Posted by Marc Hodak on April 30, 2007 under Patterns without intention | 
Why is a French socialist politician vowing to form an “anti-liberal” party? In Europe, liberals are those who believe in free markets. That’s what “liberal” used to mean in the U.S. before the Progressive movement and its Democratic enablers flipped the meaning around. So, now America’s leftists are called “liberals” while America’s true liberals have had to adopt more cumbersome tags like “classic liberal” or “libertarian.” Confusing? Don’t sweat it. Even the WSJ is labeling the left candidate in France as “liberal” in a chart about recent elections there. Since I am writing about Europe today, I will use the term “liberal” here in the classic sense, consistent with European usage.
So, back to the French socialists–why are they feeling so threatened about (economic) liberalism? Because their candidate, Segolene Royal, is now courting the “centrists” for their votes in the upcoming general election for French president. And why is she courting the centrist vote, even at the apparent risk of alienating her left wing? Because even in France, the left wing is becoming marginalized. France’s left wing is now pulling about 10 percent of the vote, a significant drop from the 1970s and 1980s when they were able to elect a Socialist president. Last weekend, Royal got 25 percent of the vote. That means that 65 percent of France is currently to her right, and she needs at least 15 percent of them to win the Presidency. That puts her in a bind, since what she gains by tacking right risks losing support on her left.
But I don’t really give a darn about Royal, or even her opponent Sarkozy. It’s France. Historically, Marx skipped over France on his way from Germany to England, but his ideas nevertheless took firm root in their powerful labor class. Even their “conservative” party is beholden to unions and nationalists. What catches my eye is the overall trend that is emerging in France, as in the rest of the Europe and the world. Politicians all over have no choice but to cater to their voters needs. Even if most voters are economically ignorant, and they think they need government intervention, reality eventually catches up, and the people and their politicians are compelled to acknowledge the competition for capital.
In the long run, this competition for capital will force a competition for productive businesses and individuals. The governmental bumps that try to regulate the inflow and outflow of people and money will get smoothed away in an ever flattening world. Even the U.S., so far ahead in capitalism for so long that it could actually go counter to the general liberalizing trend, will be forced to arrest its socialization, and join the race to greater freedom. In the future, we are all capitalists.
Posted by Marc Hodak on April 28, 2007 under Unintended consequences |
Michael Pollan published an article outlining the peculiar incentive built into our Federal government’s farm bill for Americans to get fat. The early part of the article focuses on an economic reason for the counter-historical fact that todays poor in America are more overweight than the wealthy. He noted an experiment by a University of Washington researcher, Adam Drewnowski:
Drewnowski gave himself a hypothetical dollar to spend, using it to purchase as many calories as he possibly could. He discovered that he could buy the most calories per dollar in the middle aisles of the supermarket, among the towering canyons of processed food and soft drink. (In the typical American supermarket, the fresh foods ��� dairy, meat, fish and produce ��� line the perimeter walls, while the imperishable packaged goods dominate the center.) Drewnowski found that a dollar could buy 1,200 calories of cookies or potato chips but only 250 calories of carrots. Looking for something to wash down those chips, he discovered that his dollar bought 875 calories of soda but only 170 calories of orange juice.
As a rule, processed foods are more ���energy dense��� than fresh foods: they contain less water and fiber but more added fat and sugar, which makes them both less filling and more fattening. These particular calories also happen to be the least healthful ones in the marketplace, which is why we call the foods that contain them ���junk.��� Drewnowski concluded that the rules of the food game in America are organized in such a way that if you are eating on a budget, the most rational economic strategy is to eat badly ��� and get fat.
When he peeled away the reasons that processed food are so much less expensive, it came down to the cheapness of certain commodities like corn, which are heavily subsidized, which subsidies are supported by powerful midwestern congressmen.
The whole article is fascinating. It looks beyond the incentive to obesity to offer a glimpse of the panoply of perverse incentives built into this beefcake legislation:
The health of the American soil, the purity of its water, the biodiversity and the very look of its landscape owe in no small part to impenetrable titles, programs and formulae buried deep in the farm bill.
When he went one layer deeper to ask why this congressional delegation had such power, his answer was basically farm bill complexity and voter inertia. I would have proposed something more transparently institutional–heartland senators have a number of votes far out of proportion to the number of people they represent. In other words, our bicameral system for allocating a disproportionate amount of power to more sparsely populated states may be the ultimate explanation for America’s obesity. The Constitutional Convention’s “Great Compromise” made us fat.
Posted by Marc Hodak on April 27, 2007 under Collectivist instinct |
On the fine Coyote Blog, a commenter recently used the term “giving back” to describe taxes paid in support of social programs. I don’t know how the term “giving back” ever got equated to paying taxes, but this use of the term really needs to be taken out to the back forty and shot.
I liken it to the idea that people used to have (and many still have) about praising Jesus: “If it’s the right thing to do, why not have a law?” Because, as Jefferson pointed out, threatening sanctions against unbelievers taints everyone’s religion. If your neighbor sings in church, is it an expression of piety or fear? If there’s a law, one can’t know. Part of the genius of the Founding Fathers was their realization that laws enforcing religion potentially subject all religious expression to question. They saw religious freedom as perfecting their ability to express their beliefs.
A similar argument attaches to “giving back” by way of taxation. Sure, most people don’t want to see the poor, especially the elderly poor, suffering. But as it stands now, no one can say that we take care of our poor because of collective compassion when the threat of violence stands right behind that “compassion.” One can argue whether or not our poor would be worse off without transfer payments, but one cannot call government transfer payments “giving back” since there is no choice about the “giving,” even if much of it may have otherwise been freely given absent coercion.
Posted by Marc Hodak on April 24, 2007 under Futurama |
Astronomy was my childhood passion. It was the height of the “space race.” What boy’s imagination wasn’t captivated by Star Trek and the eventuality that science fiction would become fact?
So, my heart still races when we find something remarkable out there, as today when we discovered the first planet with earth-like temperatures. This planet may have water. If it does, it would very likely be liquid on its surface beneath an atmosphere of some kind. That makes it a keen candidate for a life-bearing world.
The exciting thing is that even if this world contains no water or no life, it’s still a harbinger of other worlds yet to be discovered that almost certainly do have water and life. We’ve only been looking for a relatively short time, a few cosmic seconds, and already we have found over 200 planets, one of them earth-like, albeit with a big red sun that would look 20 times the size of the moon. (How cool is that?) At this rate, our grandkids should be familiar with dozens, if not hundreds of worlds likely to support life of some sort. Soon after, we may even be able to reach them in a reasonable amount of time.
The reason I love history is because it kind of makes up, in my mind, for all the years that I wasn’t around before I was born. At times like this, I wish I were looking back on these exciting times of discovery, but knowing what those discoveries eventually turned into. I guess there are as many ways of saying life is too short as there are stars in the sky.
Posted by Marc Hodak on April 23, 2007 under Invisible trade-offs |
The passing of Boris Yeltsin is being greeted with generally favorable obits, and some residual criticism for his toleration for corruption, initiation of the Chechnyan conflict, and other questionable calls during his time at the helm, to say nothing of his sometimes embarrassing personal behavior. Such criticisms suggest an unstated belief that his perceived shortcomings could have been avoided without other, possibly worse, consequences. For example, maybe he could have accomplished what he did without the corruption that plagued his tenure. But it’s also possible that corruption might have been the grease that enabled him to begin turning the rusty wheel of capitalism by quickly divesting the state of its control over the economy. Many things he might have done to significantly prevent corruption might have also stalled the whole effort. I’m not saying this would have necessarily been the case, or that it wouldn’t possibly have been a better tack anyway. I’m just saying that nobody knows how much better events overall could have turned out with a different package of policies.
How did overall events turn out? Better than most anyone could have expected at the height of the cold war. Well into the 1980s, most people could hardly see an endgame to Soviet communism without a hot, possibly uncontained conflict. The peaceful, almost banal disintegration of the Evil Empire is, I think, among the most underrated achievements in human history.
What Gorbachev wrought by simply stepping back when the Wall began to crumble, Yeltsin consolidated by boldly going forward when the communists were ready to be swept away. I know I would have greatly benefitted from being stinking drunk when standing atop a tank to face down the last, deperate masters of the Red Army. But that’s what Yeltsin did in one of his soberest moments.
All these little critiques of the parts of the package we don’t like are a symptom of a utopianism not unlike the one Yeltsin killed off. The downsides of his decisions are visible–a corrupt relationship with a mafia-like oligarchy, a war in Chechnya, centralized power under Putin, stumbling onto a stage and swatting at an obstruction before recognizing it was a microphone. But what would we have gotten with a sober, uncompromising master of realpolitik who could stand up to the Oligarchs? We could have gotten Putin, ten years earlier.
Posted by Marc Hodak on April 21, 2007 under Executive compensation |
Well, the Democrats have fulfilled on their populist promise to “do something” about CEO pay with the new “Say on Pay” bill passed yesterday. It’s difficult for me to add anything beyond what I already wrote when this bill was first proposed a few weeks ago, or the able commentaries of Professors Ribstein, Bainbridge, and Smith. But this is an economics, as opposed to a legal, blog, so I will make it really simple:
This bill, if passed into law, will politicize decision-making on executive compensation at public companies. Politicized decisions are rarely better decisions, so investors will suffer.
If Congress had any integrity about this proposal, the most they would do is to require all public companies to give actual shareholders the choice about adopting a “Say on pay” policy at the company level, which many companies are already doing. This measure is supposed to be for the benefit of the shareholders, right? The fact that the Democrats are choosing, instead, to end-run shareholders perfectly able to vote for themselves with a top-down, Federal law gives you a clue as to who the real intended beneficiaries are.
Anyone who believes that investor-run public companies are better than board-run public companies should invest in North Dakota firms, or in firms that have adopted their own shareholder-vote proposals, and leave the rest of us investors to choose which governance models work for us.
Posted by Marc Hodak on under Collectivist instinct |
The WSJ makes hay about SEC Chairman Christopher Cox:
Instead of the split, partisan votes that had become the norm under his predecessor, Mr. Cox, a former California congressman, brought a politician’s desire to seek the broadest support possible. The commission unanimously approved rules relating to disclosure of executive pay and using technology to improve the proxy process. Under his leadership, every vote on a proposed rule has resulted in a 5-0 decision.
But now, critics are expressing frustration with this approach, arguing that because of the time Mr. Cox takes to reach a consensus the SEC is moving too slowly on important topics, leaving Wall Street and investors without guidance on key issues. The debate gets to the heart of big questions about the role of an SEC chairman: Should he push for fewer, unanimous decisions that will endure? Or should he target contentious changes, even if he alienates colleagues and interest groups?
Actually, Mr. Cox’s approach is consistent with a minimalist approach to regulation that he clearly espoused as a congressman–only adopt regulations that nearly everyone thinks are reasonable. The real reason his approach is irking his critics is that these critics are invariably special interest groups, organizations that must now work harder than just drum up support in the majority to satisfy their parochial interests. His critics like regulation, and they want more of it.
Wall Street and investors, if anything, suffer from too much “guidance.” I would guess that Chairman Cox would probably prefer to knock down a good deal of regulation, if his was the only vote that counted. Unfortunately, he’s in charge of a regulatory agency, not a deregulatory agency. This is the best one can do when one truly cares about investors as a whole.
As mentioned in the article, even Cox couldn’t do anything to stop the new “compensation lawyer full employment act” passed under the banner of enhanced executive compensation disclosure, despite my best attempt.
Posted by Marc Hodak on April 19, 2007 under Unintended consequences |
I’m certainly not claiming this is the intent of the mass media in response to the Virginia Tech shootings, but consider the following. The shooter, apparently between murders, sent out a media packet to NBC. The packet included his rambling, twisted fantasies, including his view of the Columbine killers as “martyrs.” It had a video and digital album showing in Rambo-like posturing. If, as the media says, a picture is worth a thousand words, then what are they doing posting the contents of this killer’s media kit?
I could forgive NBC if I took their response to incentives at face value. Murder stories sell, especially if gun play is involved, and NBC is in it for the money. But not all gun stories seem to be created equal. Consider the story of a similar shooting that happened just down the road at Appalachian Law School.
There, a former student went into the school building and shot six people, killing three. Two students, Tracy Bridges and Mikael Gross, independently ran to retrieve their personal weapons from their vehicles. They approached the shooter from different positions, and when Bridges yelled to the shooter to put down his weapon, the killer promptly complied, and was then tackled by a couple other students who were near by. You’d think this was a good story. It’s got violence, a villain, and heroes.
Here’s how the Associated Press State & Local Wire reported the incident that day:
A law school student upset about his grades went on a shooting spree Wednesday, killing three people and critically wounding three others before he was wrestled to the ground by students, officials said…
He said the gunman then went downstairs into a common area and opened fire on a crowd of students, killing one and wounding three others. He was tackled by four male students as he left the building.
“They just wanted the guy,” Briggs said. “They weren’t worried about their own personal safety.”
Gee, tackling an armed shooter sounds insanely heroic, if not suicidal�Ķunless you have that little extra piece of information that the shooter had already been immobilized by armed citizens.
Read more of this article »
Posted by Marc Hodak on April 18, 2007 under Collectivist instinct |
Here is what WaPo had to say about Our Dear Senator:
“Schenectady Mayor Brian Stratton needed help: Bechtel Plant Machinery, a prominent local employer, had announced it was relocating to Pittsburgh.
“On Nov. 15, Clinton called Stratton, Schumer and Rep. Michael R. McNulty (N.Y.) to her Senate office for a meeting with Bechtel officials. Stratton described Clinton as ‘totally enraged and totally engaged’ and said she demanded to see the data that had informed Bechtel’s decision.
“Schumer reminded the executives that Bechtel relied heavily on federal contracts, that Democrats were now the majority party, and that Clinton was a member of the Armed Services Committee. Her presumed front-runner status for the 2008 Democratic nomination was never mentioned, Schumer said. But he described it as ‘the 800-pound gorilla in the room.’
“Two weeks later, Bechtel announced it was suspending the move. Relocating remained the better option, Bechtel executive T.F. Hash wrote to the senators. But he added: ‘I am, however, mindful of the difficulties this decision has placed on our employees and the community.’
The Bechtel executive’s note reminded me of statements read by hostages, plainly under duress, when they’re placed before the media.
It’s clear that the Post is heralding this as a political achievement. It’s clear that Ms. Clinton is quite proud of this vignette, too. In fact, I was made aware of it by her own staff who felt that it “might be of interest” to me. Yeah, it was.
It’s rare that we get to see into the heart of coercion. We got this glimpse because the Senators from New York apparently have no shame about conspiring against the citizens of the United States to deprive a legitimate company of the opportunity to fairly compete in government contracts. When I see displays of raw power like this supposedly exercised on my behalf, I wonder what I could do to help those without the guns. I wonder how I could apologize to Bechtel for being complicit by virtue of my citizenship. I wonder how the public and the press could be so morally barren as to applaud this kind of behavior. I wonder…where the heck are the Senators from Pennsylvania?
Posted by Marc Hodak on April 17, 2007 under Futurama |
You might not have seen the article. It was on page 12 of the WSJ.
Until recently, Germany condemned the low-tax competition from Poland and others as ���tax dumping.��� But after failing to win support within the EU, Germany has joined in�Ķ Others in Western Europe have reacted to the tax cut in Germany.
Most of the media presents globalization as the result of a political intent to liberalize. Uh-uh. Globalization is less an effect than a driver of government policy. The illusion that governments trump markets is based on the immediate, visible effects of new laws. The unseen, long-term effects include a market reaction that ultimately undermines laws that don’t make economic sense. Ultimately, we see a change in the laws–the government responding to market realities when its alternatives look worse. Chinese communists and Indian bureaucrats aren’t letting go because they like economic freedom.
Markets are aided by transparency. The impact of government policy on economic outcomes is becoming easier to see (or harder to hide). People are seeing through the collectivist excuses for limiting their ability to invest in or accept investment from anywhere, to sell to or buy from anyone. People are taking advantage of their ability to hire anyone anywhere to do a job. They’re having more trouble justifying denying anyone the right to live or work anywhere. Eventually, we may even begin to insist on the freedom to adopt a governmental jurisdiction of our own choosing, possibly even regardless of where we happen to reside, like American corporations choosing among states. Sovereignty will become commoditized. That���s what this article is illustrating in its infancy.
Read more of this article »
