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Monday, March 31, 2008

 

Chipping away at my liberal ideals

The duality between my conservative tendencies and my liberal instincts keeps becoming more and more distinct.  I am absolutely no longer amused about the situations in the world's poorest and most violent countries.  I tire of, after hours of research and surfing Wikipedia, confirming to be mostly false the politically correct notions of why the African third-world is in poverty and seeming perpetual misery and what can be done to solve those things.  I tire of hearing all these amusing anecdotes from left-wing citizens of Fantasyworld about how they did such things as join the Peace Corps or how they donated money to help save Darfur or how they think it's disgusting that the US only donates something like .002% of its GDP to global monetary aid to the third world (compared to Western European countries, which donate substantially more as a function of their GDP).  

I tire of all this for the same reason I have begun to get sick of many liberalist ideas:  they work very well in the abstract, but they don't translate well into reality when  you consider the negative aspects of human nature.  And many of these negative things, I believe, probably have far more to do with explanations vested in nature than in nurture.  This is important because if this is true, then on a macro scale it means that many of the problems we have today will never go away, and many of the inequalities we see on a micro and macro scale will probably never go away, even though they might lessen.  

The idea that there is inequality that exists and will never be neutralized is a hard idea to accept to someone who cares or has a fundamentally optimistic view of the world and of people (ie, a liberal).  However, this is a necessary concept to accept in order to be able to make tangible policy decisions and be able to render effective solutions.  

At the same time, accepting such a notion is, correctly, probably evil.  This duality I have described is one that I have understood for some time.  However, in the past I have advocated as part of my philosophy on life that shooting for the idea, even if the ideal is unrealistic or unlikely, is the correct and civilized thing to do, because in the abstract it is beautiful, and that had value to me.  I would say that the IMF, donating money to causes such as Darfur and Feed the Children, etc. are good things, even if the chances of them actually doing something positive are low (but not zero).  

Now, however, I don't believe I feel this way anymore.  I have come to conclude that the ideal is more fantastical than I had hoped.  Also, I believe the differences amongst peoples and cultures are deeper than one would like to think.  When you combine this with my belief that there are at least some things about life and of humanity that are absolute and universal, and that therefore value judgements can be made about one culture versus another, the result is a painful move towards pessimism.  I do think that our Western culture and way of life is superior.  Is it our right or responsibility to force what we know to be better onto other cultures, or at least try to?  I don't believe so, but partly because I believe it is not realistic to expect it to work.  We see this in Iraq.  It is a people's obligation to steward its own destiny.

What do we do with a Haiti, or a Sierra Leone?  Do you ignore it and watch as it wallows in misery?  Do you throw money and aid and resources at it, even though it has been shown that those things will make little to no difference in allaying the misery?  Do you hold as official policy some ethereal notion that "expanding and liberalizing trade and privatizing the economy" will solve any problem?  

There is no right answer, because in these situations there is no solution.  Food for thought:  one of the only large differences between the early progression of South Africa and the progression of the US as countries  is that the native population of the US was practically exterminated by Smallpox before Europeans really began settling and migrating west, rendering the whole continent easily conquerable.  This never happened in South Africa, and the Europeans were not able to penetrate the continent as a result; the natives were not killed en masse.  If it were not for Smallpox (and subsequent quasi-ethnic cleansing that the US engaged in until the late 1800's), the US might very well resemble closely South Africa today, a country clinging to life of the size of the current Eastern Seaboard, perhaps, with a minority white population and little global relevance or power.   

I am not necessarily advocating that the Smallpox or the killing were good things at all.  Some of the things that the Americans did were horrid.  However, when one considers what the US is today (I consider it to be a wonderful thing), one would be ignorant to ignore the painfully conflicting ideologies that result.

Capitalism embraces the negative aspects of human nature.  That's why it works.  

 

Safety in Groups

Reading through some of the previous posts I’ve noticed more than one focus on the idea defense and protection as a public good, the most recent being “A Public Good Via Self-Defense” by Michelle Rennolet. And while these articles do a good job reviewing Olson’s theory of collective action as it may apply to such a good and the applications thereof, I’d like to continue along the same lines, but now spend a little time covering some of the actual groups that have sprung up with an eye towards providing public defense, and invite all the previous posters to join in and highlight wherever I may get it wrong.

Now the most obvious groups that exist to provide defense are the United States Armed Forces. However, the incentive that brings members of this group together, outside of providing national defense, something that benefits soldiers as well as nonsoldiers, is obvious. It’s a job that not just provides a paycheck but many other benefits, such as transferable training and college scholarships. So while membership requires no coercion (except in times of a draft) providing for the costs of membership is a little different. Paying soldiers is an expensive endeavor, and one that would undoubtedly encounter free rider problems if left purely to good natured contributions from those attempting to pay for the public good provided for them. Thus the ultimate form of coercion is required in the form of compulsory government taxes.

There are, however, true volunteer groups that attempt, or at least claim, to provide for public safety. Let’s begin with militias. The question to ask here should be why members show up at all. Unlike the armed forces and local police there’s no pay and honestly, there’s little to no good being provided as there hasn’t been much call for militias to bolster national defense since the early 1800s. Thus if the good provided by the group is negligible at best, we could assume the benefit to each individual member to be less then minute, while the drain on time and energy continues to be constant. Why then continue to attend meetings and target practices? I think the answer is social incentives. Most militias, outside of the Texas Minutemen who claim to guarding the border, have devolved into something more akin to a club then a serious gathering. The true interests are in laughs and companionship not national defense.

Among the other volunteer groups you hear about attempting to provide a public good, perhaps the most often mentioned is the neighborhood watch. This is a bit of an interesting case because it varies from formation to formation. Often they’re formed in neighborhoods with little crime to begin with and can thus be chalked up to social incentives again, with the weekly meetings taking the place of ye olde neighborhood picnics and such forth. However, in other cases there is a specific need involved because of high crime rates, or a sudden local crime spree, and here I think the small group dynamic comes into play. In essence the benefit provided to each individual member is at least equal if not greater then the effort put out. A meeting and patrol every now and then isn’t high effort and neither is agreeing to call the cops or check in with neighbors if you witness something suspicious. But in high crime neighborhoods the benefit of getting your neighbors to do the same can be of untold value. Of course there’s still likely to be a free rider problem to some extent, but in a small group like this social pressure rather then incentives can prove to be the deciding factor in getting everyone on board.

-Jaeson Madison

 

Athletes vs. Farmers

What do Chinese farmers and the Olympics athletes have in common? Water. During the Olympics that will be held in Beijing this summer, the city’s water demand is expected to spike up by 30 percent above average. The northern province of Hebei provides the majority of Beijing’s water. Unfortunately, this province is now suffering severe drought due to a lack of winter rain and snow. The four dams that supply water to the regional farmers and the city of Beijing are reported to be 60% lower than average. On top of the current water shortage, China is in the process of building 309km of channels to draw water from the four Hebei dams to the city of Beijing. These channels are intended to bring an extra 300 million cubic meters of water to be used as a “back-up” supply during the time of the Olympics. What will be the consequences of this move? The drought has already affected 1.89 million head of livestock and left 2.43 million people without sufficient drinking water. According to the World Fact book, 43 percent of the Chinese population is employed in agricultural. What will happen to the Hebei farmers if they lose another 300 million cubic meters of water to the city? In China’s efforts to make a good impression on the international community and boost their economy by hosting the Olympics they are creating a situation that will potentially have many unintended consequences. Is it worth jeopardizing the health and livelihood of so many people for the sake of having “green” games and making Beijing the sparkling host city of the 2008 Olympics?

http://sport.guarding.co.uk/breakingnews.html

 

California Prison Guards

Unless drastic measures are taken, California will soon be spending more tax dollars on its state prison system than its public universities. Schwarzenegger’s 2007-2008 state budget even shells out more than our federal prison system - $3.3 billion more – even though federal prisons house almost 30,000 more prisoners.

The wealth of knowledge I gained while reading Mancur Olson lead me to believe that there was something more to this excessive expenditure of taxpayer dollars, so I decided to do a little research. Of course, I didn’t have to look far, for the second article that popped up on my google search was labeled “The California Prison Guards’ Union: A Potent Political Interest Group”. http://thirdworldtraveler.com/Prison_System/CalifPrisonGuards.html

Author Dan Pens eloquently states that there is “a well fed Political Interest Group feasting at the California public trough, and most taxpayers are unaware of the huge growth in this creature’s appetite and political clout.” The California Correctional Peace Officer’s Association’s (CCPOA) sudden rise to power began in the year 1980 with the installation of Don Novey as the CCPOA president. The ambitious Novey exhibited true genius in the arena of political lobbying, increasing prison guards’ salaries from $14,400 a year in 1980 to $44,000 a year in 1996 – an amount that totaled well over $50,000 a year with benefits. That amount was $10,000 more than the average teacher’s salary in 1996, quite a large sum when one considers that the position of prison guard requires only a high school diploma while a teaching position demands at least a four year college degree.

Novey found it all too easy to exert tremendous influence over California’s politicians, for as one would expect “there are no vested interests against spending more on prisons.” Everyone wants “to keep thugs off the streets and in jail where they belong” and no politician wants to be known as the man who was soft on crime, so the state prison budget steadily grew as the CCPOA’s influence increased.

Obviously the extra funds committed to the prisons must come from somewhere, so it should come as no surprise that the California prison budget has grown at the expense of other public programs, most notably higher education. In 1983-1984, California spent only 3.9 percent of its budget on its correctional systems and 10 percent on its public universities. The meteoric rise to power of the CCPOA will produce correctional system spending levels that are set to pass higher education expenditures in less than 5 years. Don Novey must be very proud.

The expansion of prison funding has also resulted in a tax increase. This tax increase has prompted a massive exodus of corporations and as these corporations flee they take with them thousands of jobs, leaving fewer taxpayers to shoulder the added tax burden.

Dan Pens concludes his article by speculating that “only after the state drives itself into an abyss that a radical revolutionary shift can take place.” Sadly, I believe he may be right.

Sunday, March 30, 2008

 

South Africa

I recently went to a conference about the economics of South Africa. They had swithched their government process about a decade ago and their economy has been headed up ever since. They dropped the procedures that they had been using, cleaned house, and started fresh. In The Rise and Decline of Nations Mancur Olson talks about how an upheaval and change is a way that many economies get a boost. Finding out some of the information about how much more successful the new economy has been was just more evidence to Olson's stance. Everything that he stated in that book, particularly in Chapter 4 was validated in this conference. Although they still have a long way to go the economy there is looking up, and it is because they had a complete restart on the way they do things. I have tended to agree with Olson anyway, but this was just more validation for what he states in his book.

Friday, March 21, 2008

 

Zimbabwe

As we turn to Olson's Power and Prosperity, you might be interested in considering the views of MORGAN TSVANGIRAI, a presidential candidate in Zimbabwe's upcoming elections:
As the March 29 election in Zimbabwe approaches, the cards are clearly stacked in favor of President Robert Mugabe and his ZANU-PF party. Draconian legislation has curtailed freedom of expression and association. Daily, the representatives of the Movement for Democratic Change (MDC), the political party that I lead, are harassed, tortured, imprisoned without trial and even killed.

Economic mismanagement by Mr. Mugabe's government is an even more serious problem. Zimbabwe's inflation and unemployment rates are 150,000% and 80% respectively. Infrastructure is crumbling, and education and health-care systems have collapsed. Life expectancy is now among the lowest in the world, having declined, since 1994, to 34 years from 57 years for women, and to 37 years from 54 for men. Some four million of my fellow citizens have fled the country, taking with them both human and financial capital.

Out of the many reasons for Zimbabwe's decline, three stand out. First is the ruling regime's contempt for the rule of law. The government has repeatedly stole elections, and intimidated, beaten and murdered its opponents. It has confiscated private property without compensation and ignored court rulings declaring such takings illegal. Such behavior only scares away investors, domestic and international. Current circumstances make it impossible to have a growing economy that will create jobs for millions of unemployed Zimbabweans.

[ . . . ]

The second reason for Zimbabwe's decline is the government's destruction of economic freedom, in order to satisfy an elaborate patronage system.

Today, Zimbabwe ranks last out of the 141 countries surveyed by the Fraser Institute's Economic Freedom in the World report. According to 2007 World Bank estimates, it takes 96 days to start a business in Zimbabwe. It takes only two days in Australia. Waiting for necessary licenses takes 952 days in Zimbabwe, but only 34 days in South Korea. Registering property in Zimbabwe costs an astonishing 25% of the property's value. In the United States, it costs only 0.5%.

[ . . . ]

The third factor responsible for the country's decline is the size and rapaciousness of the government. Today, that size is determined by the requirements of patronage. But a government that provides hardly any public services cannot justify the need for 45 ministers and deputy ministers, all of whom enjoy perks ranging from expensive SUVs to farms that were confiscated from others.

The Central Bank too has departed from its traditional role of stabilizing prices. Instead, it dishes out money to dysfunctional, government-owned corporations that are controlled by the ZANU-PF and are accountable to no one. The result is runaway growth in the money supply, and the highest inflation rate in the world. Zimbabwe's potential for economic growth cannot be realized without macroeconomic stability. Hyperinflation must be tamed, in part by taming the government's appetite for spending.
If you lived in Zimbabwe, would you vote for this candidate? His views certainly seem consistent with Olson's Power and Prosperity. Come to think of it, I would like to hear candidates for our presidency who seemed to understand as much about power and prosperity as Mr. Tsvangirai does.

Thursday, March 20, 2008

 

Sub-prime Crisis? Yeah, right.

There is perhaps a moderate economic crisis looming in the not-too-distant future, with the sub-prime crisis in swing, and there is some reason to worry that another economic boom is going to be in the distant future as opposed to the near one.

However, I believe that these concerns are largely exaggerated. The hegemony of the US economically is not something that can be disturbed easily, something that was certainly not true prior to 1950. Even the worst-case scenario economic ramifications of the sub-prime crisis do not really rival some other "crises" that the US has experienced in the last 50 years.

For one, the petroleum shortages of the late 70's and early 80's were a far greater macro threat to our economy. Back then the US's economy was far more dependent and reliant on petroleum than it is now (it's true). Inflation was off the charts (highest levels in modern history, at least in 100 years in the US), and interest rates were fluctuating wildly. Nothing short of the death of American auto was at hand, and Paul Volker, bless his soul, was doing his best to try and stem the tide. Any economics professor will easily tell you (and will have the graphs to prove it) that the early 80's was easily the most volatile time economically since the Depression. An assortment of figures and data points from the era would show up on econ graphs as statistical anomalies inconsistent with trends of before and after.

And you know what? America didn't hit the fan. There was recovery (which had some, but not everything to do with, Reaganomics). It wasn't the Great Depression II. And life moved on. Gas prices now are, in real terms, still not even as high as they were in 1982 (I believe it's getting close). America didn't collapse into a pile of anarchy and chaos.

A more comparable analogy would be the S&L scandal, also in the 1980's. Thanks to President [deleted by Professor] Reagan, the American public ended up losing something like $300 billion (I'm too lazy to look up the real amount, but it's big) in the government's bailout of all the private S&L's that went under. The government was partly to blame, amid scandal and probably corruption and collusion. You want to talk about bank failure though? This was the time to talk about it. The ramifications of the S&L scandal also far surpass anything we have today.

And yet we're still here.

Inflation happens. Stagflation happens. And neither of these things are happening now in amounts that even remotely rival the 1980's.

And as far as the Depression goes... yes the stock market is volatile. Yes it is subject to crashes. However, the Great Depression had many causes, and the stock market crash had little to do with it. It was certainly the cause, but the Fed back then had no idea how to handle things. Deflation was going on. The Fed should have pumped money into the supply. It didn't. If it would have, there would likely have been recovery (if it did that and a few other things) in relatively short order.

Now, there is the whole China-could-pull-the-plug-on-us-and-plunge-our-nation-into-anarchy-and-war-and-chaos-if-they-wanted-to thing, but that's another story. And it's extremely unlikely anyway.

Peak Oil? Hmmm. I'm not sold. The energy companies will get off their keisters and develop alternative energy when it becomes economically feasible. I'm confident of this.

Maybe I'm too optimistic.

Thursday, March 06, 2008

 

A Loophole? Really?

What luck! Talking today about political entrepreneurs and low and behold an article specifically about them.

The article talks about how a recent smoking ban in Minnesota has a loophole that "contains an exception for performers in theatrical productions." So, bars are allowing "theatre performers" to smoke all night. The loophole, which we will speculate in a moment, was found by a political entrepreneur (actually a lawyer, but then who better?).

As we have discussed in class, a law passed by a citizen vote (democracy), like the one we have in the state of Colorado, is different from the law passed by the legislature in Minnesota. We should then look for who wanted the law passed in Minnesota. My guess would be those restaurants that have gone to no smoking were feeling the revenue pinch still found at smoking bars. Rent seeking?

""It's too bad they didn't put as much effort into protecting their employees from smoking," grumbled Jeanne Weigum, executive director of the Association for Nonsmokers." Hmm, are the employees FORCED to work there? Is this the only job they can get? My guess would be that the tips they get from the smokers are far better than those at Waffle House.

"The Health Department this week vowed to begin cracking down on theater nights with fines of as much as $10,000." I suppose that the health department knows that "out of one hundred smokers, fewer than six will get lung cancer. . ."(Why People Hate Economists (and Why We Don't Care))It would seem the health department knows what is best for me better than I do and feels I cannot make my own choices, maybe like the impending environmentalism movement?

Will they ever make a law without loopholes? Due to spontaneous behavior, I seriously doubt it.

 

Palestinian Terrorist

The tragedy today in Israel is deplorable and inhumane. I have neither the knowledge nor the insight to imply any economics to this situation. However, a caller to the Hugh Hewitt show today attempted to condone the terrorists actions with economics.

Specifically, the caller blamed Israel for causing this "man" to walk into a seminary and kill 8 people. And his reasoning? That Israel had enforced a blockade against Palestine and was causing Palestinians to starve and live in below poverty conditions. This is enough reason to cause terrorist actions. No way.

Economics is the study of choice. I say terrorists choose to cause terror for non-economic reasons. There cause is not any better off by killing 8 Israelis or 3000 Americans. I have studied economics now for two years and nowhere have I seen studies that terrorists use deadly force for pure economic reasons.

And what makes me nervous is the recent home fires in Washington. These "green" mansions were torched by environmental terrorists. For what reason? Terrorism is not even human, it is barbaric and cowardly.

I have heard argument after argument for economic reasons why terrorists act. This is CRAP!! The economics I love would deal with the choices these "people" have in a different way, not deadly force.

Tuesday, March 04, 2008

 

Clumsy economics may lead to ideas that are detrimental to liberty

So, I scrambled to come up with an interesting blog for Power and Prosperity; hey, a person who procrastinates and operates behind the 8-ball tends to scramble! So, instead of dealing with power and prosperity, I decided to play with the notion of collective action. One might view collective action as a common good; if that is the case, is there such a thing as common sense to determine the common good?

I googled common sense and to my surprise, I stumbled (stumbling is a normal thing for one who is scrambling) upon a website:

http://commongood.org/society.html

MISSION

Common Good is a non-profit, non-partisan legal reform coalition dedicated to restoring common sense to America. By conducting polls, hosting forums, and engaging with leaders in health care, education, law, business, and public policy from across the country, Common Good is developing practical solutions to restore reliability to our legal system and minimize the impact of legal fear in American life.

Not delving too deeply into the site, I quixotically jumped around from one page to another in the site and found myself thinking, “self, do we like this site or do we not?” To which my only reply was “I don’t know!”

After reading Olson’s book, “The Logic of Collective Action,” I felt like I intuitively understood WHY special interest groups occur and WHY people are drawn to becoming a part of a group; and groups want to be larger groups, etc. I felt like it all made sense and that things are the way they are because that’s the way things are!

I basically felt like my understanding of things was rudimentary at best! This feeling doesn’t feel very good, but it’s at least better than feeling rushed, scrambling and stumbling!

The website is something that certainly makes me wonder if there are ways to use government power to come up with a system that operates well. Reading the site, with an assumed intuitive knowledge of collective goods, I felt like what I was reading was promising and that there was hope!

It’s a good thing that my evolution of understanding economics and the farces of government-necessity is occurring! Because if it wasn’t, I might actually buy into the website and believe that by applying common sense and contributing to the common good, I might actually impact government to act in a way that would beneficial to me.

So, I maintain my skepticism of the government and of collective logic… no matter how flowery the website is. Maybe I can take something from it, without immersing in it. Perhaps I can gain an understanding of different vantage points and thus protect my liberty… hell, even preserve my own prosperity and develop my own power. Perhaps I need to get better organized so that I don't clumsily stumble and scramble my way into subscribing to ideas that sound good, but actually may harm my liberty!

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