Posted by Marc Hodak on July 9, 2008 under Unintended consequences | 
For most countries, R&D is a major cost. The U.S., Russia, France, and other members of the “nuclear club” spent a ton of money to get there. Korea and Iran have now shown non-nuclear nations around the world how to actually get the wealthy countries to fund their nuclear R&D.
1) Spend lots and lots of money on nuclear enrichment
2) Convince other world leaders that you’re batshit crazy
That second piece is important. It makes people take seriously the idea that you might use them.
Here is how civilized nations will react:
“Iran’s development of ballistic missiles is a violation of United Nations Security Council resolutions and completely inconsistent with Iran’s obligations to the world,” said National Security Council spokesman Gordon Johndroe.
Johndroe said that the U.S., Britain, France, Russia, China and Germany “are committed to a diplomatic path, and have offered Iran a generous package of incentives if they will suspend their uranium enrichment activities.”
That’s right. First issue the recrimination, then offer a “generous package of incentives.” That’ll show ’em.
The problem, of course, is that once the nuclear wannabes have credibly shown that they are able to play this game, their incentive will be to keep playing it over and over. This game is bound to attract more players.
Posted by Marc Hodak on June 24, 2008 under Unintended consequences |
In the head of a utopian.
We said to ourselves … what if we can create a city where there is no persistent underclass and where the children of the poor [are] achieving at a level that approximates the level of middle-income families? … [T]hat’s the mentality we have here — that we want to say enough is enough,” she told the Hartford Courant in 2001.
“She” is Claire Gaudiani, one of those elitist, liberal, central planners who told everyone that she wanted to turn depressed New London into a “hip little town.” All she needed was Suzette Kelo’s home to make the dream happen.
The Supreme Court said it was OK, as long as the city had a plan, even a dubious plan without any accountability to the taxpayers.
Like most utopian plans, this one is on it’s way to failure. The distressed taxpayers, far from benefiting from their leaders’ vision, have been left $78 million poorer.
Posted by Marc Hodak on June 14, 2008 under Unintended consequences |
…because they are being helped.
Here is a more recent example of getting what you pay for, in this case FEMA supporting Katrina victims (yes, they’re still out there):
The scorching heat puts many at the Quality Inn poolside, but for Gwenester Malone, she chooses to beat the heat by setting her thermostat to sixty degrees. Malone’s room for the past three months, along with three meals daily, have all been paid for by taxpayers.
“Do you work?” asked NBC 15’s Andrea Ramey.
“No. I’m not working right now,” said Malone.
Malone says she can’t drive and it’s too hot outside to find work within walking distance. “Since the storm, I haven’t had any energy or pep to go get a job, but when push comes to shove, I will,” said Malone.
HT – Instapundit
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Posted by Marc Hodak on June 12, 2008 under Unintended consequences |
Here is an interesting idea: After a presidential election, each state gives its electoral votes to the person with the largest number of popular votes.
Several states have apparently already passed measures that would do this. These measures would kick in when a collection of states totaling over 270 electoral votes–the number needed to elect the president–have approved them.
The intended effect is to get candidates to campaign beyond the “swing” or “battleground” states. Today, candidates nearly completely avoid those states where polling shows a foregone conclusion. There is no point for Obama or McCain to spend much time in Illinois or Arizona before the general election. By promising to award one’s electoral votes based on national results, the states would be encouraging the candidates to spend time in more states, which might also have the benefit of attracting more voters to the polls, for those who get a swell out of that sort of thing.
Every proposal draws its critics:
Gary Gregg II, director of the McConnell Center at the University of Louisville in Kentucky and a fan of the Electoral College, agrees that the National Popular Vote would change the way candidates campaign, but not in a good way. Candidates would go where most of the votes are, namely cities. “Rural areas would never see a presidential candidate. Small states would never see a presidential candidate,” he said.
As if candidates today spend any time in rural New York or rural Alabama. Rural Florida, maybe.
Gregg also predicted chaos if there were a close election and candidates challenged the vote count. “You would have the [2000] Florida recount replayed across the country … It would be a very ugly situation.”
Easy. Each state can simply say that if the two highest candidates get within a single percentage of each other, the state’s electoral votes would revert to the candidate who won that state. That would contain any problem to whatever Florida might crop up again. See? Mechanism design isn’t always that hard.
A critic from the Cato institute asks:
Do people in Maryland know under the National Popular Voter system, that their vote may go to someone who didn’t win their state?
I can assure you from extensive personal experience that voters in Maryland don’t have a clue. And they still won’t even when this circumstance comes up, because they will be watching the popular vote on TV with the rest of us, knowing that this mechanical fact would make no difference to the outcome, except for a few newspapers looking for a story.
Predictably, where many people stand on this proposal depends on where they sit. Republicans are against this if they believe that it will benefit Democrats, and vice versa. Some people, I am shocked to learn, care more about outcome than process.
Posted by Marc Hodak on May 29, 2008 under Unintended consequences |
I want to follow up on my last post with the unintended consequences of Congressional policy on global taxation of U.S. citizens. As I mentioned earlier, many U.S. citizens living abroad are tiring of dealing with the IRS and renouncing their citizenship. This NYT article includes some excellent vignettes along those lines.
The legal ritual of renunciation is largely unique to the United States because other countries base taxation on residency, not citizenship, according to Ingmar Dörr, a tax lawyer with Lovells in Munich.
“We don’t have that issue,” he said. “We only have the problem that rich people who don’t want to pay taxes in Germany just move to a lower-tax country in Switzerland.”
That’s precisely the choice that the U.S. Congress wishes to deny its wealthy citizens. So, beginning in 1996, they have enacted increasingly draconian laws to make renunciation for tax avoidance purposes as difficult and costly as possible. They are, in a sense, trying a Berlin Wall solution.
To understand why Congress feels it needs a Berlin Wall strategy for American taxpayers, one only need look beyond the populist rhetoric about our wealthy paying their “fair share” to realize that our top 1 percent of households pay 28 percent of all taxes collected by the U.S. government. Congress will complain all day about “the rich,” but it does not want to let these people go.
The problem with this strategy, of course, is that what looks like a Berlin Wall to your own citizens looks like a Hotel California to outsiders who have a choice of where to check in.
How has that been working? Well, it used to be that everyone I knew from abroad was looking forward to American citizenship. Now, not a single one of my professional acquaintances wants it. They don’t mind paying their taxes while they’re here, but would just as soon be left alone by the IRS once they have departed to Toronto, Dubai, Shanghai or wherever opportunity might take them in this big world.
This is more than just an anecdotal trend. In the five years before the 1996 change in the law, the ratio of professionals to total immigrants was a steady 15-16 percent. In the five years afterward, which included the dot-com boom that attracted so many of the world’s entrepreneurial types here, that ratio dropped to 12 percent. It is currently below 10 percent. In fact, the raw number of professionals naturalizing here in recent years is below those from the mid-1990s in the lead up to the new tax laws.
In other words, the new rules that have kept an extra few hundred of our professional class from checking out have likely scared away tens for thousands from checking in. I’ve done the math, and it’s crazy.
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Posted by Marc Hodak on May 26, 2008 under Unintended consequences |
Clinton or Obama? Obama has the nomination in his pocket; even Hillary knows it. Still, the super-delegates must make their choices known, and it appears that they will be compelled to choose the most popular candidate of their party–Obama–even if he is less likely to prevail in November.
Hillary, of course, has been arguing all along that she is more electable than Obama against McCain. The evidence shows that she is right: According to polls tracked by the non-partisan electoralvote.com, Obama is barely ahead of McCain, and neither has enough to claim an electoral majority. Hillary Clinton versus McCain is a lock. She owns every major state with over 15 electoral votes except Texas. She could lose every toss-up state and still win the presidency.
One can imagine the agony it must be for Hillary to know this, and yet face an almost certain upcoming defeat in her party’s primary. What I wonder, though, is how her party’s leaders feel about this? They must know the numbers, too, and yet have their hands tied. Many of them are probably telling themselves, “Screw it. Obama will win, too.” The Iowa Electronic Market is on their side, for now. But that market is thin, and doesn’t necessarily reflect the best bet for the Dems.
My choice remains:
Posted by Marc Hodak on April 18, 2008 under Unintended consequences |
That wasn’t the intent. A number of states (a.k.a. laboratories of democracy) have mandated diabetes coverage in insurance contracts. The idea, of course, was to help diabetics by improving their access to treatment. However, economics tells us that such a law has two likely, secondary consequences:
1) Price increases: This would be the economic result of constraining the right of insurance companies to freely contract with their customers
2) Moral hazard: If the likelihood of disease is partly driven by lifestyle, and people know treatment for the disease will be covered, they might be less conscientious about prevention.
Price increases as a response to mandates has been well-documented. The moral hazard question has been much less settled. Would a diabetic actually get lax about controlling risk factors, like their weight, if there were no marginal cost to treatment?
Well, a study of the moral hazard effect is in: it appears that mandating coverage for diabetes treatments increases incidence of obesity in diabetics. Here is what researchers Jonathan Klick and Thomas Stratmann concluded:
we employ a triple-differences methodology comparing the change in the gap in body mass index (BMI) between diabetics and nondiabetics in mandate and nonmandate states. We find that mandates do generate a moral hazard problem, with diabetics exhibiting higher BMIs after the adoption of these mandates.
The politicians who created these mandates were surely trying to help (thanks guys!). Now we have evidence supporting economic theory that these mandates may actually be counterproductive as well as costly. Now we just have to get politicians to pay attention to economics. After all, what’s the point of running these policy experiments if they are simply ignored?
(HT: Truth on the Market)
Posted by Marc Hodak on April 14, 2008 under Unintended consequences |
By Big Corn, I mean U.S. policy supporting corn growers.
By “policy,” I mean the accumulated, incoherent hodgepodge of subsidies and mandates around growing and selling corn.
If corn policy were debated in an open and thoughtful manner…well, that’s just crazy talk when referring to Congress. But if it were possible, one doubts it would look anything like what we have now, because it would be clear that what we have now creates incentives for environmental destruction and mass starvation, not to mention higher domestic prices, in exchange for financial appeasement of certain special interests.
Corn subsidies significantly contribute to accelerating the burning of the Amazonian rainforest.
“American taxpayers are spending $11 billion a year to subsidize corn producers—and this is having some surprising global consequences,” said Laurance. “Amazon fires and forest destruction have spiked over the last several months, especially in the main soy-producing states in Brazil. Just about everyone there attributes this to rising soy and beef prices.”
So, where were the environmentalists when these subsidies were being announced? Oh yea, most of them don’t believe in economics.
Ethanol mandates promote rising food prices in the U.S. and hunger in the third world.
Our policy makers currently don’t foresee these consequences, partly because they result from interaction among disparate laws that individually make sense to their supporters, and partly from a lack of imagination or concern about secondary consequences of government intervention in the marketplace.
And, after all, why should they care if the worst effects are unlikely to impact their own voters, or at least the ones who write campaign checks?
Posted by Marc Hodak on April 10, 2008 under Unintended consequences |
The idea behind traffic tickets is to improve public safety. The theory is that tickets create disincentives for things like speeding or running red lights, thereby reducing the incidence and severity of traffic accidents. The fact that these tickets generate revenue for the city or state is supposed to be incidental. But money is never incidental.
An ironic side effect of municipalities handing out tickets for unsafe driving is the incentive of municipal agents to root for this dangerous behavior.
Of course, rooting for dangerous behavior is not the same as facilitating it, right? I mean, would municipalities actually create dangerous situations just to boost their income? For example, would a township reduce the duration of yellow lights in order to increase the number of tickets that it hands out for running those lights when they (quickly) turn red? Would they do that despite the fact that shortening yellow lights increases the accident rate, thus resulting in more property damage and personal injuries? The unfortunate answer is YES, more often than you’d expect.
(HT: Alex T at MR)
Posted by Marc Hodak on February 29, 2008 under Unintended consequences |
One in 100 Americans are now in prison. That’s higher than Russia or China. Higher even than Cuba or Zimbabwe. Higher than any other nation, big or small, democratic or despotic. We have over one quarter of the world’s prison population. Thanks drug warriors. Way to go, Congress! Thanks Justices Kennedy and Scalia.
When breaking the law becomes so easy that one percent of your population is in jail, it erodes respect for the law. This statistic does not suggest that we have too many lawbreakers–it suggests we have too many laws.
