West Coast Bored of Exchange

The September Job Report

2006-10-06T16:12:00.000-07:00

The headline number of nonfarm payroll employment came in below expectations at +51K jobs. However, the rest of the report looks better. The household survey shows growth of 271K jobs and a decrease in the unemployment rate to 4.6%. A decrease of 8K in government employment is also good news. The upward revision of August jobs to 188K is big but the big item is the "Preliminary Estimate of Benchmark Revision to the Establishment Survey".

Each year, the Current Employment Statistics (CES) survey data are benchmarked to comprehensive counts of employment for the month of March derived from state unemployment insurance (UI) tax records that nearly all employers are required to file. For national CES series, the annual benchmark revisions over the last 10 years have averaged plus or minus two-tenths of one percent. The preliminary estimate of the benchmark revision for March 2006 is +810,000

That is that tax returns for unemployment insurance filed by all employers shows much larger employment gains then by tracking the employers in the employment survey. Tax statistics, when available, are much more accurate than survey statistics since they represent all employment.

In the Apr-Mar 06 period NFP increased by 2,029K, employment increased by 3,040K and unemployment decreased from 5.1 to 4.7%. The upward revision of 810K closes most of the gap between NFP and employment. (However, the revision has not correlated with the difference between NFP and employment in the past decade.) In the six months since NFP has increased by 708K and employment has increased by 1,209K. High employment growth with low unemployment claims tend to indicate that NFP is the out-lier statistic that is diverging from the economy and that job growth has been strong.

Ig Nobel Prizes

2006-10-06T16:09:00.000-07:00

The 2006 Ig Nobel Prize Winners have been announced. Highlights include:

Acoustics: for conducting experiments to learn why people dislike the sound of fingernails scraping on a blackboard.
Mathematics: for a trivial calculation on the number of photographs must be taken to ensure that nobody in a group photo will have their eyes closed.
Physics: for research on why bent dry spaghetti breaks into more than two pieces. Experiments in spaghetti can be easily reproduced in your own home.
Chemistry and Biology: for research involving cheddar and limburger cheese, respectively.
Economics: no prize this year.

Katrina Rebuilding

2006-08-29T03:19:00.000-07:00

Is the government so far failing in rebuilding New Orleans or succeeding in not rebuilding?

The LA Times reports that so far only $44 billion of the $110 billion of aid approved has been spent. That means that the government has not yet spent $66 billion rebuilding in an unsustainable below-sea-level river delta that is likely to flood again when the next tropical storm hits the New Orleans area. It is much more wise to build new in locations that do not need the protection of multi-billion levee systems to survive the next tropical storm. The challenge is how to encourage people to build elsewhere without being seen as not caring about New Orleans. Especially when the accusation "George Bush doesn't care about black people" has already been made.

Doing nothing is often the right thing to do. But for the government, doing nothing can actually be difficult. The media will attribute doing nothing to not caring, which to the press is usually worse than failure to "do something". For example, the administration has succeeded in doing nothing about China's exchange rate, which has required a delicate balance of providing just enough rhetoric to be seen as caring while preventing arch-protectionist Chuck Schumer from imposing massive tariffs and quotas. They also succeed in doing nothing in Lebanon for the first few weeks.

If it takes failure to not spend taxpayer's money than incompetence can be a virtue.

Sleeper Cell

2006-08-11T00:35:00.000-07:00

FOX News reports that the airplane bombing plot was infiltrated by an undercover British agent. The cell had "planned to stage a dry-run within two days, with the actual attack expected just days after that". In the television series Sleeper Cell, where the plot has many similarities to the real terrorist plot, the cell was rounded up with much less time on the clock.

HBO's The Wire is another show to watch. The third season should help anyone understand the necessity of the NSA program and how it relates to arrests of terror suspects with hoards of prepaid cell phones.

Distracted

2006-08-10T23:27:00.000-07:00

Before Iraq, when we were not distracted by all our operations overseas, when all our troops were at home, we were successfully attacked at home by Al Qaeda twice. One attack on the World Trade Center was partially successful and the other was 9/11. Now that we are completely distracted by Iraq, with more people hating us because of our actions in Iraq and elsewhere, the number of times we have been attacked at home is zero. And today that number remains zero, thanks to intercepted terrorist chatter and other surveillance.

What are our troops supposed to do make us safer after we bring them home?

We want to hunt down and kill the terrorists wherever they are.
We can hunt down and kill the terrorists wherever we are.
We will hunt down and kill the terrorists wherever both we and they are.

To help win the war on terror our troops need to be where the terrorists are. Not at home, not where the terrorists were, but where the terrorists want to be. Right now, this is Iraq. Iraq is where the most terrorists are being killed. That is because our troops can be there and the terrorists want to be there. We cannot hunt down and kill them where we are not or where they are not.

Minimum Labor Cost

2006-08-02T17:49:00.000-07:00

An increase in the minimum wage will always result in lower employment because the demand curve slopes downward. However, a wage increase now will probably not reduce employment as much as expected, most of it will be passed on to consumers. We have recently had an extinction event. We had a bubble where labor costs rose out of control until the bubble burst. The fittest companies that could control costs survived, the rest did not. Most employers now can control costs well, and will just pass on an increase in labor costs to consumers. Those employers that cannot control costs and would have to pass them to investors or reduce employment died in the bust. This is why profits have reached record highs and will continue to be strong for a long time.

The minimum wage is paid disproportionately by the poorest consumers. Poor families will be hurt more as consumers than they will gain as workers. A single mother of two, for example, will benefit once from a wage increase but will pay for it three times. Raising the minimum wage will also make legal workers and employers even more uncompetitive against illegals.

A minimum wage increase is an increase in the cost of living of the poorest Americans.

Capitalism in Cuba

2006-08-02T17:18:00.000-07:00

Fidel Castro is ill, and there is no prediction market contract on his expiration.

There has been some hope that his brother Raul may be more market friendly and that capitalism may be coming to Cuba shortly. But why wait? There is one place where we can start building capitalism in Cuba right now—Guantanamo Bay. We could build a free capitalist port city there in the same model as Hong Kong. Some current residents there that would have to be moved, but there is plenty of space in the rest of the world that can be used for prisons.

Update (8/4): TradeSports now has a contract on Fidel resuming power by the end of August. Independent Sources links to some betting sites taking bets on Fidel.

Zarqawi Contract Expires

2006-06-08T08:01:00.000-07:00

Zarqawi is dead. The TradeSports contracts have expired at 100. The Market had yesterday's closing prices at 5.5 for the June contract, 15 for September, and 25 for December. His demise was not immenently expected by the market.

Debt Limit Raised

2006-03-17T03:33:00.000-08:00

The Senate voted to raise the federal debt limit to $8.97 trillion. This new massive debt limit is all of 70% of current GDP. Even 70% debt to GDP is small compared to other countries, but by the time we reach the new debt limit our GDP will be much higher and our debt ratio smaller.

To conceptualize our debt, $8.2 trillion is the total amount of treasury securities that are demanded at current interest rates (about 4.6%). $4.7 trillion of that is all voluntarily held by the public, the rest is held by our own government. $9 trillion is about 16 days of trading volume in the treasury market, which has a total daily trading volume of over $500 billion.

Without our current national debt there would be trillions of dollars of demand for risk free securities that would not be met. It is inconceivable that the demand for treasury bonds would ever vanish in the future. Treasury bonds are one of the few things that only the government can supply. But it seems that treasury bonds are the only thing that some people don't want the government to provide.

State of the State

2006-01-05T17:08:00.000-08:00

5:06 PM Arnold Schwarzenegger begins with a USC joke.

5:12 PM "We will never catch up unless we know where we are going."

5:15 PM Arnold begins proposing the big bond spending. Each proposal ends with "... I say build it!"

5:24 PM Arnold proposes $1 mininium wage increase.

5:26 PM Proposes reimportation of prescription drugs.

5:30 PM "The state of our state is sound because our dream is sound."

Nothing really good in the speech. The defeat in the special election shows. Some of the building will be cost effective and some will not, but all of the spending will come in one bond issue.

A minimum wage increase when legal workers are competing with illegal workers is even worse than normal. However, the minimum wage is already higher in some places. Cost of living is a local issue, so the minimum wage should not be a state or federal issue. A living wage is really a "living on your own" wage. If you are not worth a living wage before you are living on your own then you never will be.

Price controls on drugs is a bad idea and importing price controls is as bad. Drugs are always getting cheaper. They drop from price infinity (unavailable) to expensive, and then decrease further as competitors enter the market and patents expire. The amount spent on drugs is increasing, but the benefits from drugs are increasing more. The amount of money spent on many things is also increasing, but nobody is proposing price controls on cellular, broadband, and other emerging technologies.

Rose Bowl Halftime

2006-01-04T19:37:00.000-08:00

ABC showed both marching bands. No out-of-key pop-stars or wardrobe malfunctions.

Thank You. Unfortunately, there was no Big 10 band.

Ben Bernanke

2005-10-24T16:36:00.000-07:00

Ben Bernanke has been selected from the global glut of candidates to replace Alan Greenspan as chairman of the Federal Reserve. There were only three 'leading candidates' and Bernanke was trading in the high 30's on TradeSports before the nomination. Bernanke is a good pick favored by conventional wisdom and by most bloggers, which is a good thing after the Miers nomination. Tyler Cowen rounds up Bernanke's major economic contributions.

Southern California Weather

2005-10-17T01:49:00.000-07:00

Proposition 76

2005-10-15T21:29:00.000-07:00

The anti-prop 76 ad speaks for itself. Their claim that Prop 76 gives the governor unlimited power to cut the budget reveals their intent to spend unlimited amounts of your taxpayer money. Prop 76 allows the governor to cut spending only if the state spends more money than it collects in taxes and the legislature fails to agree on budget cuts. If the legislature would simply pass a balanced budget without any budget gimmicks then Prop 76 will not be triggered unless there is a real emergency. And if the legislature can agree on budget cuts, then the governor will not have a budget to cut. Since their own ad shows that they insist on spending unlimited amounts of your money you should take that power away from them.

Yes on Prop 76.

Proposition 78

2005-10-15T21:08:00.000-07:00

Prop 78 is being packaged as a drug discount measure, but it is really a price discrimination measure.

Drugs are intellectual property with high fixed costs and low marginal supply costs and profits can be increased by price discrimination. Student discounts increase profits because vendors can charge one profit maximizing price to students and a different profit maximizing price to non-students. This leads to higher profits than if vendors charged only one profit maximizing price to all. Rebates are another price discrimination program, charging one price to people with the patience to claim them and another price to those who don't. The drug market is already split into two segments, low-income families on Medi-Cal who have drugs purchased by the state at taxpayer expense, and the rest who pay market prices. Prop 78 creates another segment of lower-income families with income below 300% of poverty level. All the language about voluntary discounts and rebates really means that lower income people will pay one market price and everyone else will pay a different market price for drugs.

Prop 78 is a rent-seeking measure that uses the government to create an artificially segment the market so that drug companies can increase profits by price discrimination. Lower income families will pay a lower market price for drugs, a discount. But with low-income families excluded, higher-income families will pay higher market prices than they otherwise would. This will increase drug company profits but it is not a big give-away. The costs will be paid by consumers and not taxpayers. It will distort the free market and Prop 78 should be opposed on principle, but...

Prop 78 is also a compromise to prevent Prop 79. Prop 79 is an anti-business price-control measure that will adversely affect drug research and hurt consumers of drugs in the future that will not be developed. Price controls are bad for consumers because they create shortages and price controls on IP hurt consumers in the future because of shortages of future IP products not developed. Also, this is California. If both are defeated, anti-business groups and the legislature will continue to attack drug makers. The drug market is already segmented by Medi-Cal, and creating another segment would not be that bad. Without Prop 78 the legislature will probably attempt to have more drugs purchased at taxpayer expense.

Prop 78 will likely hurt the non-poor as consumers but help them as taxpayers. Prop 78 is worse than no legislation but much better then Prop 79, and is probably better than what we will end up with if neither pass. I am hesitant to recommend special-interest favored legislation, but Prop 78 has been endorsed by Schwarzenegger. If Schwarzenegger thinks we need to compromise on drugs than I think he is probably right. Because this is California, Prop 78 should get a reluctant yes vote.

The rest of the Special Election is a no-brainer. Yes on 73, 74, 75, 76, and 77 and no on 79 and 80.

Harriet Miers

2005-10-15T19:43:00.000-07:00

If you trust George W. Bush you should not oppose Miers.

If you don't trust Bush, then why would you trust his replacement pick to be any better?

None of Bush's choices or leaks, Clement, Roberts, and Miers, were conservative favorites before they came up. If Bush thinks Miers is the most qualified than it would be unwise to trust his replacement pick to be significantly more qualified then Miers. And a replacement would need to be significantly better and confirmable to be worth the political cost of withdrawing Miers. If you don't trust Bush on Miers then you shouldn't trust him to pick her replacement, and you should not oppose Miers.

We can decide whether we trust Bush's judicial nominations later.

Serenity

2005-09-26T01:09:00.000-07:00

Certainly the cast of Firefly has been described as Libertarian or Burkean conservative, and act with strong principles. Since most bloggers and fans tend to be libertarian-leaning, they may be biased to this point of view. Because of this bias, someone needs to serve as an apologist for the Alliance.

The Alliance does often get "in the way", but not significantly more than our own big governments. For a government that just fought a unification war, it does not seen to be especially repressive. Our own Union government during our Civil War was not a bastion of freedom. Also, groups that resist joining a new government are not usually the good guys. Just look at Iraq and Afghanistan. The biggest injustice by the Alliance government would seem to be how they treat psychics, notably River. But real psychics can be a big problem for any government to handle. In Babylon 5, psychics had to either join and be regulated by the Psy Corps or have their abilities suppressed by drugs. This was not widely considered as evil by B5 fans. There are also no known free psychics in America, Since there are no real psychics, as far as we know. The Alliance wanting to restrict and track down people with extra powers is not completely unjust. Also, all of the details about River and the program she was in are provided by her brother. But many "moonbats" are family members of people harmed by the government, and their information has often been very unreliable. We do not know enough about their psychics program to call it evil.

The Alliance does, after all, allow Mal, a soldier who fought against them, to own his own spaceship and the freedom that it provides. The Alliance would probably leave him alone but for the fugitives who are his passengers. Except for psychics, people in the Alliance seem to be mostly free.

But by the trailer, we will probably see many questions about the Alliance and River answered in the new movie, Serenity, opening this Friday.

Joss Whedon, the Oscar® - and Emmy - nominated writer/director responsible for the worldwide television phenomena of BUFFY THE VAMPIRE, ANGEL and FIREFLY, now applies his trademark compassion and wit to a small band of galactic outcasts 500 years in the future in his feature film directorial debut, Serenity. The film centers around Captain Malcolm Reynolds, a hardened veteran (on the losing side) of a galactic civil war, who now ekes out a living pulling off small crimes and transport-for-hire aboard his ship, Serenity. He leads a small, eclectic crew who are the closest thing he has left to family -- squabbling, insubordinate and undyingly loyal.

Missile Launch Detected

2005-09-22T20:16:00.000-07:00

A Minotaur missile was launched from Vandenberg Air Force Base at 7:24 PM tonight.

Photos at 7:30 PM and 7:34 PM.

Schwarzenegger Reruns

2005-09-16T14:28:00.000-07:00

The Arnold Schwarzenegger for Governor show will return to California again in 2006.

Pledge Dumped

2005-09-14T11:52:00.000-07:00

A judge on the 9th U.S. Circuit Court of Appeals has declared the Pledge of Allegiance unconstitutional. It violates the clause in our constitution where "no law can be contrary to the beliefs and provisions of the sacred religion of Atheism."

Banning Video Games

2005-09-14T02:06:00.000-07:00

The California legislature passed AB 1179 that penalizes the sale of violent video games to minors. The same legislators who voted for this are also opposed to all attempts at increased penalties for convicted sex offenders, voted against the people's will to uphold marriage, and oppose most structural reform to improve schools. California Democrats are only for the children if it involves spending money. Do they think that violent video games are more dangerous than having sex offenders living next door?

But this is really an anti-business bill. This will place a special extra burden on video game creators and retailers. Video games are a big part of California's high-tech computer industry. But even Silicon Valley's own legislators are trying to punish one of their best high-paying employers. Schwarzenegger may veto this, but Democrats will claim that it is a conflict of interest because he appears in Terminator video games.

Update: (9/15)
The Sacramento Bee reports that Schwarzenegger is likely to veto AB 1179. Also, apparently his game is not affected by the bill.

Taking any action on Yee's Assembly Bill 1179 could create the perception of conflict for Schwarzenegger. If Schwarzenegger signs the bill to ban the sale of certain "violent" video games to anyone younger than 17, he could be seen as eliminating videos that compete with his own "Terminator 3: The Redemption."

He will probably be attacked for conflict of interest either way, since the truth has never mattered in anti-Schwarzenegger ads.

The bill's author, Leland Yee, definitively claims that violent games harm children. Yee was also the author of a bill attempting to mandate Feng Shui in building codes last year.

What's Poverty Got To Do With It?

2005-09-06T05:38:00.000-07:00

Many of the residents of the areas New Orleans that were flooded had incomes below the poverty line. But what government policy would have saved more of them?

Government has been very successful in promoting home ownership. There was over 50% home ownership in the flooded part of the city, and the rest still owned rooms full of possessions. Even poor Americans live with lots of stuff they don't want to leave behind. Some people could even afford non-productive non-food animals (pets) that they were reluctant to leave behind. People in true poverty have little to leave behind, and would be less reluctant to leave their homes. The "success" of federal disaster aid also makes living in disaster prone areas more affordable. It is the success of our economy that so many people had homes and possessions that they did not want to leave behind. Only because of our success did so many people choose to stay behind.

The lack of private transportation is frequently cited as causing so many to stay behind. Two in 10 households in the disaster area had no car. But all government policy, from labor, CAFE, emissions, and safety standards, has been to make cars better, but more expensive. Our government does not try to increase car ownership. The government has always encouraged the use of public transportation, by rich and poor alike, to reduce pollution, congestion, and other problems. Our successful use of public transportation allows people to live without cars. But it was the failure to utilize public transportation that was more responsible than anything else for the number of lives lost in the flood.

Chief Roberts

2005-09-05T05:20:00.000-07:00

Bush nominates John Roberts for chief justice. This means only two confirmation hearings instead of three. I don't see any reason why we can't have three confirmation battles at the same time. Everyone is already prepared for full-scale judicial war. Congress should be able to handle multiple confirmations, a hurricane, making the tax cuts permanent, repealing the estate tax, reforming social security, and fundamental tax reform all at the same time. We pay them a full-time salary and provide a large staff budget.

Hawking Blinks

2005-09-05T02:45:00.000-07:00

Physicist Stephen Hawking's one remaining usable hand has been slowing down. Now he is controlling his computer by blinking his eye.

Typhoon Talim

2005-09-04T02:32:00.000-07:00

The world has not stopped after Katrina. A Typhoon with 125 kph winds (78 MPH) has hit China and killed at least 54 people.

We should not be calling the rest of the world stingy for not doing enough to help us. There are millions of people around the world who are worse off than the survivors of Katrina. Those in Zimbabwe, Darfur, and many other places are worse off than we are and need the world's help far more.

Kelo in Sacramento

2005-09-02T04:28:00.000-07:00

The California State Senate Judiciary Committee failed to advance the property rights movement by defeating Tom McClintock's amendment.

Majority Democrats derailed SCA 15, a broader constitutional amendment that would have barred all seizure of private property unless it was for a public use, such as roads or schools. Sen. Christine Kehoe, D-San Diego, and others agreed to shelve a narrower version protecting homeowners, SCA 12, until hearings can be held this fall.

The committee did approve the much weaker AB 1162, "a measure that would impose a two-year moratorium on taking homes for private projects". But that bill will not stop the eminent domain runaway. The full Senate just approved a bill allowing a tribe to help manage land taken by eminent domain financed by the tribe.

Yolo County is attempting to acquire the land through eminent domain in hopes of preserving the property and its water rights. The owner of the land, developer Steve Gidaro, is fighting the action....
Senate Republicans assailed the proposal on Wednesday as representative of eminent domain's problems. Sen. Tom McClintock, R-Thousand Oaks, said AB 1747 would enable a theft that is being underwritten by the Rumsey Indians.

The private benefit of the government is not "public use".

America's Worst

2005-09-02T03:58:00.000-07:00

The looters in New Orleans have been shooting at helicopters and rescue workers and now the National Guard has to be called with order to "shoot and kill". Instapundit links to a suggestion that looters should be shot to deter violence. Unfortunately, in this case, shooting looters will not deter them because without communication it is impossible to get the message out that looters will be shot.

But that is not the worst behavior in America. KFI AM in Los Angeles found a flyer calling for a "Jihad" against the LAPD.

KFI NEWS has obtained a copy of a flyer that's been circulated in South Los Angeles, calling on members of two violent street gangs to join the Nation of Islam in a jihad, or holy war, against the LAPD.

This after their local leader was arrested after challenging police officers. We are not a theocracy! religious leaders are not above the law!

Blogburst

2005-09-01T14:51:00.000-07:00

It's blogburst day for hurricane relief. Baldilocks recommends donations to Soldier's Angels to help families of soldiers serving overseas that are displaced by the hurricane. The Truth Laid Bear has a donation tracking page. California Mafia has a Bear Flag League blogburst roundup.

Tag: flood aid, hurricane katrina

2005 Q2 GDP up 3.3%

2005-08-31T18:24:00.000-07:00

Real GDP increased at an annual rate of 3.3% in the second quarter, revised down from 3.4%.

Today's GDP revision was little noticed due to hurricane coverage, though there has been speculation on how much the broken window fallacy will affect future GDP measurements.

Invasion!

2005-08-31T03:00:00.000-07:00

The United States is being invaded ... by itself. In addition to all the National Guard troops being sent to the Gulf Coast, the Navy is also sending some ships to the area.

The Pentagon effort includes the Navy amphibious assault ship USS Bataan, whose helicopters have been flying relief missions from off the Louisiana coast.
The ship, which resembles a small aircraft carrier, can produce large quantities of fresh water and is equipped with 600 hospital beds. (Watch video report on storm-related health risks)
Several other ships, including a rescue and salvage vessel and the USS Iwo Jima, another amphibious assault ship, are on their way from Norfolk, Virginia, the Navy said.
The USNS Comfort, a floating hospital based in Baltimore, Maryland, will depart in coming days. A medical crew from Bethesda Naval Hospital will staff the ship. It has full hospital capabilities, including operating rooms and hundreds of beds.

We sent the USS Abraham Lincoln Carrier Strike Group to Indonesia to assist the tsunami victims. Should we have had a similar force trailing the storm to be there quickly in anticipation of roads and airports being unusable?

Chief's Disease

2005-08-31T02:01:00.000-07:00

The Sacramento Bee reports that the man appointed to find workers' compensation fraud in the California Highway Patrol claims that it is the top brass and not individual officers who were abusing the system.

The Bee's investigation last year found that about 80 percent of CHP chiefs file workers' comp claims within two years of retiring. They win injury awards and lifetime medical care, with the injuries laying the groundwork for medical pensions, which shield half of retirement income from taxes.
Several CHP employees have complained anonymously to The Bee in the past year that the system has been used to ease out those who face disciplinary problems or have fallen from favor.

So nobody ever gets fired, they just go on disability. It is pretty much a universal problem that under-performing state employees never get fired. This is a huge expense in the state budget. What we need is for Schwarzenegger to literally be "The Terminator" for employment contracts.

Stem Cell Boondoggle

2005-08-31T01:23:00.000-07:00

The Sacramento Bee reports that the advocates of stem cell research who passed Prop 71 are retreating from their claims that the research would pay for itself. The legislators offering the money for the research want to have strings attached in the form of royalties or discounts. But the advocates who promised the benefits of the measure don't want any strings on their money.

Proposition 71 supporters are doing a flip-flop. Biotech firms and university officials are saying that royalties and discounted care would discourage "innovation" and diminish the potential for medical breakthroughs. To drive home this point, they are now throwing cold water on the idea that stem cell research will be very profitable.

If embryonic stem cell research had the potential to pay for itself from royalties and savings then venture capitalists would already have been funding the research. The state should not think it can do better than private venture capitalists at finding profitable research investments. There are also additional legal difficulties in the state using tax-exempt bonds to finance for-profit research.

California faces obstacles in issuing tax-exempt bonds for certain stem cell grants. In a May 23 letter to state Treasurer Phil Angelides, the state's bond counsel warned that patents and royalties resulting from state grants might be construed as taxable "assets," making them ineligible for financing by tax-exempt bonds.
Apparently, Angelides and leaders of the stem-cell institute have known about these challenges for some time, but haven't said anything. To flush out this issue, this page filed an open records request for all memos written by the treasurer's bond counsel on Proposition 71 prior to its passage. Angelides rejected those requests, citing attorney-client privilege.

Other lawsuits have prevented the state from selling the bonds and spending the proceeds. Is it not too late to pull the plug and save the state from spending $3 billion on research that offers little benefit to the state?

More Blackouts

2005-08-26T02:40:00.000-07:00

The loss of a transmission line combined with moderately high heat led to rolling blackouts in Southern California.

Temperatures that hovered around 100 in inland areas and reached 94 in Los Angeles had created increased demand of about 1,500 megawatts. A megawatt is enough power to serve about 750 homes.
The demand crisis was exacerbated by the sudden loss of power from a transmission line originating in southern Oregon, officials said.
A transformer in California that converts the power took itself offline automatically at 3:56 p.m. when an oil flow alarm went off, said Carol Tucker, a spokeswoman for the Los Angeles Department of Water and Power, which co-owns the line.
The converter station, in Sylmar about 25 miles north of downtown Los Angeles, is capable of distributing 2,250 megawatts of power. It was operating at half capacity Thursday evening, and an inspection was under way to determine if the transformer could be fixed, Tucker said.
The emergency order from the ISO caused SoCal Edison to reduce demand by 800 megawatts throughout its territory. The ISO asked San Diego to shed 100 megawatts.

The loss of transmittion clearly exceeded the increased demand from the heat. Perhaps it is time to pay more attention to the advice by Vernon Smith on deregulating transmission in OpinionJournal.

Mortgaging Education

2005-08-22T19:36:00.000-07:00

The California Teachers Association is mortgaging their headquarters so that they can spend $54 million on the special election. They will pay for it by increasing union dues by $60 million. These dues are paid by teachers, and ultimately by California taxpayers. But they say that the people of California are too poor to spend $50 million on a special election while their union members are so rich that they can easily afford to pay $60 million for political activism. This is Robin Hood in reverse. Paycheck protection must pass.

Another candidate in the last election was able to get a $6 million mortgage on a house even though he did not report paying one penny of property taxes on his tax return.

The Kelo Strip

2005-08-18T03:25:00.000-07:00

In a small strip of land near the Atlantic coast, Local Liberty reports that the city of New London wants to charge back rent to the Kelo litigants.

The U.S. Supreme Court recently found that the city's original seizure of private property was constitutional under the principal of eminent domain, and now New London is claiming that the affected homeowners were living on city land for the duration of the lawsuit and owe back rent. It's a new definition of chutzpah: Confiscate land and charge back rent for the years the owners fought confiscation.
In some cases, their debt could amount to hundreds of thousands of dollars. Moreover, the homeowners are being offered buyouts based on the market rate as it was in 2000.

However, I think the outrage is not what what is happening now but what happened in 2000. The injustice is that the City seized the land in 2000. The law, however wrongly determined, is that the City paid for the land in 2000 and has owned it since then and can charge the occupants for rent. The last appeal must go to the court of public opinion. The City may want to settle to avoid bad PR. But the litigants claim that rents were not part of the 2000 agreement.

A lawyer for the residents, Scott Bullock, responded to the letter on July 8, 2004, asserting that the NLDC had agreed to forgo rents as part of a pretrial agreement in which the residents in turn agreed to a hastened trial schedule. Bullock called the NLDC's effort at obtaining back rent "a new low."
"It seems like it is simply a desperate attempt by a nearly broke organization to try to come up with more funds to perpetuate its own existence," Bullock wrote. He vowed to respond to any lawsuit with another.

I had originally noted when the ruling came out that the taking was for government self preservation not for public benefit. However, I doubt that the City had planned on profiting from collecting rents during a long court fight. They had planned to hand the land to developers and start collecting taxes from them as soon as possible.

Also, the City is now doing for housing exactly what Social Security reform opponents insist on doing for retirement. When the City seized the property in 2000 they bore the full risk of owning "blighted" property. House prices are risky while fixed rents are risk free. The government is taking their property and giving them a "guaranteed risk free housing benefit" just as reform opponents insist that the government take 1/6 of your income so it can give you a "guaranteed risk free retirement benefit".

Meanwhile, in a larger strip of land on the Mediterranean, the government is seizing land, with compensation, in order to transfer the land to another government. The hold-outs there could lose a third of their compensation. I don't know if disengagement will make things better or worse, but there has been little progress under the status quo peace process. Whatever happens there, the sooner it begin the sooner it will be finished. We need to watch and learn what happens when extremists are in charge of their own land.

And on our large strip of land on the Pacific, Local Liberty reports that a Democrat State Senator has proposed a two-year ban on Kelo style eminent domain seizures.

Reproposition

2005-08-12T17:49:00.000-07:00

Daniel Weintraub just reported that Prop. 77 has been returned to the ballot. The state Supreme Court restored the measure and will review it again after the election. This is not unexpected since the court restored Prop. 80 to the ballot despite obvious constitutional problems in that proposition.

Update: (6:20 PM)
The Sacramento Bee has the story on the return of Proposition 77 to the California Special Election ballot.

The state Supreme Court moved Friday to put Gov. Arnold Schwarzenegger's redistricting measure back on California's special-election ballot, saying discrepancies between different versions of the measure were not "likely to have misled the persons who signed the intiative petition."
"We conclude," the court added, "that it would not be appropriate to deny the electorate the opportunity to vote on Proposition 77..."
In their half-page order, the justices said they would determine after the election whether the initiative was flawed.

Illegal Immigrant Homeowners

2005-08-10T18:04:00.000-07:00

There has been a large increase in banks providing home loans to illegal immigrants. This is definitely a positive symptom. It is a good sign that foreigners who rise into poverty by crossing our borders can further rise out of poverty by earning enough money to buy a home. Our economy must be quite healthy for illegal immigrants to be able to afford to buy homes despite large increases in home prices, especially in heavily immigrant markets. Illegal immigrants who both can and want to participate in the American dream by purchasing a home are certainly the top candidates for participation in some sort of guest worker program. However, there is no real need to provide any government assistance to illegal immigrant home buyers like what is provided for legal American home buyers.

We need immigration reform so that we can be more selective about who is allowed to immigrate to America. Home buyers are usually high among those who we want to select.

Exit Strategy

2005-08-04T17:05:00.000-07:00

Independent Sources notes that the Democrats' exit strategy from the 2004 election has failed. Despite all the reasons why liberals would be welcome in Canada, a Reuters reports that "in the six months up to the U.S. election there were 16,266 applications from people seeking to live in Canada, a figure that fell to 14,666 for the half year after the vote." But he does not mention the downside reported in the story.

"I can only assume the Americans who checked out the Web site subsequently checked out our winter temperatures and further took note that the National Hockey League was being locked out and had second thoughts,"

So it was the NHL labor union and the failure of global warming that foiled the Democrats' exit strategy.

Camp Crawford

2005-08-04T14:53:00.000-07:00

After praising the French for all the vacation time that they have no choice but to take, the MSM is now attacking Bush for the vacation time that the President chooses to take. Bush has hosted several foreign dignitaries in his Crawford ranch, which is both a workplace, the "Texas White House", and a vacation spot. But the Huffington Post reveals that the Press Corps's opposition is not about vacation time but about location, location, location!

Prisoners of Camp Crawford complain of small cells, poor meals, constant surveillance, and disrespectful--even disdainful--treatment from Presidential staff.

"Thirty-three days in this hell-hole feels like thirty-three years," said a bitter long-time White House correspondent. "You're away from your family. We're all billeted into these crappy Waco motels--you know, the kind they hose down with antiseptic every day and you've got one lousy blanket which is made of recycled Coke bottles or something. There are huge fights for the cells with fast Internet connections but not many have them. The networks always get those. We didn't mind the facilities in Santa Barbara or Martha's Vineyard. Even Kennebunkport was more endurable than this."

A Fox News camera man agreed. "Basically you sit around in baking heat, bored out of your mind. How many times can you visit the 'Texas Sports Hall of Fame' or beat Nora O'Donnell at Scrabble? Nothing happens, except maybe when one of the staff summons you to watch the President pulling brush. After a few minutes, they pile you back into the buses, and that's it. It's torture."

All inmates interviewed agreed that the food they were served was inferior to that of other camps, such as Guantanamo. "How can I put this?" said a Los Angeles-based correspondent. "The meals would be paradise if you were six-years-old. Like, what is it going to be tonight: chicken nuggets or pizza again? It's like living that movie, 'Supersize Me.' A big deal is to go to the Marriott Courtyard's breakfast buffet. At least you can get a piece of fruit, even if it's not ripe."

The inmates agreed, however, it was far better to be in Waco than have to do duty in the press pool in the town of Crawford itself. Even Crawford's own website describes the facilities this way: "The town currently boasts only one restaurant, a converted gas station called The Coffee Station. There's no supermarket or hotel but there are five churches. Tourists will find that this 'dry' town has no sale of alcoholic beverages."

The Press Corps would probably be much happier if Bush took a vacation to Aruba. A vacation there would do wonders for Bush's ratings.

War on Terror

2005-08-04T12:58:00.000-07:00

President Bush is sticking to using the label "war on terror". It seems it was only the defense department that wanted to use "global struggle against violent extremism".

Many pundits have been saying "Our enemy is not really 'terror' but ..., this is really a war on ... (zzzzz)". They are right, but "war on terror" is shorter and this label has stuck, having been used in many speeches. If there was a better short label then that is what we would have used it in first place.

After all, what was so bad about the numeral 'II' that 60 million people had to die in a war over it?

Retirement Insurance

2005-08-02T17:20:00.000-07:00

The New York Times notes that the insurance industry is lobbying congress for a piece of the Social Security action. If they want it, we should let them have it. The private insurance industry already competitively provides retirement accounts, annuities, life and disability insurance, everything that Social Security provides. Instead of private accounts, people should be allowed to put part of their Social Security contributions into private insurance and annuities that meets government constraints.

What should be the role for Social Security? What government insurance uniquely provides is risk blindness. Only the government can be blind to risk without going out of business, either by mandating contributions or by passing losses to taxpayers. The blind Social Security insurance annuity currently does the former, but should be doing the latter. It is better for Social Security to be a small money-losing program than a large solvent program. Social Security's solvency is meaningless since we have a unified federal budget. Instead of raising contributions or reducing benefits to keep the blind Social Security retirement annuity solvent, we should let people opt out while leaving Social Security as a backup. Social Security benefits could be more flat, based more on hours worked than contributions, so that most would opt out while adequate benefits would still be available for low earners.

The insurance industry is also trying to prevent the elimination of the estate tax, which many wealthy Americans now pay with the proceeds of life insurance policies. As a compromise for sending them annuity business we should reduce their planning business by eliminating the estate tax. The AARP could also compete for retirement annuity business, so they would probably not be opposed.

Make Life Frist

2005-07-30T15:38:00.000-07:00

Now that Bill Frist has reversed his opposition to embryonic stem cell research a better compromise needs to be found. To make the best compromise we need to ask what is the most pro-life goal for human embryos?

Preventing the destruction of human embryos.
or
Bringing as many human embryos to life as possible.

I believe that the latter is the non-greedy pro-life goal. Because we cannot bring all the human embryos so far created to life, the best compromise is to have the use of embryos for stem cell research conditional on successfully bringing embryos to life. This is the policy I previously proposed in "make life first".

I think that we can allow leftover embryos from a fertility process that has already successfully created a living baby to be used, with permission, for embryonic stem cell research. I think we should create embryos only for the process of creating life, and we should destroy embryos for research only if the creation of life is successful.

A federal stem cell compromise would also reduce the demand for state financing of embryonic stem cell research, like the California Proposition 71 boondoggle.

2005 Q2 GDP up 3.4%

2005-07-29T17:41:00.000-07:00

Real GDP increased at an annual rate of 3.4% this quarter.

GDP from past quarters has been revised downward somewhat.

For 2001-2004, real GDP grew at an average annual rate of 2.8 percent, 0.3 percentage point less than in the previously published estimates. The average annual rate of growth of real GDP from 2001:IV to 2005:I is 3.3 percent, 0.2 percentage point less than in the previously published estimates.

And inflation in past quarters has been revised up slightly.

The percent change from the preceding year in the price index for gross domestic purchases was revised up for all 3 years: From 1.5 percent to 1.6 percent for 2002, from 2.0 percent to 2.2 percent for 2003, and from 2.4 percent to 2.9 percent for 2004.

Bear Flag League

2005-07-29T13:41:00.000-07:00

The Bored has been admitted to the Bear Flag League.

Lockyer Propositioning

2005-07-27T22:39:00.000-07:00

Bill Lockyer has changed the title and summary to Schwarzenegger's "Live Within our Means" initiative.

First, the title now starts with the words "state spending" instead of "school funding."
Second, the summary itself leads with the overall spending limit, which is based on a three-year average of revenues. The old version started with its potential effect on school spending.

These changes came only after Lockyer's bias was caught.

The changes came about after supporters of the measure -- Proposition 76 -- threatened to sue to get a better summary.

Lockyer also wrote his Prop. 77 summary from the version that was not circulated and said he will not prepare a new one unless ordered by the court to do so.

Lockyer will at least take the right side of the Kelo battle and will support the landowners in a Kern County eminent domain case.

In other ballot news, the state Supreme Court reinstated Prop. 80, stating that "it would be more appropriate for opponents to challenge the measure if and when it is approved by voters." Re-regulating electricity is both a bad idea and will likely be struck down if is passes.

More Lockyer Misdiscription

2005-07-26T14:47:00.000-07:00

Bill Lockyer again fails to write an impartial ballot summary, this time on a marriage protection initiative.

But the amendment's official sponsors ... said Monday they plan to challenge Attorney General Bill Lockyer's proposed summary in court, calling it prejudicial and erroneous.
"True to his liberal bias, but untrue to his constitutional duty, Bill Lockyer has dumped on us an inaccurate and prejudicial paragraph that is anything but impartial and fair as the law requires," Thomasson said.
...
From top to bottom, the Democratic attorney general's 100-word analysis makes it clear that if the amendment passed, it would limit a lot more than marriage to unions between a man and a woman. While sponsors submitted a working title of "The Voters' Right to Protect Marriage Initiative," for instance, the attorney general has renamed it, "Marriage. Elimination of Domestic Partnership Rights."

Also, the Secretary of State has released the Voter Information Guide for the special election propositions.

Lockyer vs the People

2005-07-25T16:30:00.000-07:00

Bill Whalen of The Weekly Standard exposes how California State Attorney Bill Lockyer is failing to uphold the will of the people by writing biased ballot summaries.

It's not the first time that Lockyer, a liberal Democrat who's running for state treasurer next year, has played fast and loose with the initiative process. As the attorney general, his job is to write impartial title and ballot summaries. But that's not always been the case. The summary for another of Schwarzenegger's initiatives in this fall's special election--Proposition 76, the "Live within Our Means Act," which would enable the governor to make spending cuts when the state budget goes into the red--says little about tighter purse strings. Instead, it reads:
Changes state minimum school funding requirements ... permitting suspension of minimum funding, but terminating repayment requirement, and eliminating authority to reduce funding when state revenues decrease. Excludes above-minimum appropriations from schools' funding base.
Other examples of Lockyer's whole-language approach include Proposition 38, a school voucher initiative which lost badly in November 2000. He gave it this ominous-sounding description: "public funding of private and religious schools." The same year's Proposition 22, California's Defense of Marriage Act, was re-titled "Limits on Marriage" instead of its original "Definition of Marriage." Earlier this year, Lockyer helped chase away another initiative Democrats loathed--public pension reform--by misleadingly claiming in his summary that the measure would eliminate orphan and widow death benefits for police and firefighters.

Our attorney general who is supposed to uphold the constitution is also failing to uphold the honor of the American flag.

Music Prices

2005-07-23T19:29:00.000-07:00

Music sharing supporters have often argued that "music wants to be free", but the news that Sony BMG and Spitzer are nearing a settlement over "independent promoters" demonstrates that disposable music is seeking a negative price.

The investigation relates to the companies' use of so-called "independent promoters": middlemen who are paid to plug new songs to radio stations. The practice has often been likened to payola -- direct payment in exchange for airplay of specific songs -- which has been illegal under federal law since the 1950s. It also includes more direct relations between the executives of record labels and radio stations.

Advertisements have always been negative priced content directed to increasing sales of other products. Radio airplay has long been seeking negative prices that have been expressed first as payola, then as independent promoters, and now as actual advertisements (this song is brought to you by ...). This is because disposable music still increases sales of owned music (CD's and legal downloads). Illegal music sharing, which sets both a price floor and ceiling at zero, harms both labels and listeners because it prevents prices from reaching equilibrium. Labels lose when downloaders retain ownership of music and do not purchase it. People who claim that labels benefit because they actually own more music because of sharing are also losing because they are not being paid for the attention of their pocketbook. The zero price is also harmful to micro-payment innovation that will help musicians, writers, publishers, other content creators, and advertisement viewers.

The Balanced Budget

2005-07-23T17:29:00.000-07:00

The Skeptical Optimist wants to redefine the definition of a "balanced budget" to include economic growth.

The financial benefits of economic growth will exactly offset the financial costs of debt growth, if both the economy and the debt are growing at exactly the same rate. Robert Eisner, in fact, suggested defining a "balanced budget" as the level of deficit spending which would result in no increase and no decrease in the ratio of debt-to-GDP.

This is definitely a better definition of a "balanced budget" than the current definition. The problem is that this definition would keep debt/GDP at current levels rather than trying to find the optimal levels of taxes, deficits, and spending. My best definition of a balanced budget would be a budget that is "balanced" such that the marginal cost of borrowing equals the marginal cost of taxes which equals the marginal benefit of spending. This would be difficult in practice since the cost-benefit analysis to find this triple-point would be non-trivial.

Also today The Skeptical Optimist looks at the definition of the Social Security lockbox. He compares two options:

1: Leave the dollars in the Trust Fund; lock them up and don't let anybody touch them, because in the future they will be spent on SS beneficiaries.
2: Use those dollars to buy intragovernmental bonds; convert them back to dollars in the future, to be spent on SS beneficiaries.

Option 2, the current policy, earns interest while option 1 does not. But he notes that the nature of intergovernmental bonds means that "In truth, both options are identical in their effects on total federal government finances." So he asks lockbox advocates "Why don't you want the SS Trust Fund to earn interest?" I will answer for them without squirming: because We want to reduce spending on Social Security. We would rather have the money go to general budget spending or not taken and spent at all. It is not the government's top priority to spend money writing wage-inflated benefit checks to people who don't them. We should use progressive indexing or other cuts to reduce spending even if Social Security is expected to be solvent. The reality is that we have a unified federal budget and Social Security needs to be compared directly to other government expenditures and not be kept separate. I would recommend option 3: "blow up the lock box!"

Tags: Balanced Budget, Deficit

The Hurricane Market

2005-07-23T14:34:00.000-07:00

A new prediction market has been born. Truck and Barter notes that The University of Miami has launched a hurricane futures market.

MAHEM is the Miami Hurricane Event Market, a futures trading market for hurricane landing sites. Meterologists, students, and Joe Public are all allowed to create an account and purchase up to $500 worth of securities with a payoff tied to a specific hurricane behavior.
Their concept is very interesting in that it ties a monetary incentive to the accuracy of a prediction. Hopefully this encourages more accurate forecasting. Fortunately the $500 limit prevents people from using the market to hedge their bets against actual hurricane damage.

The site was created by to economics professors and one meteorology professor and is being run by the Iowa Electronic Markets

It looks like they only have markets for the location of hurricane landfall. I think it would also be useful to have a market for hurricane strength. If there is enough volume then there could be individual markets for each strength and location combination.

Tag: Prediction Markets

California Kelo

2005-07-22T16:10:00.000-07:00

The Claremont Institute's Local Liberty blog has a roundup of post-Kelo eminent domain opinion in California. I would add that it is typically growing communities that need to acquire property for new schools and new roads to serve the needs of a growing population. Declining communities typically need to take property and give it to developers to artificially bring new development to try to prevent residents from leaving. Without eminent domain the development would happen elsewhere, so non-public takings does not increase overall economic activity, it just preserves the size of local government.

Local Liberty also links to their plan to "blow up the legislature" in reaction to the prop 77 deballoting. They propose doubling the Senate and Assembly. I propose "blowing it up" even more to have at least 400 in the Assembly.

The blog also has a comprehensive roundup of the Bear Flag League Summer Conference. I had a connection, other bloggers had better photography, while others who were not distracted by taking pictures or posting had better analysis of the conference speakers.

Deproposition

2005-07-22T15:23:00.000-07:00

Props 77 and 80 have been removed from the California Special Election ballot.

Democracy Market has the scoop on prop 80's removal from the ballot.

The court found that only the legislator has the authority to give the PUC additional powers so they tossed it.

This seems like a sound court judgment. Preventing competition for energy users is not a good idea. However, the public will not get to decide this for now.

Prop 77 was removed because the court decided that the difference between the submitted and circulated props were "substantive". Flap and others think that this is not a bad thing. This will focus attention on the remaining propositions. I agree because I don't think that redistricting will help very much. The population in California and elsewhere has been self gerrymandering themselves recently by their choice of residence. I also oppose an intra-census redistricting after a proper constitutional districting, however unwanted, has been performed. I think it would be a much better idea to vastly increase the size of the Assembly. Splitting each district into five would give legislators a more focused smaller constituency while keeping the legislature at a manageable 400 members. The split should not redraw existing district lines and would keep existing legislators in their seats, reducing opposition. The new districts would create new competitive primaries at least, and bring new blood into the assembly.

London Again?

2005-07-21T05:28:00.000-07:00

smoke, evacuations, explosions reported on the London subways just now. Fox News is reporting on possible gunshots.

Roberts to the Bench

2005-07-19T18:04:00.000-07:00

The Tradesports market did not read Bush's mind today. John G. Roberts gets the nomination, and the market had a low of 0.4 on him today. The market took the conventional wisdom that it would be a women nominee. Today's highs were 88 for Clement, 59 for Jones, and 29.5 for Luttig. The first solid tip on Roberts from Bench Memos came in at 7:05 PM EDT, and the announcement hit at 7:47 PM EDT.

The information that prediction markets are best at aggregating and the markets that are most fun to participate in do not have much overlap.

Update: 7/20
Jim Lindgren and Orin Kerr at Volokh Conspiracy had a discussion thread on the Tradesports prices. Their graph shows that prices on Roberts first spiked at 6:49 before dropping later. The final convergence began at 7:44, about two minutes before the name was printed by the press.

Update: 7/25
It appears the first Roberts tip came from NRO's the corner at 5:24 PM

Driving to Kyoto

2005-07-19T14:14:00.000-07:00

Tim Haab at the Environmental Economics blog does some rough calculations on what it would cost to meet our Kyoto emissions target. To achieve automobile driving's share of a 20% reduction in CO2 emissions, the cost per mile driven would need to increase 74%. This would be an average cost increase of $.10/mile, or $1200/year for an average driver driving 12000 miles/year. Are we willing to pay that much to meet your share of our Kyoto targets?

A 2004 JEEM study notes that "our most conservative estimate of annual household [willingness to pay] for ratification of the Kyoto Protocol to reduce global warming is $200". Given that we had a tax revolt in California recently when the car tax was tripled, I think that this is a non-starter. The car tax rate was (illegally) raised from .67% to 2% of the car value, which is an increase of $400/year for a new $30k car. Some of the resistance was because of the legislative tactics used to raise the tax, but the car tax was a major issue in the California Recall. KFI AM 640 had a big radio contest where they would pay one caller's tripled car tax bill each day. This real world data point supports the $200 JEEM figure.

Tag: Kyoto

Schwarzenegger on Supplements

2005-07-19T01:00:00.000-07:00

Did Arnold veto legislation to regulate dietary supplements because he stood to gain from ads in magazines he has relationships with?

Or did Arnold veto the legislation because he knows more about supplements then the rest of the legislature put together?

There are costs and benefits of having industry insiders in government. They may take action to benefit themselves or colleagues. They also have insider information that they can use for the benefit of government in contracting and other decisions.

I don't have a problem because Arnold took the position of government non-involvement. It would have been entirely different if he had taken a position of government intervention. The worst offenses are when politicians help some businesses at the expense of others, or when they create regulation to protect existing businesses from new competitors. There is a difference between pro-free-market and pro-big-business.

Flexed

2005-07-18T22:25:00.000-07:00

Today's heat caused the California ISO to flex their "Flex Your Power NOW!" system.

Reason's blog had a good link summary of the challenge of introducing consumer time-demand based pricing for electricity, which would work far better then power alerts.

The California Energy Blog is a good place to keep track of the local power situation.

Bear Flag League Summer Conference

2005-07-17T13:47:00.000-07:00

Live Blogging the summer conference

Kevin Drum has infiltrated the conference and gotten a post out from inside.

4:29 PM done.

3:50 PM Allan Hoffenblum
4:03 PM "The only -ism I believe in is plagiarism"

3:38 PM Ted Costa

3:37 PM Scott Schmidt

3:30 PM Daffyd Ab Hugh nomination for best dressed

3:07 PM FullosseousFlap is also live blogging.

2:56 PM Bob & Joseph

2:55 PM Bob & Joseph

2:48 PM Joseph C. Phillips

2:30 PM Bob Hertzberg.

2:04 PM Dan Weintraub and Scott Schmidt.

1:58 PM The Bear Flag League Members.

The Sky Is Not Falling

2005-07-16T15:06:00.000-07:00

Steve Conover at The Skeptical Optimist writes to deflate the fear over treasury debt held by foreigners. Foreigners invest in our treasury debt because they believe that our treasury is the best, safest place to put their money. It is a sign of the strength of our economy that foreigners invest their money here rather than at home or in another county. Also when principle is owed to the foreign debt holders they are most likely to do with that money what they have done before, reinvest it in our treasury. What is good for foreigners is also good for local bond holders. Anyone who directly or indirectly owns treasury bonds receives their own share of the interest on the national debt. It also means that the government also already has some of their money which reduces the amount of taxes the government must collect. It is unfortunate that some people think that voluntary debt is a problem and want us to solve the "twin deficits" problem by hiking taxes to turn our country into a tax hell so that foreigners will no longer choose to invest here.

Over on the spending side, Perry Eidelbus finds a 1996 Joint Economic Committee Report that concludes that "at current spending levels the last dollar government spends reduces private sector GDP by $1.38. In other words, the economy experiences a net loss of 0.38 cents." On the tax side, the same JEC report notes that "Economists have studied the burden of taxation and have estimated that every dollar raised from taxes reduces income from 17 to 56 cents."

Meanwhile, the White House (pdf page 37) has updated their tax collection forecasts for 2005 and the CBO has updated their tax receipts through June. The expected increases are quite significant. Note that the increase in social insurance receipts is greater than the best increases during the bubble years. This shows solid gains in employment and wages in addition to the rich getting richer.

        Percent Increase in Tax Collections, 2005
Tax                     OMB     CBO
Individual Income       14.8    17.6
Corporate Income        40.3    40.8
Social Insurance        8.2     6.9
Total                   13.8    14.6

But a final warning: both taxes and debt crowd out private capital, and nothing crowds out private capital more than taxes on private capital. We must make sure that the large increase in non-withheld taxes does not hemorrhage money from the markets and cause "the money to run out" like it did in "the bubble". We also need to make sure that the increased supply of savings from supply-side tax cuts does not supply increased government spending like it has in the past.

Hetch Hetchy

2005-07-14T21:22:00.000-07:00

A workshop in Sacramento Thursday discussed the prospects for restoring the Hetch Hetchy Valley as part of a study launched last fall by Gov. Arnold Schwarzenegger. The Environmental Economics blog looks at the costs and benefits of removing the dam that floods the valley as part of their topic on cost/benefit analysis. The benefits of the current dam in the valley go entirely to San Francisco. The benefits of restoring the valley would go to tourists throughout the country and the world. San Francisco, predictably, takes the non-green position on dam removal.

The best information on the reclamation proposal comes from the the Sacramento Bee's Pulitzer prize winning editorial series on Hetch Hetchy.

No Favoritism

2005-07-12T14:35:00.000-07:00

LA's new mayor has some tough words on reducing corruption.

Among his top priorities, Villaraigosa said, is enforcing ethics in an effort to erase the public perception of corruption in city politics.
"I made it clear to every general manager that I want them to report whenever someone uses my name to try to move something through the system," Villaraigosa said. "I said people like that need to know -- and know quickly -- that will not be tolerated."

Hopefully, we will hear less use of the words "I work for the government". Lets see if words can turn into deeds.

Uranium in Niger

2005-07-12T04:27:00.000-07:00

The leak in the Plame investigation has caused the uranium claims to return to the news. However, the media continues to miss the central point in the uranium dispute. The key point in Joe Wilson's original 7/6/2003 New York Times article (archive) was that Niger's operational mines were secure.

Given the structure of the consortiums that operated the mines, it would be exceedingly difficult for Niger to transfer uranium to Iraq. Niger's uranium business consists of two mines, Somair and Cominak, which are run by French, Spanish, Japanese, German and Nigerian interests. If the government wanted to remove uranium from a mine, it would have to notify the consortium, which in turn is strictly monitored by the International Atomic Energy Agency. Moreover, because the two mines are closely regulated, quasi-governmental entities, selling uranium would require the approval of the minister of mines, the prime minister and probably the president. In short, there's simply too much oversight over too small an industry for a sale to have transpired.

At the end Wilson queries:

The question now is how that answer was or was not used by our political leadership. If my information was deemed inaccurate, I understand (though I would be very interested to know why).

We would not find out until a year later that his information was inaccurate. Or more precisely, it was completely irrelevant. In Mark Huband's 6/28/2004 article in the Financial Times (archive) we learn that the uranium was to be smuggled from abandoned mines.

Intelligence officers learned between 1999 and 2001 that uranium smugglers planned to sell illicitly mined Nigerien uranium ore, or refined ore called yellow cake, to Iran, Libya, China, North Korea and Iraq.
According to a senior counter-proliferation official, meetings between Niger officials and would-be buyers from the five countries were held in several European countries, including Italy. Intelligence officers were convinced that the uranium would be smuggled from abandoned mines in Niger, thereby circumventing official export controls. "The sources were trustworthy. There were several sources, and they were reliable sources," an official involved in the European intelligence gathering operation said.

The dispute is between operational and abandoned uranium mines. The British intelligence behind the "16 words" was that uranium would be acquired from abandoned mines while Wilson checked the security of operational mines. Wilson's trip did not debunk anything. Perhaps it should have occurred to him that since the black market price of uranium is significantly higher than the regulated market price he should have checked out the abandoned uranium mines.

The old 7/12/2004 Christopher Hitchens demolition of Wilson's claims is also worth rereading.

Cell Phones and Poverty

2005-07-12T03:00:00.000-07:00

The Economist looks at how cell phones help growth in the developing world.

Mobile phones have become indispensable in the rich world. But they are even more useful in the developing world, where the availability of other forms of communication--roads, postal systems or fixed-line phones--is often limited. Phones let fishermen and farmers check prices in different markets before selling produce, make it easier for people to find work, allow quick and easy transfers of funds and boost entrepreneurship.... A recent study by London Business School found that, in a typical developing country, a rise of ten mobile phones per 100 people boosts GDP growth by 0.6 percentage points. Mobile phones are, in short, a classic example of technology that helps people help themselves.

The Economist then notes how many governments are charging high taxes on handsets and service. These taxes can be a huge drag on private sector growth, which could be the government's intention. But at least some governments are starting to get it.

Yet there is anecdotal evidence that reducing taxes on handsets can boost government revenues. People would rather pay a small tax on a legal handset than no tax on a smuggled one that cannot be returned if it goes wrong. There are some hopeful signs: India cut its import duty on handsets to 5% last year and plans to scrap it altogether.

It would be a good idea in the US and elsewhere to reduce or eliminate all local and federal taxes on communications. The cost of spectrum licenses, which are required to maximize efficiency, should be the only added government expense of cellular communication.

Environmental Priorities

2005-07-12T02:09:00.000-07:00

The Environmental Economics blog comments on The Economist's Buttonwood column on Europe's adaptation of emissions trading markets. More media attention to emissions trading is a good thing, except both make the mistake of calling Europe's carbon trading markets pollution trading. CO2 is not a pollutant, it is a natural component of our atmosphere and it is the least potent greenhouse gas, though it is the biggest emission by amount.

The United States is the leader in reducing pollution emissions. We have reduced emissions of the six principal air pollutants (NO2, O3, SO2, CO, Pb, and particulate matter, PM) by 54% since 1970. We started emissions trading markets in 1995 for SO2 and have expanded trading to other pollutants. The Bush administration has proposed large diesel emissions reductions. Most of all, the Bush administration has put together the "Methane to Markets" program with 15 countries including all the major developing countries including India, China, and Brazil. Methane is 20 to 30 times as potent a greenhouse gas as CO2. The estimates are that this will remove 1% of all greenhouse gases emitted by humans by 2015 while providing needed energy to increase growth.

The United States leads the world in reducing emissions of everything but CO2. So now Europe insists on focusing on Kyoto CO2 emissions and nothing else. The Bush administration is definitely losing this PR war. I think we need to go on offense and call on the rest of the world to improve their air pollution standards and create world emissions markets for SO2 and other pollutants.

Checkpoint Charlie checks out

2005-07-06T03:56:00.000-07:00

The 1065 crosses at the Checkpoint Charlie Monument in Berlin have been removed.

Another reminder of the horrors of the greatest evil ever conceived by man has been removed. Hopefully communism will forever remain on the ash heap of history.

May The Games Be With You

2005-07-06T03:49:00.000-07:00

The Olympics are down to the final two. The latest tradesports.com markets have:
Paris 77.0
London 24.1

Update: The 2012 summer Olympics have been awarded to London.

There is lots of speculation that Chirac's trash talk may have cost Paris the Olympics.

Extra-Terrestial Super Collider

2005-07-04T01:18:00.000-07:00

Deep Impact has hit the target.

More on Affluent Bond-holders.

2005-07-03T13:39:00.000-07:00

Jim Glass, commenting on the recent New York Times story on affluent non-taxpayers, reminds us that bond-holders implicitly pay taxes on exempt interest in the form of lower interest.

As of this writing the yield on 10-year AAA-rated fully taxable bonds is 4.66%, and that on 10-year AAA-rated tax-exempt bonds 3.71%
Since 3.71% is 20% less than the 4.66% that investors could get on same-risk, same-maturity bonds elsewhere, they are paying an implicit 20% income tax to the state issuer of the 3.71% state bonds. (Which they do voluntarily, since the 20% is less than the combined federal and state tax rate that they'd pay on fully taxable bonds.)

The Times thinks government can have it's cake (bonds) and eat it (taxes) too.

Deficits should not be considered as a failure to collect taxes. Voluntary bonds sales are the most progressive means for government to raise money. The people who will pay the most (lowest interest) for government bonds are the people who least need their money for other use.

Court Replacement

2005-07-02T16:46:00.000-07:00

Many are calling for Bush to nominate a replacement with views similar to O'Connor's. I agree. It is most important that, like O'Connor, the new nominee is a defender of the ultra-extremist "property rights" movement.

As far as I know, Janice Rogers Brown is the candidate who is the strongest supporter of private property rights.

Court Vacancy

2005-07-01T08:30:00.000-07:00

Sandra Day O'Connor has retired. Now the cable networks can devote their 24/7 coverage to the search for someone who is not a damsel in distress.

Generous Non-Taxpayers

2005-07-01T02:55:00.000-07:00

The New York Times in their class warfare series looks at new 2002 I.R.S. data on "the number of affluent [top 2%] individuals and married couples who paid no federal income taxes". First it notes general tax distribution.

Over all, the top 2 percent of earners, the 2.5 million filers with income of $200,000 or more, paid almost 27 cents in taxes for each dollar of income they reported in 2002, other I.R.S. data showed. This group accounted for 53.5 percent of the income tax paid by all Americans.

The Times then divides the data into those who paid no taxes to the federal government and those who paid no taxes to any government. The data is also divided between A.G.I. and 'expanded income', which also includes money from sources like tax-exempt interest and untaxed Social Security benefits. But 'expanded income' is income that is earned from lending money to the government, mostly from buying bonds but also from payroll tax contributions. The Times may object but I have absolutely no problem with those who don't pay taxes because they have lent money to the government. The government has their money, it doesn't need to take any more. So I define 'generous non-taxpayers' as those affluent individuals who have lent so much of their fortune to the government that their remaining taxable income no longer qualifies as affluent. The report notes that "nearly two-thirds of those who lived tax free reported income from such bonds." About half have enough exempt income to be 'generous non-taxpayers' by my definition.

I have collect the number of nontaxpaying affluent from the Times article into a table:

                America                 World
        EI      AGI     G       EI      AGI     G
2002    5650    2959    2691    4922    2551    2371
2001    4910    3385    1525    4119    2875    1244
2000    2766    2328    438     298     2022    298
1977    85      60      25      64      37      27

The Times headline is that the number of non-taxpaying affluent grew by 15% in 2002. But the number of world 'generous non-taxpayers' increased by 90% in 2002 and 800% since 2000.

I, on behalf of all taxpayers, would like to thank all those generous people for lending their fortunes to the government so that it can provide the benefits it has without needing to take as much of our money.

Environmental Economics

2005-06-30T15:56:00.000-07:00

There is a new Environmental Economics blog that has several contributers. The posts so far seem to favor government regulation more than solutions based on private markets and property rights. They do, however, link to some property and market friendly sites on their blogroll.

I think a few environment questions need to be asked: Can we increase the efficiency of big car rentals so that consumers will buy the smallest car they need rather than the largest car that they need? Why are we focusing global efforts on controlling the least harmful greenhouse gas (CO2) and not starting with global markets to control the more harmful GHG's and pollutants? Should we have a consensus on why the ice age ended before we believe that there is a consensus about human caused global warming?

New and Improved

2005-06-29T14:58:00.000-07:00

The new Freedom Tower redesign is out. I love the tower geometry, but could do without the "Luxor" night-light. But rather than one tower I want a "hydra" plan. They knocked down two towers, so four towers would grow back in their place. The new towers would be of ascending height.

2005 Q1 GDP

2005-06-29T13:17:00.000-07:00

The BEA reports that real GDP increased at an annual rate of 3.8 percent in the first quarter of 2005. After a 3.1% advance and 3.5% preliminary we have now arrived at the same final growth number as the previous quarter.

This revision means that the national debt burden has dropped from 64.6 to 64.2% of GDP since last month.

Guantanamo Psychology

2005-06-28T15:54:00.000-07:00

Reason's Hit & Run discusses a New York Times article on how we are using military psychologists to help in interrogations at Guantanamo Bay.

The former interrogators said the military doctors' role was to advise them and their fellow interrogators on ways of increasing psychological duress on detainees, sometimes by exploiting their fears, in the hopes of making them more cooperative and willing to provide information.

Some question whether this is unethical. I think this is the most humane action we can take.

We treat prisoners the way we do precisely because we care about the life and liberty of potential victims of terrorism. The greedy strategy principle to 'first do no harm' and not attempt to collect information to prevent terrorism is the most inhumane action we could take. It would be nice if we had the capability to precision target information from detainees mentally without causing physical discomfort but we don't have that capability. We must use the same tactics uses by all regimes throughout history, creating a large difference in the 'payoff' for the prisoner to get them to voluntarily choose to reveal the information that we want. By precision exploition of their fears and cultural taboos we can make prisioners willing to provide information by causing discomfort and not by torture. Exploting discomfort, especially cultural discomfort, to obtain information from prisoners in order to protect victims is the strategy that will lead to the least inhumane outcome.

Grokster vs SCOTUS

2005-06-27T17:18:00.000-07:00

I think the deciding issue with Grokster is that while sharing programs are capable of it, there has been less than substantial non-infringing use of the programs. There has been substantial use of publishing programs like the web and BitTorrent to publish original content. The only actual non-infringing content published by sharing programs is stuff copied from the web and the spyware that frequently gets included in free downloads. I hope the loss of Grokster will reduce the demand for legislation that may actually harm publishing programs and threaten BetaMax.

There may not have been much economic damage from sharing. Payola and independent promoters show that the market price for disposable music is frequently negative. I think the biggest problem is that with most online music prices being fixed at zero by sharing there has been much less innovation in micro-payment then there should have been. Music publishing should be the driving innovation for micro-payment both to labels and to individual publishers. Instead, sharing programs have been driving innovation for their paying customers: spammers and spyware publishers. The customer is always right. It is best that the customer be the consumer.

Social Security Indexing

2005-06-25T15:02:00.000-07:00

The economists and politicians mostly support raising the retirement age because Social Security is relatively better as social insurance than it is as an investment. Most people don't support raising the retirement age because they don't want to be told when to retire, which is why the retirement age should be abolished. The retirement age should be replaced with a more flexible age/benefits curve. For better investment, private accounts should be like Phillip Longman's early retirement accounts where contributions raise the age to collect benefits rather than reducing benefit levels. Pozen style progressive indexing could apply to both retirement age and benefit levels to achieve solvency. We could keep a reasonable retirement age for low earning non account participants while reducing government spending on high earners and account participants who don't need government benefits while preserving the old age insurance aspect of Social Security.

Workers should work until their benefits are enough to live on, or until they have enough savings in private and other accounts to last until their benefit levels increase to sufficient levels for continued retirement. Not all retirees are the same, so why should everyone have the same retirement age?

Eternal Life

2005-06-24T01:59:00.000-07:00

The New York Times editors come out against private property. Their editorial calls the ruling

a setback to the "property rights" movement

with the scare quotes theirs. The Times has completely marginalized private property to a "movement" and not an unalienable right endowed by our Creator.

The Times then notes that the city of New London is shrinking. This is the real story. This is not about property, it is about government's rights. Rather than contract the government must use the power of eminent domain to bring business to the city to preserve the size of city government. There is no exit for government. This is the same reason that failing schools must be preserved rather than exiting allowing students to move on to better schools, and why Social Security must be preserved in its current form. Government must not contract. The court has ruled that government's rights come before God-given rights.

No government ever voluntarily reduces itself in size. So government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!

Dancing With the Stars

2005-06-22T22:53:00.000-07:00

For the fourth week the stars will dance sambas and then a group Viennese Waltz.

Joey's posture is improving, he is selling his upper body movements better, but is still a little sloppy.

Rachel and her partner are far apart and side by side too much and do not do enough dancing together. Rachel is not as good by herself, they should spend more time in and dance holds and pair stunts where she looks the best. She needs her partner to make her look good. They also need better music. I agree with Carrie Ann for once.

John looks great in the first half when he is dancing with his partner. The second half is weaker with with too much wiggling side by side. His leg kick at the end is glaringly much lower than hers.

What a difference a little ballet makes. Kelly looks like the best of the group dancing by herself. She survives nine straight spins and a wardrobe malfunction. Her posture and arm motion looks much better with the ballet work.

Unfortunately, they do not use Viennese music for the group waltz. Joey's waltz jumps and Kelly's lift spin were the best spotlight dancing. Kelly was the most noticeable outside of the spotlight on first viewing, but the camera and dress color may have helped. On replay, John looks solid and Joey was not on camera enough to verify the judges' scud comment.

Rachel is out. Though she was not the worst of the group, I have the least interest in seeing how much she would improve. I think Joey needs the ballet class this week.

Everything But Income Is Converging

2005-06-18T12:18:00.000-07:00

Brad DeLong has found, but does not link to, an interesting World Bank paper from Charles Kenny.

Why Are We Worried About Income? Nearly Everything that Matters is Converging.
Convergence of national GDP/capita numbers is a common, but narrow, measure of global success or failure in development. This paper takes a broader range of quality of life variables covering health, education, rights and infrastructure and examines if they are converging across countries. It finds that these measures are converging as a rule and (where we have data) that they have been converging for some time. The paper turns to a discussion of what might be driving convergence in quality of life even as incomes diverge, and what this might mean for the donor community.

I helpfully added a link to the abstract in his comments. The link to the full paper from the abstract costs money. I had first found this paper from Arnold Kling linking to Ronald Bailey in Reason, which has a free link to the full paper. I originally noted this paragraph:

Looking over time, a number of studies find a tenuous link between various health measures, for example, and growing income. Preston (1975) estimates that income could only account for perhaps 10-25% of the growth in life expectancy in the world as a whole between the 1930s and the 1960s. Looking at a wider range of measures, Easterly (1999) found that almost all of the quality of life variables that he could find (including infant mortality, life expectancy and war deaths per capita) were not correlated with the rate of growth in that country over the last 40 years, but instead with improvements over time common to all countries.

Symphonic Disrecord

2005-06-17T13:19:00.000-07:00

The Globalization Institute notes how symphonic recording activity in North America has nearly ceased because the musicians' unions have priced American symphony orchestras out of the recording market.

When Esa-Pekka Salonen composes an original composition to be performed by the Los Angeles Philharmonic for the grand opening of the Walt Disney Concert Hall, and the recording is performed by the Finnish Radio Symphony Orchestra in Helsinki, we have a a big problem.

Dancing With the Stars

2005-06-16T03:17:00.000-07:00

I have to let my inner Simon out for this reality show.

Evander has been flat footed the whole competition. His partner sure does make herself look good, which is not a compliment to him. Deserved to go.

Rachel finally looks like she is doing more ballroom than ballet. Best performance of the night.

John does the basic steps well and is the most useful one to watch if you want to pick up anything.

Joey's footwork is still way ahead of his posture.

Iraq's Army

2005-06-10T13:28:00.000-07:00

There has been a lot made over the lack of progress in the training of the Iraqi army. It is going to take a long time to train the Iraqi forces to the level needed to win against terrorists without our help. The performance of Russian special forces at Beslan could also be described as inadequate. Iraqis are going to need to be even better trained than those of the former super-power. However, war opponents need to realize that this makes the case for the Iraq war even stronger.

Al-Qaeda had been concentrating full-time on training and recruiting for over a decade before 9/11. The Baath resistance has been training for over a generation. We have only just begun training the volunteer military of new democracic Iraq. Al-Qaeda and the Baathists have a huge head start on Iraqi recruits. Not removing Saddam would only have made this problem worse by giving the enemy an even bigger head start. We are going to be bogged down in Iraq longer than expected because the war did not start soon enough.

Guantanamo Bay

2005-06-10T00:39:00.000-07:00

It seems certain human rights organizations only look at violations, and not at the advancement of human rights. They would rate our human rights record better if instead of detaining and interrogating terrorists we were supporting them. Terrorists at large murder, kidnap, torture, and abuse innocent Muslims and non-Muslims wherever they operate. The terrorists are the biggest human rights abusers, and those who support them and those who do nothing in the war against them are abusing human rights by not confronting terrorism. To have a better human rights record than us, a country would have to achieve as much or more to control terrorists while committing fewer abuses in the process. Those who say they can do human rights better should not be telling us to shut it down, they should be offering to run the place.

There is one alternative to Guantanamo Bay that is worth consideration. Turning it into a Hong-Kong style Guantanamo Bay Freeport.

?NC Chairman

2005-06-08T21:26:00.000-07:00

Howard Dean's mouth keeps moving.

Republicans "all behave the same, and they all look the same. ... It's pretty much a white Christian party."

Republicans "never made an honest living in their lives,"

"You know, the Republicans are not very friendly to different kinds of people. They're a pretty monolithic party. Pretty much, they all behave the same, and they all look the same. ... It's pretty much a white Christian party,"

"Republicans don't represent ordinary Americans, and they don't have any understanding of what it is to go out and try and make ends meet.''

"Republicans always divide people."

It looks like the democrats have chosen Howard Dean as their ideal choice for the head of the Republican National Committee.

A Day Without...

2005-06-04T11:37:00.000-07:00

With Bill Moyers claiming that anyone who pays taxes on dividends, capital gains, and inheritance are "idle rich" and Howard Dean claiming that "a lot of [Republicans] have never made an honest living in their lives", do you think we could live a day without them?

The best way to specifically target the money of the "idle rich" is to sell bonds. Struggling families, hard workers, and entrepreneurs are not going to put their money in government bonds when they have greater needs for their money. The people who buy bonds are the people who need their money the least, otherwise they would use their money for a greater need. Deficits are the best way for government to raise money from "old money" without taking it away from the "new money" that drives economic growth.

Neuroeconomics of Trust

2005-06-02T13:25:00.000-07:00

The Economist reports on how sniffing a spray containing a hormone called oxytocin increases a person's level of trust in others in a trust game.

Of the investors who were sprayed with oxytocin, 45% invested the maximum of 12 units, while only 21% of those who received the control spray did so. On average, the oxytocin-sprayed group transferred 17% more money to their trustees than the controls.
But the sum returned did not depend on whether there was oxytocin in the spray a trustee had sniffed--as it might have been expected to if oxytocin promoted generally sociable behaviour, rather than trust specifically.

Lynne Kiesling has more analysis.

Anyone see a resemblance between this and the latest Alias plot line dealing with water and mind control?

2005 Q1 GDP revised up 3.5%

2005-05-27T13:04:00.000-07:00

Real GDP revised up from 3.1% to 3.5% in Q1 2005.

Major revisions were imports revised down from a 14.7% increase to a 9.1% increase, and inventory increases revised from $80.2 billion to $68.4 billion.

Cell Phone Taxes

2005-05-17T15:40:00.000-07:00

The Tax Foundation's blog has a table of federal and state cell phone tax rates. The federal government levies a 6.05 percent tax on wireless telecommunications.

The federal government controls spectrum, and collects lots of money from spectrum auctions. Indeed, the government must charge market price for spectrum in order to maximize efficiency. Yet communications has a positive network effect on the economy, so the government should want them to be as inexpensive as possible. So the government should not be charging any additional taxes on cellular users. That 6% tax should be eliminated.

Star Wars Episode 2.5

2005-05-16T22:37:00.000-07:00

A parallel universe begins in the middle of Episode II, when Count Dooku has Obi-Wan captured and asks Obi-Wan to join him, Obi-Wan says yes!

Obi-Wan joins only to learn more about the other side, but learns of the corruption of the Senate and the full extent of the Sith conspiracy. Obi-Wan informs the Jedi that with the dark side having widespread influence in the Senate but only control of the leaders of the CIS, they should switch sides. The Jedi remove the leaders and take control of the CIS, and with the balance of power on their side, win the peaceful surrender of the Old Republic. The reformed CIS forms a new Republic under the principles of capitalism, economic freedom, and free commerce, and everyone lives happily ever after. (Episodes 3-6 never happen)

George Lucas may be making a political statement about democracy turning into dictatorship and good people becoming bad, but the Republican Party has the most in common with the separatists who look to be on the losing side of Episode III. The Darth Vader transformation more accurately describes fears about Vladimir Putin and the history of other Leftist movements.

Ground Zero

2005-05-10T04:36:00.000-07:00

Many people want to dump the Freedom Tower design and build something else. My plan is the "Hydra" plan. Chop off one head and two heads grow back. They knocked down two towers, we build four back in their place. The four towers would be of ascending height. The middle towers of the sequence should be built and occupied first. Then, depending on supply and demand, the remaining towers would be built, in sequence, taller or shorter than the first towers.

Death Spiral

2005-05-10T03:48:00.000-07:00

Economist's View takes note of a conference around a paper (free) by Michele Boldrin showing that Social Security leads to a reduction in fertility.

Social Security transfers responsibility for retirement security from children to the government. Yet the government needs children to pay into the system to support current retirement benefits, but the government doesn't have children (except "Brave New World"), people do. The paper shows a definite negative correlation between the size of Social Security benefits and fertility. The higher payroll taxes paid by prospective parents also makes it more difficult to afford children. Lower birthrates lead to lower worker to retiree ratios requiring even higher tax rates leading to what David Frum referred to as a "death spiral" on Tucker Carlson's show (4/29).

One way to try to undo the reduced fertility rates without eliminating Social Security would be to have reduced or even negative effective payroll tax rates for parents. Private debit accounts could be created in Social Security to pay for children's health and other expenses (blow up the lock box). Retirement benefits could also be linked to the number of children a retiree has added to the payroll tax system. The government could also explicitly pay much more for children.

Of course, Europe really needs to be experimenting with this now since they are most affected by declining fertility and an aging population.

Children are our future. The greatest investment in our children is having them.

Kaus gets mugged.

2005-05-06T15:43:00.000-07:00

"A conservative as a liberal who has been mugged by reality." Mickey Kaus has changed his position on social security.

Democrats charge that Bush's proposed benefit cuts are vicious, and that they don't fix Social Security's solvency problem. But if even vicious cuts don't fix the problem, doesn't that mean the problem is a bit bigger than the Dems have been letting on? I believed Social Security wasn't in much trouble at all--just needed a few "tweaks"--until I looked at the tweaks the Two Peters were proposing. In addition to the benefit cuts outline above, Diamond and Orszag have the current 12.4 percent Social Security payroll tax rising to 15.4 percent in 2078 and continuing to rise "slowly over time thereafter."

He thinks we should be more like Australia and reduce spending on future retirement benefits. I agree. We should worry about saving money, not about saving government programs.

Unions in Iraq

2005-05-04T17:48:00.000-07:00

Kevin Drum thinks we should support unions in Iraq because unions were effective in fighting socialism in the 80's and Iraqi unions were anti-Saddam. Not quite.

Unions are most effective when employment is a monopoly. Unions were successful fighting socialism because under socialism, Government is the monopoly employer. Unions were anti-Saddam because his government was a socialistic monopoly employer for most jobs.

That is why the most effective unions here are public and athletes. The Government and Sports Leagues are the only monopoly employers around. Private sector unions are diminishing because we have free market competitive employment. Now that Saddam is gone, creating a free labor market in Iraq is preferable to supporting unions in Iraq.

Blow up the Lock Box!

2005-05-04T17:08:00.000-07:00

Social Security provides zero security till death, disability, or retirement age. Social Security locks the money away from you, but not from the government.

The purpose of a forced savings program should be to save for expenses you need to pay for. The solution is not locking your payroll contributions into the stock market, but letting you spend them when you most need to. Private accounts should fund what young people need to save money for: home ownership and children. People should be able to take raid their lock box for a down payment on their home. The equity will only increase future savings. We should also have childhood health and education debit accounts to pay the expenses of having our children. Children are needed to earn and pay taxes to support both ourselves and the government in the future. Government can't have children, people do. There could be a means tested repayment for debit accounts. But even if retirement benefits are reduced for those who raid their lock box, they will have equity and children who can help pay for their retirement.

Lock Boxes are the problem, we should blow them up!

A Zero Newspaper Town

2005-05-01T00:43:00.000-07:00

Los Angeles is definitely a zero newspaper town. Patterico catches the Los Angeles Times deliberately removing facts supporting the U.S. on their reprint of a Reuters story about the Italian shooting incident. Proof that the U.S. is telling the truth and the Italians are lying is definitely news not fit to print in the L.A. Times.

This is worse than their s/pro-life/anti-abortion/g incident, and all of their other blunders.

Game Theory at 190 MPH

2005-04-30T04:51:00.000-07:00

NASCAR visits Talladega this weekend. There is a old paper on game theory on superspeedways that is a classic read. Read it for an excuse for smart people to watch this seemingly dumb sport.

At this year's Daytona 500 the drivers figured out that position doesn't really matter until near the end of the race. They broke into smaller packs for safety to avoid having the "big one", at least until the end of the race.

Transferable Fish Quotas

2005-04-29T15:04:00.000-07:00

From Econotarian a link to a study showing that transferable fish quotas make fishing more efficient in British Columbian waters.

Contradicting previous assumptions, new fisheries research shows that allocating catch among vessels reduces the amount of fish discarded at sea.
The study in Canada's British Columbia waters compared so-called individual transferable quotas with a previously used system of trip limits where vessels are only allowed to land a certain quantity of each species every two months.
The findings come at a time when individual transferable quotas are being considered for the west coast of the United States.

The system was implemented in 1997.

Inventories from Q1 GDP

2005-04-29T15:01:00.000-07:00

Angrybear has an analysis on inventories from the GDP report.

How much of the inventory growth is domestic and how much is imports, especially oil? Inventories of imports will reduce future foreign production and future imports and add to future GDP. Crude inventories surged at the end of the quarter. Are we also seeing a stockpiling of Chinese imports in expectation of future increases in import and export tariffs and currency valuations? Is there a breakdown on import inventories anywhere?

2005 Q1 GDP up 3.1%

2005-04-28T19:44:00.000-07:00

Real GDP increased at an annual rate of 3.1% this quarter. This is less than the 3.5% estimate, but above the rate used for most economic and budget projections.

David Altig of macroblog writes:

I'm not sure I had ever contemplated what the day would look like when 3.1 percent growth was considered bad news, but now I know for sure.