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Friday

13

January 2017

0

COMMENTS

Three Cheers for Process Reform

Written by , Posted in Legislation, Liberty & Limited Government, The Nanny State & A Regulated Society

Outside of election season, few people really pay attention to what happens in Washington DC. Start talking about “process reform” and the average citizen completely tunes out. That’s unfortunate because the how of policymaking is often more important than the who.

Public choice teaches us to look at the incentives and institutional constraints placed on elected (and unelected) officials in order to understand how they are likely to behave. This is of practical import. If we want to compel government to live within its means, for instance, then applying public choice theory we know to direct our efforts toward the creation of a debt break or other spending cap, rather than naively thinking it is sufficient simply to elect politicians claiming they will be more responsible. The reason the latter doesn’t work is because politicians are incentivized to seek reelection, and showering various constituencies with taxpayer dollars remains the best way to go about it (we could drill down deeper, if we desired, into things like the problem of concentrated benefits and dispersed costs to further understand why electoral mechanisms are unlikely to enforce spending restraint).

There are a great many reforms that are needed if the nation’s many policy-related problems are ever to be solved. Thankfully, there seems to be enough awareness of this fact that some key process reforms are moving forward. One of them is the REINS Act, which was passed by the House last week, and attempts to solve the issue of excessively expensive and numerous regulations. Recognizing the fact that career bureaucrats have an incentive to grow their power and to ignore the costs imposed on society by doing so, the REINS Act requires Congress and the president to approve regulations with significant economic impact before they are finalized.

It understandably has the left freaking out, as the REINS Act would return to Congress a bit of the lawmaking power that has long been delegated to unaccountable regulators–power which the left has exploited to insert government into every aspect of our lives. And while Congress carries its own set of perverse incentives, looping legislators into the rule-making process adds an obstacle to the promulgation of new regulations that should hopefully prevent some of the more onerous and destructive rules from ever coming to fruition.

The REINS Act reforms Congress as much as it does regulatory agencies. Under the current system, legislators can hide from electoral accountability by delegating more and more of their responsibilities to unelected bureaucrats, who they then campaign against. By restoring the role of Congress in filling in the details for new laws, legislators cannot as easily duck electoral responsibility for agency actions.

Other regulatory reform efforts are also proceeding concurrently. But there are other areas that can improve from process reforms as well.

One of those is the electoral system. There’s been renewed interest in the topic post-election, though most of it is motivated by the particular partisan circumstance of recent elections and directed in unhelpful ways.

Hillary supporters are focused on the fact that she won the popular vote but lost in the electoral college. Ignoring that we don’t actually know how the campaign would have unfolded were the goal different from the beginning, they are focused on the wrong reform. The real tragedy of 2016 is that despite two major party candidates with historic unfavorables, and an electorate in which a plurality of 43% choose not to belong to either major party, the major party nominees still secured 94.3% of the vote.

Why did this happen? Because the voting system we have chosen compels it to. See Duverger’s law for the full explanation, but the short of it is that our first-past-the-post voting system (pick one, winner take all) incentives voters to vote against their most hated candidate instead of for their most liked one.

Interestingly, this same election also produced a tiny step toward a new (and I’d argue better) system. Maine passed a ballot initiative to implement ranked-choice voting for all statewide elections (though not federal House, Senate, or presidential campaigns). It works by having voters rank their top choices in order. If no candidate breaks 50 percent, the candidate with the least first choice votes is dropped and the ballots recounted. This continues to happen until a candidate reaches a majority. If such an approach had been used in the presidential election, as an example, voters could have supported a candidate outside the Republican-Democrat duopoly without fear that they were inadvertently supporting Hillary or Trump depending on which they loathed more.

But that’s not our voting system, and so we are left with the most unpopular president ever elected. Process is destiny.

 

Friday

16

September 2016

0

COMMENTS

Washington Can’t Permit EU-Led Open Season On U.S. Companies

Written by , Posted in Taxes

To justify its recent $14.5 billion ruling against Apple, the EU claimed that Apple benefited from “a significant advantage over other businesses that are subject to the same national taxation rules.” If they had provided any evidence of a special carve-out for Apple, this might be easier to believe. Instead, the likely explanation is that the EU is stepping up its war on tax competition as part of its long-standing pursuit of harmonization of tax rates across the continent and ultimately the globe.

The European Commission says Apple owes $14.5 billion plus interest in back taxes to Ireland. What makes the ruling particularly unusual is the fact that Ireland itself disagrees. They don’t want to collect the money. They would rather continue to be a nation with an attractive corporate tax code so that they can benefit from tax competition, rather than short-shortsightedly treating companies as ATM machines.

At issue is whether Ireland granted illegal “state aid” to Apple, which is prohibited under the EU treaty. Such aid is admittedly the wrong way to do tax competition. Jurisdictions should compete through the overall tax and regulatory code, not through special carve-outs. But even where they get it wrong, sovereign nations must be free to administer their own tax codes for tax competition to exist.

The EU surely knows this, which is why their ongoing efforts to move control of tax policy away from individual jurisdictions and towards Brussels is deeply disturbing. The Apple ruling fits a pattern of seeking to eliminate tax competition on the continent, where nations like France and Germany have in the past pressured Ireland to raise its 12.5% corporate tax rate. They wrongly fear a “race to the bottom” that would leave national treasuries empty, instead of recognizing that taxpayers and politicians alike benefit from the higher economic growth induced when destructive taxes are kept low.

It is not at all clear that Apple did in fact receive special dispensation. Those facts will continue to be litigated, as both Apple and Ireland plan to appeal the ruling. They insist that the company was merely given rulings that offered clarification as to how the tax law would be applied in their case, which is both a common and desirable practice because it provides certainty. Adding uncertainty through broad retroactive tax rulings won’t just impact the U.S. companies that Europe wrongly thinks can provide their financial salvation, but it will make the continent less attractive to businesses going forward.

Ultimately, it is up the the United States to defend its businesses against these opportunistic tax grabs. The bipartisan criticism of the EU ruling is a good first start. But politicians must stop demonizing businesses to distract from their own failures to spend responsibly. The U.S. should also lead by example and end its own greedy worldwide tax system.

We’ve seen through the OECD BEPS project what happens when Washington, and in particular Congress, allows European bureaucrats to dream up global tax rules unmolested. It inevitably leads to a byzantine system of arcana designed to keep the government bureaucrats and  accountants employed while squeezing the maximum amount of tax revenue possible out of the global economy. If U.S. politicians continue to sit on the sidelines, these threats will only multiply.

Unfortunately, years of politically motivated attacks on corporations have made large multinationals like Apple seem like low-risk targets. Voters are not going to take to the streets on behalf of the likes of Apple, Google, or Amazon. After pounding on and on about big business not paying its “fair share,” Washington is in an awkward place now that the EU has said “we agree” while helping themselves to the coffers of an American company. Yet if Washington doesn’t act, Apple will just be the first of many.

Thursday

23

June 2016

0

COMMENTS

Sotomayor Was Right on Utah v. Strieff Because She Articulated a Constitutional Principle, Not Because of Her Race

Written by , Posted in General/Misc.

I wasn’t a fan of Sotomayor’s appointment to the Supreme Court, and what I found particularly disappointing about her nomination, aside from her judicial philosophy, was the furor of identity politics which surrounded it. Nothing has really caused me to reassess that stance, though I have no problem giving credit where it is due. Sotomayor was right to dissent in Utah v. Strieff, and the mostly conservative majority was wrong. Unfortunately, the hyperventilating coverage of her dissent from the political left is again myopically focused on identity politics.

The facts of the case were not in dispute. The stop of Strieff was acknowledged by all to be illegal. The question was whether, upon happening to find an outstanding warrant, any evidence uncovered during the stop would then be admissible. The majority said it would. I find this troubling, and think it severely undermines Fourth Amendment protections by not punishing officers for undertaking illegal searches.

Sotomayor, along with Ginsburg and Kagan, were in the minority. One passage of Sotomayor’s dissent, not joined by the others, has gotten particular attention. It reads:

[T]his case tells everyone, white and black, guilty and innocent, that an officer can verify your legal status at any time. It says that your body is subject to invasion while courts excuse the violation of your rights. It implies that you are not a citizen of a democracy but the subject of a carceral state, just waiting to be cataloged. We must not pretend that the countless people who are routinely targeted by police are “isolated.” They are the canaries in the coal mine whose deaths, civil and literal, warn us that no one can breathe in this atmosphere. See L. Guinier & G. Torres, The Miner’s Canary 274–283 (2002). They are the ones who recognize that unlawful police stops corrode all our civil liberties and threaten all our lives. Until their voices matter too, our justice system will continue to be anything but.

Aside from the vague social justice-y “until their voices matter” bit, which has no legal or policy meaning that I can deduce, I think she’s generally on the money.  The leftwing coverage of the matter, however, has been atrocious.

Ethan Epstein at the Weekly Standard (I don’t know what his/the magazine’s opinion of the decision is, though I suspect it’s not the same as my own) accurately captures the vacuousness of much of the leftist coverage in his mocking headline, “You Won’t Believe What Happened When Justice Sotomayor Dissented.”

It’s not just the clickbait-style breathlessness of their coverage which is so exasperating, but also the weird fixation on Sotomayor’s personal characteristics instead of the quality of her opinion. The Nation, before changing its headline (hopefully due to realizing how stupid it was), declared “Sonia Sotomayor’s Epic Dissent Shows Why We Need People of Color on the Supreme Court.” (For those keeping track, “People of Color” is the current approved nomenclature, though it will no doubt be rotated out soon enough). The New Republic assessed, “Sonia Sotomayor just showed the value of having a ‘wise Latina’ on the court.” This apparent obsession is worth noting because it can lead to false conclusions on how to reach better judicial decisions.

Insofar as Sotomayor’s got it right, it was due not to her race but her defense of the clear intent of a key Constitutional protection. She is not, after all, the only minority on the court, and her fellow “POC” voted with the other side. In my original critique of the boosters of Sotomayor’s appointment, I noted how the reverence to identity is inconsistent, employed by the left when it serves ideological interests and tossed aside when it does not. They certainly have never respected the “lived experience” of Clarence Thomas.

To the point, if we want a SCOTUS more consistent in its defense of individual rights, it will not come from appointments based on whatever personal characteristics happen to be the most important according to the identity politics of the day. It will come through recognizing the proper role of the Court as a patrolman on the border of governmental power, a last safeguard against the persistent encroachment of state authority on individual rights through enforcement of clear Constitutional limits.

Saturday

28

May 2016

0

COMMENTS

NYC Police Commissioner’s Circular Drug War Reasoning

Written by , Posted in General/Misc.

New York Police Commissioner William Bratton is confused by the fact that more and more states and their voters are embracing liberty minded drug policies.

In a radio interview yesterday, New York Police Commissioner William Bratton said violence associated with marijuana trafficking in his city should give pause to advocates of legalization. “In New York City,” Bratton told AM 970 host John Catsimatidis, “most of the violence we see around drug trafficking is involving marijuana, and I have to scratch my head as we are seeing many states wanting to legalize marijuana.”

I suppose his confusion is understandable given his apparent ignorance of the consequences of prohibition. What these other states know and Commissioner Bratton does not is that prohibition does not eliminate the market for a good, but rather drives it underground in the black market where crime is more likely to occur.

The negative effects of prohibition are not a secret. It is well understood, for instance, that the production and sale of alcohol is not an inherently violent trade, despite its close relationship with organized crime during Prohibition. This occurred for a multitude of reasons. Prohibition significantly increases the costs of a good, which creates a strong profit motive. But because entering the market requires breaking the law, only those comfortable with doing so move to capture those profits. And if they don’t mind breaking the law to make and sell a product, they’re less likely to care about breaking it to fight, often with violence, their competitors.

Prohibition also increases health risks for users. Product quality declines on the black market, where information on who produces what and how are necessarily hidden from consumers, and torts are not available to hold producers liable for subpar product. The Iron Law of Prohibition also states that, for reasons of economic efficiency, product potency increases in concert with the level of enforcement. Put another way, “the harder the enforcement, the harder the drugs.”

All of this is to say that what Commissioner Bratton sees are the products of prohibition itself, not justifications for it. Sadly, he is also providing a demonstration of how bad government tends to beget more bad government.

Wednesday

13

April 2016

0

COMMENTS

Most Common Media Myths About the Panama Papers

Written by , Posted in Liberty & Limited Government, Media Bias, Taxes

The media has breathlessly reported on the massive data breach of Panamanian law firm Mossack Fonseca. Much of that coverage has involved the politicians and other figures whose activities revealed corruption, ethical lapses, or dishonesty and wrongdoing. That includes Icelandic Prime Minister Sigmundur David Gunnlaugsson, who has “stepped aside” for an unspecified period of time after his ownership of a holding company established by Mossack in the British Virgin Islands was discovered. There’s been no indication so far that there was anything legally wrong with the company or its activities, or that he pursued favoritism on behalf of his financial interests while in office. However, he failed to disclose his assets in Iceland’s parliamentary register of MPs’ financial interests and was not forthcoming with his constituency.

In other words, like most of the stories from the Panama Papers that are dominating the news, Gunnlaugsson’s is one of only tangential relation to the actual business of Mossack Fonseca. Had he been a private citizen with the exact same legal and business arrangements, no one would care. Where he erred was on his responsibility to disclose his holdings and maintain the trust of his citizens.

Nevertheless, his and other similar stories have been framed as proof that something must be done about “shady” offshore dealings. In fact, the entire media coverage from start to finish has been littered, either directly or through implication, with myths.

Here are a few areas where the media, and the public discussion surrounding the Panama Papers, has more often than not gotten it wrong:

Myth 1: Tax Avoidance and Tax Evasion Are Both Wrong

On the tax front (the instances of corruption representing a different matter entirely), most all of the media and political hand-wringing surrounding the Panama Papers has been due to a willful blurring of the lines between tax evasion and avoidance. Yet in reality there are significant legal and ethical differences between the two.

Tax evasion is a crime, and involves the deliberate disregard of tax obligations. Evasion can be committed by lying about assets or engaging in fraud. Banking in jurisdictions that respect privacy rights can be used by unscrupulous individuals as part of a strategy to commit tax evasion. But so can using cash. Both also have legitimate functions, making it unfair to treat everyone who uses privacy respecting services (or cash) as suspect and unwise to create rules on that assumption.

Tax avoidance is not a crime. It is, in fact, simply obedience to the law as it is written. Lawmakers bemoan those who seek to minimize their tax burdens when doing so shines a negative light on the quality of the laws they have written. But in other instances they encourage it. When politicians provide tax credits, for instance, it is with the understanding that those who use them are doing so to avoid paying more tax than they have to. And when they seek to discourage other activities through excise taxes, they are counting on people changing their behavior to avoid the tax. Politicians understand and even expect tax avoidance when it suits them, and decry it when it does not.

Most of what the media directly claims or indirectly implies to be tax evasion is merely legal avoidance. It is individuals choosing to do business in jurisdictions with less onerous tax codes. Not only is this legal, but it has concomitant positive benefits. Tax competition between jurisdictions serves as a check on political greed, and pressures governments to adopt tax policies designed to grow economies instead of just treasuries.

Myth 2: Offshore Financial Services Are Only Used for Wrongdoing

Opportunists who have long despised the ability of individuals to legally flee from confiscatory tax rates want to make the Panama Papers story about financial privacy. It’s not. That makes no more sense than if the story of Congressman William Jefferson, found with a stash of ill-gotten money in his freezer, had been spun as one primarily about cash or kitchen appliances.

Yes, bad people also use legal and financial services. Sometimes they even do so to help them conduct their illicit activity. They also sometimes use airplanes to meet with co-conspirators, or cash to conduct black market sales. That’s not an argument for depriving law abiding citizens of then use of either of those. The fact that corrupt politicians made use of the legal services of Mossack Fonseca does not mean that something must be done about Mossack Fonseca and similar firms. It suggests, if anything, that something must be done about political corruption.

The idea that anyone benefiting from the legal services of Mossack Fonseca, and others who specialize in meeting the needs of international clientele in establishing new businesses and trusts, simply does not match reality. They file incorporation papers. What is then done with those companies is on the people who actually manage them.

Myth 3: Indiscriminate Leaking of Private Financial and Legal Information, Especially of the Rich, Serves a Public Good 

While exposing potential corruption of politicians who might be looting their national treasuries or hiding potential conflicts of interest likely serves a public good, massive data leaks that include innocents are still a massive violation of privacy. The Panama Papers leak consists of confidential and legally protected communications, including those of the vast majority of innocent Mossack Fonseca clients caught up in the data for no other reason than that they used ordinary legal and tax planning services that a small number of elites may have been simultaneously misusing.

Whether or not the individuals who did nothing wrong but were exposed anyway are wealthy or not shouldn’t matter. They have the same expectation of privacy as the rest of us. Moreover, the implication that they are “hiding” their wealth even when all tax laws have been followed presumes a public right to individual financial information that does not exist. No one accuses an individual with an ordinary savings account who chooses not to broadcast their account balance as “hiding” their money. That information is simply their business and their business alone.

Sunday

20

March 2016

0

COMMENTS

Garland SCOTUS Pick Good Politics, Bad Substance

Written by , Posted in Liberty & Limited Government, The Courts, Criminal Justice & Tort

President Obama made the relatively obvious strategic choice by nominating a “moderate” judge to fill the late Judge Antonin Scalia’s seat. Although it disappointed the hard left, in particular the race and gender obsessed identity politics crowd, Merrick Garland’s nomination will challenge Republicans’ resolve to deny Obama opportunity to fill the seat before he leaves office.

Had Obama simply appointed another die-hard leftist, Republicans would have risked nothing by waiting him out and seeing what happened during the election. If Hillary won they’d be no worse off, but if a Republican (not named Trump) won they’d get someone more to their liking. And the idea put forth by Democrats that stalling would spark an electoral backlash against the GOP is wishful thinking at best.

But now it’s trickier. Hillary will almost certainly appoint someone to the left of Garland, who Orrin Hatch in 2010 pushed Obama to nominate to the seat eventually filled by Elena Kagan. He and some other Senate Republicans have suggested they might take up Garland’s nomination during the lame duck session after the election. However, if a Democrat wins Obama will likely withdraw the nomination (which Sanders has already publicly asked him to do in the unlikely scenario that he is elected) and allow his predecessor to put forth a Progressive ideologue. That puts pressure on them to

A wildcard is Trump’s populist insurgency. If he is the nominee, Republicans can go ahead and assume Hillary will win – baring the increasingly unlikely scenario that she is indicted – and act accordingly.

Long story short, Obama has forced Republicans to weigh the risks and rewards of accepting his nominee instead of the no-risk position they’d have faced against a more hardline pick.

But while his nomination is good politics, what might the “moderate” Garland mean for liberty if confirmed? Sure, he has some level of bipartisan appeal, but they are mostly on issues in which the parties are both wrong.

As Ilya Shapiro explains, he is simply too deferential to government.

Garland has shown an alarming amount of deference to the government in his years on the important D.C. Circuit, which handles appeals from administrative agencies. I also fear that he won’t represent the check on ever-expanding federal power and executive actions to the same extent as Scalia. And if you’re a civil libertarian, his solicitude for law enforcement makes him much less appealing than other judges who had been under consideration.

Reason’s Damon Root made a similar case:

While Garland is undoubtedly a legal liberal, his record reflects a version of legal liberalism that tends to line up in favor of broad judicial deference to law enforcement and wartime executive power.

In the area of criminal law, for example, Garland’s votes have frequently come down on the side of prosecutors and police. In 2010, when Garland was reported to be under consideration to replace retiring Justice John Paul Stevens, SCOTUSblog founder Tom Goldstein observed that “Judge Garland rarely votes in favor of criminal defendants’ appeals of their convictions.”

Likewise, Garland voted in support of the George W. Bush administration’s controversial war on terrorism policies in the Guantanamo detainee case Al Odah v. United States, in which Garland joined the majority opinion holding that enemy combatants held as detainees at the U.S. military facility at Guantanamo Bay were not entitled to habeus corpus protections. The U.S. Supreme Court ultimately overruled that decision, holding in the landmark caseBoumediene v. Bush that Guantanamo detainees do enjoy habeus corpus rights.

Nevertheless, there is at least one issue likely to prove a major obstacle to Garland’s finding broad Republican support, and that is gun control.

Overall, however, deference to government is a common trap for Republicans, who fear “judicial activism” to the point that they would rather Congress and the Executive operate without significant judicial constraints. As such, they might see Garland as a real move in their direction from Obama, when in fact he’s more likely to be another ally of big government and a disappointment for civil liberties.

Thursday

7

January 2016

0

COMMENTS

Why Just Stop With Tariffs on China?

Written by , Posted in Economics & the Economy, Free Markets

Noted scholar and respected intellectual Donald Trump has unveiled another part of his plan to “make America great again:”

Donald J. Trump said he would favor a 45 percent tariff on Chinese exports to the United States, proposing the idea during a wide-ranging meeting with members of the editorial board of The New York Times.

…“I would tax China on products coming in,” Mr. Trump said. “I would do a tariff, yes — and they do it to us.”

Mr. Trump added that he’s “a free trader,” but that “it’s got to be reasonably fair.”

“I would do a tax. and the tax, let me tell you what the tax should be … the tax should be 45 percent,” Mr. Trump said.

Now, I know I’m just a simpleton, but something strikes me as off about this plan. Perhaps The Donald can help a poor confused sap make sense of all this.

Presuming he believes this tariff on goods coming in from China will benefit Americans, why does he not propose similar measures on goods from other countries?

But why stop there. If a tariff on goods coming into the U.S. is good for those within the U.S., then so too must a tariff on goods coming into a state be good for those within that state. Should Florida, then, tax goods made in Texas at 45%, or better yet, do so for goods made in any state other than Florida?

It seems to me that Donald Trump believes taxing goods when they cross borders makes us better off, so I’m having a hard time understanding why he isn’t compassionate enough to want to improve our lot even more by implementing that policy across the board. I mean, it’s all well and good to “make America great again,” but why not make it SUPER DUPER great? Hmm?

Wednesday

11

November 2015

0

COMMENTS

Market Power

Written by , Posted in Economics & the Economy, Free Markets

The Week has a great story (hat-tip: Alex Tabarrok) about how Feeding America, which runs the largest network of food banks and is the third largest non-profit in the U.S., drastically improved its operations by adopting a market approach to solve its food distribution problem.

Supermarkets usually donate food directly to their local food bank. But large food manufacturers often donate to Feeding America headquarters, which then allocates this food across its nationwide network of food banks…

Before 2005, Feeding America allocated food centrally, and according to its rather subjective perception of what food banks needed. Headquarters would call up the food banks in a priority order and offer them a truckload of food. Bizarrely, all food was treated more or less equally, irrespective of its nutritional content. A pound of chicken was the same as a pound of french fries. If the food bank accepted the load, it paid the transportation costs and had the truck sent to them. If the food bank refused, Feeding America would judge this food bank as having lower need and push it down the priority list. Unsurprisingly, food banks went out of their way to avoid refusing food loads — even if they were already stocked with that particular food.

It shouldn’t be difficult to see the warped incentive structure and information shortfalls that would plague such a system. Indeed, the author notes:

This Soviet-style system was hugely inefficient. Some urban food banks had great access to local food donations and often ended up with a surplus of food. A lot of food rotted in places where it was not needed, while many shelves in other food banks stood empty. Feeding America simply knew too little about what their food banks needed on a given day.

After seeking the advice of four University of Chicago economists, Feeding America adopted an internal price and auction system to take advantage of the vastly superior ability of price signals to transmit information.

Here’s how the new system works:

Every day, each food bank is allocated a pot of fiat currency called “shares.” Food banks in areas with bigger populations and more poverty receive larger numbers of shares. Twice a day, they can use their shares to bid online on any of the 30 to 40 truckloads of food that were donated directly to Feeding America. The winners of the auction pay for the truckloads with their shares.

Then, all the shares spent on a particular day are reallocated back to food banks at midnight. That means that food banks that did not spend their shares on a particular day would end up with more shares and thus a greater ability to bid the next day. In this way, the system has built-in fairness: If a large food bank could afford to spend a fortune on a truck of frozen chicken, its shares would show up on the balance of smaller food banks the next day. Moreover, neighboring food banks can now team up to bid jointly to reduce their transport costs.

Note everyone was thrilled with the idea, however:

Initially, there was plenty of resistance. As one food bank director told Canice Prendergast, an economist advising Feeding America, “I am a socialist. That’s why I run a food bank. I don’t believe in markets. I’m not saying I won’t listen, but I am against this.”

But the Chicago economists managed to design a market that worked even for participants who did not believe in it. Within half a year of the auction system being introduced, 97 percent of food banks won at least one load, and the amount of food allocated from Feeding America’s headquarters rose by over 35 percent, to the delight of volunteers and donors.

I can’t help but wish for some follow-up with Ms. Prendergast to see if her experience with the market system, and its superiority over the prior approach, has caused her to rethink her preference for central planning over markets. I argue in my column at EveryJoe this week that greater exposure to functioning markets, such as those popular in the emerging sharing economy, poses a threat to the political left. So her answer could help determine if I’m right.

Thursday

8

October 2015

0

COMMENTS

Getting Better All The Time

Written by , Posted in Economics & the Economy, Free Markets

You wouldn’t know it from the popularity of Thomas Piketty’s anti-capitalism treatise, or the Pope’s routine railing against free markets, but the world is getting ever more prosperous. The dramatic decline in global poverty in the last few decades is nothing short of remarkable.

According to a recent World Bank report, extreme poverty is expected to fall below 10% by the end of 2015, which will be a first in human history. I mentioned a few other improvements in a recent EveryJoe column chastising the Pope for spreading economic ignorance:

Across a variety of metrics, life continues to get better and better. Extreme poverty – measuring those living on $2 per day or less – has been cut in half since 1981 and will be all but eliminated by 2030. Global GDP per person has never been higher. Pick a measure of human wellbeing and it’s virtually the same story over and over again: life expectancy is up, infant mortality rates have plummeted, women are better represented in governments than ever before, etc. etc.

The world is simply not the horrible place the pope describes. It is better than it ever has been and we have precisely those institutions that he savages to thank for it.

Over at Cato, Ian Vásquez ties the decline in global poverty to the spread of economic freedom:

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Using updated methodology, the World Bank recalculated poverty figures back to 1990. The new data track closely with previous Bank figures, which I use in the graph to show the fall in poverty since the early 1980s when 43 percent of the world’s population was extremely poor…The drop in poverty also coincides with a significant increase in global economic freedom, beginning with China’s reforms some 35 years ago and the globalization that followed the collapse of central planning in the late 1980s and early 1990s.

Much more could be said on that point, but there are any number of examples demonstrated the superiority of market freedom when it comes to producing wealth (Argentina versus Chile, Venezuela versus Singapore, etc.). Yet the more things get better, the more we seem to worry that they’re not. As the totality of social problems decreases, we devote more energy to those that remain. Which in many ways is healthy. A benefit of being better off overall is that we need not tolerate things which we had no choice but to accept in the past.

But we must be careful not to lose perspective. Exaggerating current problems can lead to poor policy choices if it causes us to disregard the means by which we achieved our current prosperity in the first place.

Saturday

15

August 2015

0

COMMENTS

Third Time Won’t Be the Charm in Greece

Written by , Posted in Big Government, Economics & the Economy, Foreign Affairs & Policy, Free Markets, Taxes

Greece is getting bailed out for the third time in just five years, proving yet again that lessons from political mistakes are rarely heeded. As I wrote last month in a column for EveryJoe:

The simple explanation is that Greece tried socialism and it predictably failed, as socialism is wont to do… More specifically, Greece has saddled its economy and its people with heavy taxes to fund a corrupt government weighed down by excessive pensions for their bloated workforce. A byzantine and oppressive regulatory system further stifles growth and prevents the economy from keeping up.

To put some numbers on the problem, Greek debt exceeds 177 percent of its GDP. That means Greeks would have to work almost two years to produce an equivalent amount of goods and services. It’s unfunded future liabilities, which includes generous pensions, tops 875 percent of GDP! Its yearly spending on pensions alone accounts for a whopping 16 percent of Greece’s GDP, and overall the government spends upwards of 50 percent.

If all this proves that Greece is suicidal, it was its entrance into the European Union that gave it the rope needed to hang itself. When it joined the EU, Greece suddenly had access to levels of credit it never had before thanks to the implicit backing of stronger EU economies like Germany. Creditors determined – correctly, apparently – that if Greece couldn’t pay its debt then they would be bailed out by the larger economies. And like a kid that got his hands on his parent’s credit card for the first time, Greece went nuts. In economic terms that’s called a moral hazard, and the latest bailout has only reinforced it.

This week’s announcement of yet another bailout will only exacerbate the moral hazard, and demonstrates the continued folly of the EU’s grand experiment with a common currency without a common fiscal policy.

Continuing to prop up Greece’s bloated government will not solve the problem. There are no good solutions, but the least bad option is for them to go bankrupt and solve the root of their problem, which is excessive government spending.

Instead, Germany and the rich EU nations are offering yet another loan to the demonstrably irresponsible, on condition that they raise taxes and cut spending. Unfortunately, only one of those conditions will help while the other will prove counterproductive. Leftist bleating about ‘austerity’ conflates tax hikes with spending cuts, but the former is bad for growth and saps the political will for belt tightening, while the latter is a proven path toward fiscal solvency.

What Greece needs is to tear down its bloated bureaucracy and insane regulatory regime, but that won’t happen so long as the EU continues acting as enabler.