-shaped relationship between your body and the world around us. No food—death. A little food—good health. Way too much food—death. It's all hormesis.

Howl, Raines

It's probably not too late to find a copy of the May issue of the Atlantic. In it, Howell Raines, deposed editor, defends his tenure at the New York Times. (The Atlantic online only offers this teaser.) There is a lot of dirt dishing. The Atlantic could easily fill an entire issue with the letters it will receive, so next month will also be highly entertaining.

In theory, the piece is a defense of the L'Affaire Blair (Jayson, not Tony.). This is supposed to be Howell's opportunity to clear the air. But in the telling, there is a lot more Howell than Jason in the piece. Highlights include the role of the unions in creating mediocrity at the Times and Raines's defense of pandering to popular culture.

I always find pieces like this fascinating. How do you write an autobiographical account like this without sounding like a chapter from Nietzsche's Ecce Homo? Turns out it can't be done. Raines reminds me of the job candidate asked to list his flaws. "I'm too much of a perfectionist." So it is with Raines when he confesses that his biggest failure on the job was trying too hard to make the paper better too quickly.

As in all such barbaric yawps, much (almost all?) is hidden. To my great disappointment, there is no mention of the moose, an object which many of the staff saw as so much Bullwinkle.

Polio vaccination and jobs

50 years ago this month, Dr. Jonas Salk launched nationwide testing of his polio vaccine. Within an incredibly short time (and with help from the researches and refinements of Dr. Albert Sabin), polio was effectively wiped out as a health threat in America.

But there’s a downside: job loss. How many workers, who played by the rules, lost their jobs as a result of this development? People who built wheelchairs and crutches, who helped manufacture iron-lung machines, and who specialized in nursing polio victims – many of these people were thrown out of work by the product supplied by Dr. Salk and Dr. Sabin. Some of these workers surely found comparable alternative employment quickly. Others took longer to do so. And probably some others were obliged to accept jobs at much lower pay. Maybe some of these workers never found new jobs.
.....
Of course, this downside is vanishingly insignificant compared to the upside of the polio vaccine. But I mention it to highlight the fact that particular jobs are eliminated by almost any economic or societal change.

Why, then, in our public discussions do we focus so obsessively on international trade as a source of job loss? When domestic consumers shift more of their spending to imports, some specific domestic jobs are lost – just as other jobs are created elsewhere in the domestic economy – but there’s nothing at all unique about trade on this front. Any – ANY – change in the pattern of consumer spending eliminates some jobs and creates others.

Do we condemn the spaying of dogs because it reduces the demand for dog catchers? Ought we to stymie research on electrical cars because, if successful, such cars will cause many workers to lose their jobs in oil fields? Should we denounce the Atkins diet because it will eliminate some jobs in factories making pasta and chocolate? Are the jobs threatened with elimination by spaying, electrical cars, the Atkins diet, and the multitude of other economic changes having nothing to do with international trade, less important to workers who hold them than are jobs held by people working in industries that compete with foreign suppliers?

Dobbs and jobs

The New York Times (rr) reports that Lou Dobbs is coming out with a book on outsourcing. It will be critical of corporate greed. The publisher is "hurrying" the book—it will be out in four months. Only the publishing business considers a four month lag "hurrying." Outsourcing was a hot topic when the war was quieter and the job market was mediocre. If the economy keeps adding jobs at anything close to its March pace, trying to scare people about outsourcing will be like writing a book on the dangers we face from the Japanese economy.

Lest there be any doubt, work on the book will be done in the United States.

"Obviously the editor and publisher are situated in New York, in the U.S.A.," Ms. Raab said. "It's almost definitely going to be printed in Fairfield, Pa., just outside of Gettysburg."

Mr. Dobbs, informed of the likely printer's location, said, "I am delighted, and would have expected nothing else."

That's a relief, isn't it? But given his views on greed, I'm disappointed Dobbs isn't posting the book on the internet or giving it away on street corners.

Second thoughts on outsourcing

Not on my part, but on the part of America's businesses. So reports Newsweek. Turns out, some outsourcing experiences don't go well.

...many American companies are discovering that sending work to low-wage countries is not as easy or as inexpensive as advertised. In hotspots like Bangalore, wages and real-estate prices are soaring to record levels—though still generally a fraction of U.S. costs—which cuts into potential savings. As U.S. companies move from exporting call centers to outsourcing more complex work like software development, they're finding overseas workers are often ill-equipped to deliver consistent, quality work. The bad experiences are creating a boomerang effect—the return of jobs to the United States—which some have dubbed "onshoring."

Many of the policy critics who have railed against outsourcing have argued that the strategy isn't as good as it looks. But as reader Cora Barnhart points out, this kind of problem is self-correcting. If businesses lose money from outsourcing, they'll stop doing it. Overzealous outsourcers or faddish outsourcers will bear the costs. This feedback loop is very powerful.

Barry is the ultimate role model

Yesterday was opening day for my oldest son's baseball team, a cheerful group of eight and nine year olds. One of the coaches asked the kids to gather round for some batting advice. He told them to choke up a bit on the bat, watch the first pitch and so on. Then he asked them if they knew who Barry Bonds was. He wanted the kids to see the virtues of a light bat and choking up. A legitimate answer to his question would be, "The greatest hitter of his generation," or "One of the greatest players of all time." Instead, this eight year old raised his hand and volunteered: "He's going to die soon. He puts bad things in his body."

Probably not a lawyer's kid. he didn't put the word "allegedly" in front of the word "puts."

Here's what the kid was referring to.

I'm not sure steroids should be against the rules, but I don't want my kids taking them. What I like is how the kid at the game showed that with the right parental commentary, even a bad role model can be a good one.

Here's Tyler Cowen's take on the search for perfection.

Still alive in the long-run

Trade’s documented effect on employment is clear: freer trade does not reduce the aggregate level of employment (and nor does it increase it). Skeptics of free(r) trade frequently respond “Sure, in the long-run new jobs will be created. But what about workers who are unemployed now? The long run is no good to them. Even an economist, John Maynard Keynes, recognized that ‘in the long run we’re all dead.’”

This justification for protectionism – that protectionist policies are justified because they diminish pain and anxiety today, while the costs of protectionism emerge only in the less-significant tomorrow – is faulty on a variety of fronts. Perhaps the biggest flaw of this justification is that it’s a lie. No one really believes that short-run consequences should take precedence over long-run consequences.

You see, people who really believe that long-run effects should be ignored or significantly discounted in favor of short-run effects would, in addition to supporting protectionism, support also the following policies:

- eliminating environmental laws (because these impose substantial costs today in return for benefits that arise mostly in the long-run);

- Uncle Sam’s current, unprecedented budget deficit (because the benefits of the deficit are enjoyed today while payment for today’s benefits need not be made until tomorrow);

- eliminating Social Security (which forces people to forego consumption today in favor of the long-run).

If no sensible person accepts the mantra “in the long run we’re all dead” as an argument against environmental laws and efforts to reduce the budget deficit, why does this mantra have credence in debates over free trade?

Technology Update

Reader Peter Hays points out that the technology in the parking lot delight is infrared just like the self-flushing toilets.

Reader Roger Meiners says his dentist doesn't use the modern day pliers for tooth removal, but a laser.

And in my list of modern day improvements, I should have mentioned self-dissolving sutures. Some comfort, but that laser is definitely the future. Or the present, for those lucky few.

Patriot's Day

Today is Patriot's Day, now celebrated, I assume, on the third Monday of April. When I was growing up in Lexington, I remember it as always being April 19th, regardless of the day. They coincide this year.

My memories of Patriot's Day are the Boston Marathon and the Red Sox playing in the morning. I also remember a parade and the inscription that ran around our auditorium in Lexington High School: "April 19th, 1775, What a glorious day for America." At least that's my memory.

We moved to Lexington when I was a boy of 7, coming from Moses Lake, Washington. Always the motivator, my father warned me that the Lexington kids would know all about the American Revolution. Turns out, to my relief, that they knew no more than I did. Probably less.

In my nine years in the Lexington public school system, I have no memory of ever learning anything about the Revolution or the founding. I'm sure that we talked about it at some point, at least I assume we did, but I have no memory. I went to Muzzy Junior High. (Bless you, Miss Kineen!) I thought Muzzy was a funny name. It was only a few years ago, reading a book about the Battle of Lexington that I read that Isaac Muzzy was one of eight men who died on the Lexington green that April day. My elementary school was Frankin, presumably for Benjamin, but the other elementary schools in town, Harrington, Munroe, and Parker were named for those who died that day.

How could that be? How could you be raised in the cradle of the American revolution and learn virtually nothing about it from what was and is, an excellent school system? How could you learn nothing about tyranny? Nothing about the Constitution?

Part of it was the times, part of it the politics of the place, part of it surely, the belief among too many teachers of high school, that history is really nothing more than the recitation of facts and that the poetry of revolution and creating of a republic were too much for young minds. Who knows? And perhaps I had a glorious high school history course that I have simply forgotten.

When we moved to the Washington DC area a few months ago, I did not tell my children how all of their neighbors would know more about government and the founding and the Constitution. Instead, I try to give them a feel for how rare and glorious is the country we live in.

Ironically, perhaps, the three schools nearby are Walter Johnson High, Churchill High, and Herbert Hoover Middle School. No founders. No war American war heroes. A pitcher, a Brit and a President who is not next in line to get a monument on the Mall downtown.

That motivating father loves European history. So only recently I have been trying to make up for lost time and reading about the founding and the Civil War. Any suggestions would be appreciated.

I suspect my memory of my auditorium quote is wrong. School is closed today, so I can't verify it, by my guess is that the actual quote is "What a glorious morning for America" rather than day. It's a quote from Samuel Adams who speaking to John Hancock said, "What a glorious morning this is!"

He was right. And now we think of Sam Adams as a beer. We have lots of work to do.

Here is the Wikipedia page on the battles of Lexington and Concord.

Parking Technology

On a trip last week, I parked at BWI, Baltimore's airport. New technology tells you how many parking spaces are available on each floor. Very cool. So I head for the floor with lots of spaces, figuring I'll save time that way. But that's only the beginning. At each lane is an indicator that tells you whether there are empty spots in that lane and how many. Wonderful. Glorious. So instead of wandering aimlessly through the packed garage in hopes of finding the one empty space, you know exactly where to go.

How does the garage know? Over each space is a sensor. When a car leaves a space, the light over the space turns from red to green and the lane indicator changes its count of how many spaces are available. So how does the sensor know whether the car is there? I don't know but my guess is it's the same technology that automatically flushes the toilets in public restrooms.

I wonder why the parking garage goes to the expense of making parking more convenient? Is it part of BWi's strategy given competition from other Washington airports? Was the contractor forced to include it in the bid? Sure is lovely.

Modern Dentistry

Had a tooth pulled this morning. I'm writing on book on growth and markets—part it deals with how much life has changed in the last 100 years. Dentistry is an interesting example. Lidocaine beats a swig from a whiskey bottle, though the whiskey would be better today than it was then. The antibiotics prevent some gruesome infection from forming. The Tylenol with codeine that I may be turning to in a few hours is better than finishing the whiskey bottle. Then again, some things don't change much. Basically there's something that's way too much like a pair of pliers and some physical exertion is required on the part of the extractor.

Broken Window I

Jeff Jacoby points out that Boston's benefits from hosting the Democratic National Convention may be slightly lower (actually a lot lower) than the estimated $150 million being bandied about. It's a nice example of the seen and the unseen. Seen are some of the benefits. The costs are a little harder to see. But he cites a study by the Beacon Hill Institute that claims when the full effects are considered, the Convention will actually harm the city by $12.8 million.

Here is the original analysis by Bastiat on the seen and the unseen.

Tax Free

Millions of Americans pay zero taxes. According to this story from Fox News, 44 million people, roughly 1/3 of all those who file their taxes have zero tax liability because of sufficiently large deductions. Another 14 million pay zero because they don't even have to file. Adding in dependents, children, and so on, 122 million Americans pay zero tax.

The numbers are a little misleading because these are income tax numbers. Lots of folks pay payroll tax. But the political economy of large numbers of people paying little or no tax is a bit frightening for the long-run growth of government. When you pay little or nothing for something, you tend to want a lot more of it.

Job Survey Info

Here is a very nice piece from Business Week online that explains how the job numbers are gathered, how unemployment is measured and the difference between the Household Survey and the Establishment Survey.

Fair Trade Coffee

The Christian Science Monitor reports that small coffee farmers are feeling the heat from larger farmers elbowing into the cachet of fair trade coffee:

But as the movement has expanded in recent years to include such brands as Starbucks, Green Mountain, Procter & Gamble, and Dunkin' Donuts, dissension is percolating among some smaller roasters. They claim that the large firms, which buy only a small percentage of fair-trade beans, are turning it into a marketing ploy rather than an effort to help farmers.

Here's my favorite part:

Another sticking point inside the movement are the requirements for being certified. Germany's Fair Labeling Organization (FLO), which certifies all fair-trade coffee in the world, charges farmers $2,431 to certify plus an annual base of $607 for recertification and $.02 per 2.2 pounds of coffee sold under the fair-trade label.

Feeling Our Fat

Reuters reports that McDonald's is launching an anti-obesity campaign. Can you say "legal defense strategy?" I'm surprised it isn't just a slogan: Eat Responsibly.

Lies, Damn Lies and Statistics

James Surowiecki writes in the New Yorker that Bush is manipulating government statistics for political gain.

He begins by telling how Simon Kuznets invented the national income accounts:

Though crude by modern standards, it was the first reliable measure of national economic performance in American history. Within a few years, the Commerce Department had invented the gross national product and had started analyzing the economy by industry and region...

He then claims that this increase in economic number gathering has been remarkably beneficial:

...the economy depends on these numbers; they make business smoother and policy smarter. (Recessions after the Second World War, for instance, have lasted about half as long as recessions before it.)

The claim about milder recessions is true. And it's not just recessions. Economic fluctuation is dramatically milder over the last fifty years than over the previous fifty. But I'm skeptical about the claim that this improvement in economic performance is due to better data. I've always believed it to be due to a better understanding of the role of the central bank in a modern economy and I give Milton Friedman (with help from Anna Schwartz) a lot of the credit. That may not be right. But I don't see how the immense number-gathering army of the government has played a positive role. It has been good, generally for economists. It gives us some grist for our mills. And it's hard to improve the performance of the economy if you don't have any idea of how it's doing. But I think a persuasive case could be made that government statistics have hampered economic performance. One example is the trade deficit. The focus on the trade deficit hampers good economic policy.

Surowiecki then goes on to give examples of Bush's malfeasance:

Statistical expediency and fiscal obfuscation have become hallmarks of this White House. In the past three years, the Bush Administration has had the Bureau of Labor Statistics stop reporting mass layoffs. It shortened the traditional span of budget projections from ten years to five, which allowed it to hide the long-term costs of its tax cuts. It commissioned a report on the aging of the baby boomers, then quashed it because it projected deficits as far as the eye could see. The Administration declined to offer cost estimates or to budget money for the wars in Afghanistan and Iraq. A recent report from the White House’s Council of Economic Advisers included an unaccountably optimistic job-growth forecast, evidently guided by the Administration’s desire to claim that it will have created jobs.

I really like James Surowiecki. He is one of the top two or three journalists writing on economics. He is consistently interesting and educational. He has a book coming out, The Wisdom of Crowds, that I suspect I will like a great deal. But this indictment of the Bush Administration is disappointing. I was expecting to read that Bush had leaned on the bureaucrats to redefine unemployment or some such measure in order to look good in November. But except for the BLS example, Surowiecki's examples are examples of where the Administration has made inaccurate forecasts that led to more palatable political results. That's a good reason to ignore most forecasts but it doesn't threaten our macroeconomic well-being. Pardon my cynicism, but "statistical expediency and fiscal obfuscation" are a bipartisan perennial problem with every administration. Surowiecki admits as much, but I don't see much evidence of the expediency part being worse these days than in the past. If anything, those CEA forecasts will haunt the President politically if they don't come true.

As for the BLS not reporting mass layoffs, the implication is that the data are being censored or no longer being collected. Nope. Here they are. Maybe they just don't issue them with as much fanfare.

Cuban Cars

Just when you thought it was OK to have a little fun, Cuba has decided to confiscate the cars of the occasional capitalist. From now on, the managers of Cuban state run enterprises will have to go back to Ladas, one of the worse cars in the world. So reports Reuters:

Managers of Cuba's state enterprises have been told to hand over their expensive cars like Toyotas and Mitsubishis and stick to the more proletarian Russian-made Ladas or smaller vehicles.

I am amazed that Ladas are still being made. Who is buying them? And if the indignity of swapping your Toyota for a Lada weren't bad enough:

Nor can they drive cars with decorations or air-conditioning, which has set them apart from ordinary Cubans in the sweltering heat of tropical summer.

What a delightful country.

Meanwhile, Oliver Stone profiles El Commandante on HBO. Allesandra Stanley's review is here.