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(Don Boudreaux)

… is from pages 193-194 of the 1993 re-issue of Rose Wilder Lane’s beautiful 1943 volume, The Discovery of Freedom (original emphasis):

The American who leaves Government to the politicians, permitting or urging the men of his party, when they are in office, to increase their power and use it upon other Americans for his benefit, and howling when men of the other party are in office increasing their power and squeezing him for the benefit of other Americans, is trying to evade his responsibility.

He will not evade it; he can not.  His natural liberty is responsibility.  He is born free; he controls his life and his affairs; he is responsible for them.  In trying to make any other person responsible for his welfare, he must try to transfer his control of himself to that other man, for control and responsibility can not be separated.

In demanding that men in Government be responsible for his welfare, a citizen is demanding control of his affairs by men whose only power is the use of force.

It’s a question that cuts to the heart of political matters: Why in the world does anyone suppose that people who specialize in and excel at winning political elections are also uniquely skilled to excel at running other people’s lives?  Or why in the world does anyone suppose that people who vote – people who specialize in their daily lives in jobs as diverse yet as narrow as baking, butchering, neurosurgering, massage therapying, teaching economics, writing newspaper columns, driving taxicabs, movie acting, managing department stores, and on and on and on – are, when in the voting booth, endowed with sufficient wisdom and detailed knowledge to have a productive say in how millions of strangers will live their lives?  Such suppositions are senseless.

Cash-strapped police department to Taser chief in fundraiser for new squad car...


(Third column, 14th story, link)

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The city of Miami has no "stop and frisk" program, but you'd be forgiven for assuming it does after hearing this amazing (in all the wrong ways) story.

Earl Sampson has been stopped and questioned by Miami Gardens police 258 times in four years.

He’s been searched more than 100 times. And arrested and jailed 56 times.

Despite his long rap sheet, Sampson, 28, has never been convicted of anything more serious than possession of marijuana.

Miami Gardens police have arrested Sampson 62 times for one offense: trespassing.

Almost every citation was issued at the same place: the 207 Quickstop, a convenience store on 207th Street in Miami Gardens.

FDLE records show that Sampson was stopped at least once a week for the past four years, and sometimes several times a week and even as many as three times in one day. The stops are often conducted by the same police officers, who have arrested him time and time again.

The problem here isn't just the endless harassment of one resident who doesn't seem to be a threat to anyone. The problem here is the fact that Sampson works for the 207 Quickstop. It's pretty hard to "trespass" on property when you have the explicit permission to be there. It would be shady enough if the cops were just picking up Sampson every time he visited the store, but they've been patting him down, questioning him and sometimes arresting him for trespassing during his shifts.

One video, recorded on June 26, 2012, shows Sampson, clearly stocking coolers, being interrupted by MGPD Sgt. William Dunaske, who orders him to put his hands behind his back, and then handcuffs him, leads him out of the store and takes him to jail for trespassing.

Another video posted at the Miami Herald website shows Sampson being arrested for trespassing when he returns to the store after taking out the trash. (That arrest report says Sampson was "loitering" outside the store, but the video clearly shows he left, threw trash in the container, and went back in followed by the police officer who arrested him.)

Sampson's not the only one being harassed by the MGPD, although he is the main concern of the owner of the 207 Quickstop, Alex Saleh. Saleh fought back, though, installing 15 cameras to catch the endless harassment of Sampson and customers of his store.

The videos show, among other things, cops stopping citizens, questioning them, aggressively searching them and arresting them for trespassing when they have permission to be on the premises; officers conducting searches of Saleh’s business without search warrants or permission; using what appears to be excessive force on subjects who are clearly not resisting arrest and filing inaccurate police reports in connection with the arrests.

Saleh pins this invasion by Miami Gardens PD on his unfortunate decision to mark his store as part of the PD's "zero tolerance zone."

Almost immediately after Saleh put the “zero-tolerance” sign in his window, he regretted it.

Miami Gardens police officers, he said, began stopping his patrons regularly, citing them for minor infractions such as trespassing, or having an open container of alcohol. The officers, he said, would then pat them down or stick their hands in citizens’ pockets. But what bothered Saleh the most was the emboldened behavior of the officers who came into his store unannounced, searched his store without his permission and then hauled his employees away in the middle of their shifts.

The "zero tolerance zone" turns over a whole lot of power to the Miami Gardens PD. Here's part of the description from the MGPD's website (which hasn't been updated in more than 5 years...).

This simple program asks local business owners to complete a simple affidavit, and post a sign on their properties, which allows MGPD officers to act on behalf of the business owners in their absence. The program also gives MGPD officers the authority to direct unauthorized personnel to leave private property or risk enforcement action from the officers…

This program is designed to reduce the number of individuals who are sometimes seen trespassing and loitering on private property without legitimate business.

This would explain all the "trespassing" charges. The affidavit gives the MGPD permission to patrol the store and surrounding area and make arrests/question citizens as officers see fit. This lowers the bar for police officers, removing anything resembling probable cause or reasonable suspicion.

But even as limitless as this is, the MGPD went even further when "patrolling" the 207 Quickstop. You'll note that the agreement gives the PD permission to act on behalf of business owners "in their absence." Saleh was present for a great many of these "interactions." Not only that, but the officers' idea of acting on Saleh's "behalf" was to harass and arrest many of his customers, which is a strange way of construing this relationship. Stores need customers to purchase their goods, something that occurs less frequently when the patrons are being detained, questioned or arrested.

Saleh regretted this decision after seeing what "zero tolerance" (as applied by the MGPD) actually entailed. But Miami Gardens PD doesn't take "no" for answer.

He finally told them he no longer wanted to participate in the program and removed the sign.

The officers, however, continued their surveillance of his store over his objections. The officers even put the sign back on his store against his wishes, he said.

Things got worse when Saleh took copies of his video to MGPD Internal Affairs.

One evening, shortly after he had complained a second time, a squadron of six uniformed Miami Gardens police officers marched into the store, he says. They lined up, shoulder to shoulder, their arms crossed in front of them, blocking two grocery aisles.

“Can I help you?” Saleh recalls asking. It was an entire police detail, known as the department’s Rapid Action Deployment (RAD) squad, whom he had come to know from their frequent arrest sweeps. One went to use the restroom, and five of them stood silently for a full 10 minutes. Then they all marched out.

Saleh also details a recent incident where an MGPD officer pulled him over for having a tag light out. By the time it was all done, six officers had arrived on the scene and one searched Saleh's vehicle without his permission. Saleh's recordings show him leaving the store that night in his vehicle. His tag lights were working.

As is usually the case in incidents like these, the police department has not offered a comment on this story. Police Chief Matthew Boyd did apparently issue a boilerplate statement about the PD's "commitment" to "serving and protecting citizens and businesses," but didn't address any specific complaints.

Violent crime, particularly murder, has spiked in Miami Gardens in recent months, but this application of "zero tolerance" policies will do very little to bring those numbers down. What it will do, however, is fill activity logs and ledgers that will show the PD is very busy keeping Miami Gardens free of "trespassers" and handing out open container citations. Even if this story hadn't broken, a few years of skyrocketing arrests and tickets without a corresponding drop in violent crime would have exposed the MGPD's superficial, shoddy and ultimately unconstitutional efforts.

Saleh's filing a lawsuit against the city for this non-stop harassment, including warrantless searches of his premises. Not unsurprisingly, the announcement of his litigation has led to a sharp drop in police presence at the 207 Quickstop. Sampson himself hasn't been arrested since this announcement, either. If the MGPD sincerely believed they were helping curb violent crime by questioning/arresting Sampson and other Quickstop employees and customers, discussion of a lawsuit wouldn't have deterred those efforts. This withdrawal indicates the cops patrolling Saleh's store were, to put it most generously, padding arrest numbers. The reality is that they've been called out for their harassment of Miami Gardens' residents and are now making themselves scarce in order to prevent adding to the evidence against them.



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Originally posted at Monty Pelerin's World,

“Capitalism is not things; it is a mentality.”

So stated Ludwig von Mises in a talk in mid 1952 in a series of lectures entitled Marxism Unmasked which he gave at the San Francisco library.

Mises provided examples that illustrated this mentality or its lack. One pertained to India (my emboldening):

Nehru [Jawajarlal Nehru, 1889 - 1964] has been quoted as saying ”We want to give every encouragement to private industry.We won’t expropriate private businesses for at least ten years — perhaps not even that soon.”

 

You cannot expect people to invest if you tell them that you will expropriate some time in the future. Therefore, conditions are much worse now than when the British were there. Then you could still hope that the British would remain and that they would not expropriate your business.

Nehru had little understanding of capitalism and its requisites. He liked the things it made possible, but not the conditions necessary for their achievement. Barack Obama, at least in this respect, is a modern-day version of Nehru.

The Other “Isms”

Marxism, Socialism, Facism and virtually all other isms except capitalism are anti-economic.

Economics does not have all the answers, nor is economics a precise science. Those who pretend otherwise are generally responsible for the quackery that is passed off as economics. Economics is about human behavior. It is a positive approach to dealing with the human condition.

Isms are normative. They imagine human behavior in some ideal sense, according to some dreamer-in-chief. Behavior modification is always necessary in order to move to this “perfect” condition. The premise that it would be a better world if only people behaved differently underlies every one of the isms.

Economics, to the extent that it is science,  is “wertfrei.” Its purpose is to understand and explain human behavior. A narrower purpose, one that has captured the profession, is how human behavior impacts markets and market transactions. Economics should not not try to effect human behavior, but to explain it. It does, however understand how incentives and disincentives affect behavior.

All political visions involve the improvement of man and/or society by changing the nature of man. Social planners want to “improve” and “perfect” matters according to their ideas of what these terms imply. Little commonality exists regarding utopian visions. One commonality between these utopian ideas does exist — the universal failure of all such schemes.

There is no better way to understand the wisdom “the perfect is the enemy of the good” than to study the historical wreckage that has resulted from trying to “perfect” society. 

Every scheme requires the use of force to make people change behavior to something they otherwise would not do. The force, misery and deaths associated with these schemes exceed those from wars. Stalin, Hitler, Mao were leaders in the death count, but there were numerous others whose names are less known. Their methods and devastation were comparable.

Barack Obama and The “Isms”

President Barack Obama is not a capitalist. That is obvious. What “ism” best describes him is not.

Most people probably do not think Barack Obama is a Marxist. Barack Obama does not speak of himself as a Marxist, but he was, based on what little is known of his early life. His parents, grandparents, mentors and friends believed in Marxism. Barack has admitted to choosing his friends on that basis. 

I suspect Obama is a Marxist, but will not use such an unacceptable term to describe himself. In politics appearance is what matters and words are charged. “Liberalism” (a co-opted term) is less damaging than Marxism, but it has become so stigmatized that political marketeers have switched to the less known and as yet not fully discredited term “progressive.” 

To political opponents, a progressive is an extreme leftist or perhaps even a Marxist. But labels are meaningless. Deeds, not marketing tags, are what matter. On that basis, Obama appears to be very close to a Marxist. The argument is moot, however. Does it matter whether Nehru was Marxist or merely a Socialist? To quote one of the next presidential aspirants, “at this point, what difference does it make?”

Obama’s Nehru Moment

Barack Obama’s concept of capitalism is similar to Nehru’s. He doesn’t understand capitalism. He believes it is physical things like machines, tools, factories and wealth. These result from capitalism, but capitalism depends on freedom and individuals pursuing their own interests. If you remove these conditions, the machines, tools, factories and wealth diminish or vanish.

Nehru talked about expropriation. Obama talked about “sharing the wealth” with Joe the Plumber:

And I think when you spread the wealth around, it’s good for everybody.

The difference between expropriation and “sharing the wealth” is measured in degrees. Nehru was willing to confiscate everything, at least with respect to foreign investment, and foolish enough to announce it. Obama unwittingly expressed his intended predation, although did not define it. He clearly communicated his willingness to confiscate more (in the form of taxes) than was currently being confiscated. He didn’t limit the confiscation to foreigners. Nor did he specify the amount.

Confiscation need not be total to destroy an economy.

The Incorrect Assumption

Capitalism, as Mises pointed out, is a state of mind and an environment that allows men to pursue their own self-interest and betterment. This environment is responsible for the growth in per capita income and wealth that characterizes capitalist countries.

Statists (and many non-Statists) suffer from an erroneous assumption that an economy performs two functions — production and distribution. Pedagogically, that is true although the two functions are not independent of one another. Assuming this independence does great damage.

The production of wealth and the distribution of wealth are are interdependent. The idea that you can alter the distribution of wealth and not affect its production is naive and wrong.

Work, by definition, is not something enjoyed. That is why people must be paid in order to engage in it. When the rewards for working are reduced, you get less work and output. Raising taxes in order to “redistribute the wealth” is the same as cutting wages or income for productive activity. It is an expropriation in the same sense (although not total) as Nehru proposed in India. It has the same effects. It reduces effort and output. It causes decisions to not be made. A country is made poorer than it otherwise would be by its mere suggestion.

Government cannot change the distribution of wealth without impacting the production of it. This simple fact is either unknown or ignored by the Obama Administration. Everything done by Obama produces adverse effects on the standard of living in this country. More regulation raises costs and reduces incentives for producers. Forced medical care raises the costs and lowers the wages of workers. Deficit spending necessitates higher future taxes which means lower returns on investments and investments not made.

The consequences should be obvious and play out in our economy:

• There is no economic recovery.
• Businesses, especially small ones, have laid off employees or reduced their positions to part-time in order to avoid the onerous costs of ObamaCare.
• Labor participation rates are disgracefully low.
• Un-doctored unemployment statistics are in double-digits.
• Business expansion is deferred or canceled in light of the uncertainty regarding future regulations and tax rates.
• More people are dependents of the government than ever before.
• Government is bankrupting itself in an effort to hide these effects.

This partial list could be greatly expanded, but there is no need to go on.

The policies of our version of President Nehru have effectively expropriated our future and the future of our children.

I can't think of any justification for the FDA's shutdown of 23andme's genetic testing service except one of pure control.  It is yet another case where you and I are not smart enough or sophisticated enough to be trusted with information about our own bodies.  Because we might use the information in some way with which Maya Shankar might not agree.

Let me be clear, I am not offended by all regulation of genetic tests. Indeed, genetic tests are already regulated. To be precise, the labs that perform genetic tests are regulated by the Clinical Laboratory Improvement Amendments (CLIA) as overseen by the CMS (here is an excellent primer). The CLIA requires all labs, including the labs used by 23andMe, to be inspected for quality control, record keeping and the qualifications of their personnel. The goal is to ensure that the tests are accurate, reliable, timely, confidential and not risky to patients. I am not offended when the goal of regulation is to help consumers buy the product that they have contracted to buy.

What the FDA wants to do is categorically different. The FDA wants to regulate genetic tests as a high-riskmedical device that cannot be sold until and unless the FDA permits it be sold.

Moreover, the FDA wants to judge not the analytic validity of the tests, whether the tests accurately read the genetic code as the firms promise (already regulated under the CLIA) but the clinical validity, whether particular identified alleles are causal for conditions or disease. The latter requirement is the death-knell for the products because of the expense and time it takes to prove specific genes are causal for diseases. Moreover, it means that firms like 23andMe will not be able to tell consumers about their own DNA but instead will only be allowed to offer a peek at the sections of code that the FDA has deemed it ok for consumers to see.

Alternatively, firms may be allowed to sequence a consumer’s genetic code and even report it to them but they will not be allowed to tell consumers what the letters mean. Here is why I think the FDA’s actions are unconstitutional. Reading an individual’s code is safe and effective. Interpreting the code and communicating opinions about it may or may not be safe–just like all communication–but it falls squarely under the First Amendment.

I know that libertarians want to kill the FDA altogether.  That is never going to happen.  But what might be more realistic is to shift their governing law from validating that medical treatments are safe and effective to just safe.

Brad Warbiany has more, including real life examples of how 23andme's service has been useful to his family.

After the Senate Conservative Fund (SCF) endorsed Matt Bevin, the Tea Party challenger to Senate Minority Leader Mitch McConnell (R-KY), McConnell has reportedly gone on a rampage against SCF allies and the conservative candidates it has endorsed. 

Most recently, McConnell reportedly directed his anger at Nebraska conservative Senate candidate Ben Sasse, whom the SCF has endorsed in the open primary.

According to National Review, on November 12, "Sasse walked into Mitch McConnell’s office to clear the air" and let him know he never intended to oppose McConnell's leadership, but McConnell was having none of it. The outlet notes that McConnell's incident with Sasse in his war with SCF is "notable" because "it involves an attractive, promising candidate in an open primary as collateral damage in the intramural fight."

Josh Holmes, McConnell’s top adviser, "privately told friends afterward it was the most uncomfortable meeting he’d been in"; Sasse reportedly turned to Holmes when he walked out of meeting and said, “That didn’t go well!”

McConnell reportedly "lit into" and grilled Sasse about "exactly when Sasse had first interacted with Matt Hoskins, the hard-charging executive director of SCF" who is "working to elect McConnell’s primary challenger." The SCF was started by former South Carolina Senator and current Heritage Foundation President Jim DeMint, who feuded with McConnell because he backed candidates--like Marco Rubio and Rand Paul--that went up against McConnell's handpicked candidates in Republican primaries.

McConnell reportedly asked Sasse about the YouTube video (embedded below) that was highlighted on the Drudge Report in September in which Sasse said it was time for “every Republican in Washington, starting with Minority Leader Mitch McConnell, to show some actual leadership.”

In that video, Sasse also ripped Washington's permanent political class, saying that elected officials are not kings and the American people are not "peasants." He said there is not "one set of rules for the Washington elite and another for the masses" and called on McConnell to show leadership and give up his Obamacare subsidies. The outlet also reported that "the bad blood between Sasse and McConnell escalated" when Sasse met with National Republican Senatorial Committee (NRSC) political director Ward Baker. 

McConnell, along with the Republican establishment like the NRSC, is mounting an organized effort against conservatives and Tea Partiers. For instance, McConnell, as Breitbart News reported, said he would like to punch the SCF "in the nose" on a conference call with donors of Karl Rove's political group on October 30. McConnell has taken steps to put his words into action; National Review reported that "pressure from McConnell allies convinced SCF’s bookkeeper, Lisa Lisker, to part ways with the group," even though "Lisker has previously worked for Republican candidates locked in tense primary elections without incident." McConnell has been accused of "bullying" the bookkeeper. 

Tea Party Patriots co-founder Jenny Beth Martin, in response to McConnell's hostile words, told Breitbart News, "Why would Senator Mitch McConnell want to ‘punch in the nose’ the millions of patriotic moms, grandmoms and veterans who stand up for America through the Tea Party and groups like the Senate Conservatives Fund?”

"The people supporting SCF are the same people going to Tea Party meetings and rallies across the country. We elect our representatives to represent us, not to threaten us with physical violence during secret meetings with Karl Rove’s friends," she told Breitbart's Matthew Boyle. She added that "everything" the Tea Party said “about Obamacare turned out to be true."

She continued, “If they’ve got so much fight in them, then where were they when we needed them to stand up and fight against Obamacare?” Martin also emphasized that the "Tea Party Patriots shares Senate Conservatives Fund’s goal of holding establishment Republicans accountable, and specifically, we shared the goal of defunding Obamacare."

McConnell has not endorsed Sasse's primary opponent in the race, but Sasse is being considered "collateral damage" in a fight he never wanted in McConnell's and the Republican establishment's broader war on conservative Tea Partiers and specifically against SCF.

Monopolistic supply? Thriving wealth-effect-driven demand?

 

As we noted previously,

Medallions – essentially the right to operate a for-hail taxi in New York City – now trade for as much as $1.3 million, an all-time record.   

 

Part of this dynamic is fixed supply – there are just 13,336 medallions available for a city of 8.3 million people.  There is also a macroeconomic point, with a stronger NYC economy for those inhabitants who can afford the service.  The more surprising observation, however, is that new technology in the form of in-car credit card machines and more recently smartphone hailing apps both materially increase the value of owning a medallion.  In a world where every technology is deemed “Disruptive”, here’s a case where the status quo has actually reaped much of the reward.

 

Via ConvergEx's Nick Colas,

Here’s a news flash for everyone who thinks Elon Musk Is the preeminent automotive visionary of our generation: New York City was running electric taxicabs in the 1890s, a decade before Henry Ford’s Model T ever turned a wheel on America’s roads.  A financial crisis in 1907 put a predictable dent in consumer demand for NYC cars-for-hire, and the rise of the internal combustion engine in the 1910s and 1920s eventually did away with the battery-powered cab in Gotham.  By the 1930s the city actually had a glut of taxis, by some accounts as many as 30,000 plying the streets for fares in a Depression-era New York.

To clean up the oversupply of increasingly poorly maintained cabs with drivers desperate to make ends meet in a lousy economy, Mayor Fiorello La Guardia signed something called the Haas Act, which limited the number of taxis to 16,900.  Over the years this cap dwindled to 11,787, even as the city’s population grew.  The basic rules behind this permit, called a “Medallion”, remain largely unchanged from La Guardia’s day, and include:

• The license to own and operate a taxicab.
• The ownership of the medallion may be sold or pledged as collateral for a loan.
• The exclusive right to accept street hails.
• Fares regulated and authorized by the NYC Taxi and Limousine Commission.
• Owners of medallions must be US citizens or permanent residents
• Independent medallion owners must operate their cab 210 nine-hour shifts a year
• Corporate owners must operate their cabs 24/7
• Inspections of the vehicle occur every 4 months
• Medallions sales are subject to a 5% transfer tax

As the number of medallions available is controlled by this process – there are only 13,336 on the streets today – they are quite valuable.  Since both individual and corporate owners can sell their medallions at will, there is a ready market for these licenses.  We’ve included several charts and tables with historical price information immediately after this note, but here are the highlights:

 

 

Owning a medallion has been a winning trade that even the NY hedge fund managers who likely take several cab trips a day would covet.  At the beginning of the Financial Crisis in January 2007, an “Individual” medallion went for $414,000 and a “Corporate” version for $522,000.  Now, the numbers are $1.05 million (July 2013 “Individual”) and $1.32 million (last trade for a “Corporate” medallion, May 2013).  That is an average return of 153% over the last six and a half years. 

 

The longer term track record for medallions is equally impressive – they went for just $140,000 or so in 1993 – but teasing out the actual reasons for these eye-popping returns takes some work.  Remember that the pricing economics of taxi cab operation – and therefore the value of owning a medallion – is controlled by regulation.  You can only charge so much per mile and for wait time.

 

We went back to 1948 to see if these statutory fares explained the increasing value of a medallion.  In that year, for example, a typical cab ride of 1.5 miles with 5 minutes of waiting time at lights would cost $0.63 and the cost of a medallion was $2,500.   It would therefore have taken the average medallion owner about 4,000 trips to pay for his license.  Fast forward to 1964, and this number rose to almost 30,000 trips because fare increases did not keep pace with medallion inflation.

 

 

The good news for the medallion owner of the 1960s-1990s was that this 30,000 trip breakeven declined to about 15,000 during the difficult period of the 1970s in the city and did not breach the 30,000 mark again until 1997.  Fare increases, in other words, offset the ever rising costs of a medallion.  Gas prices also play a role in taxi cab profitability, of course, but it is worth noting (and is clear from our data) that medallion prices did not decline as oil prices rose from 1973 to the present day.

 

Taxi medallion economics have seen a breakout since the early 2000s, as evidenced by our breakeven analysis based on current fare schedules.  It now takes almost 83,000 “Typical” 1.5 mile trips for an “Individual” medallion owner to break even, up from 42,700 in 2004.  For the corporate owner, those numbers rise to 115,600 – up from 48,600 nine years ago.

Now, if you’ve ever had the chance to meet a medallion owner, you know that these are very tough people when it comes to making money.  They know their numbers cold and aren’t shy about expressing their point of view.  In short, they make the typical Wall Streeter look like slightly pouty 8 year old.   Add to this fact the realization that NYC plans to auction off 2,000 new medallions this year AND introduce a new cheap ($1,500) livery license for the outer boroughs and northern Manhattan, and the fundamentals look pretty bewildering.

Here are a few thoughts on the “Mystery of the Million Dollar Medallion”:

 

 

Pricing for a cab ride may be regulated, but nothing says New Yorkers have to take the trip.  One interpretation of the breakout in medallion prices is that New York’s affluent classes have had their own step-up in income and/or wealth and are more often taking cabs than even in the 1990s.  A wrinkle on this explanation would be that as more of Manhattan and parts of Brooklyn go through gentrification, the total population of potential cab customers increases.  This further helps keep the 13,336 medallions busy through the day.  A survey from the mid 2000s showed that most cab rides occurred during the morning commute and were generally to midtown Manhattan from the Upper East and West Side.  As the areas where affluent New Yorker live and work expand, so does their usage of yellow cabs.

 

The increase in medallion prices to nose-bleed levels is, therefore, a sign that the New York economy is extremely strong at least among the top 20% of the population by income.  Remember that if 14,000 wealthy New Yorkers all stuck their hands up at the same time on their corner, over 500 of them would have to grab a MetroCard to get to work.  And the city has 8.3 million total inhabitants.

 

The introduction of in-car credit card processing has been a boon to cab drivers tips.  According to one analysis done in 2009, cash-only tips used to run 10% of the fare.  Since the credit card options for driver tips only offer choices of 20% or more, the introduction of these machines over the last few years has meant higher per-trip revenues for the driver.  And since part of the value of a medallion is essentially the right to collect these tips, it makes sense that drivers would pay medallion owners more over time.

 

Perhaps the most interesting wild card for the value of a NYC taxi medallion is the burgeoning technology of smartphone taxi applications like Hailo, Uber, Lyft and others.  These do pretty much what you’d expect – find you a nearby cab based with information from your geolocated phone.  This could easily improve cab utilization in New York quite dramatically, justifying higher medallion prices.  The first usage data from such apps has just come out in the past few weeks, and the results are lukewarm at best.  It is, however, early days. 

What I find most interesting about this exercise is the fact that technology – credit cards and smartphone apps – has served to enhance the value of established status quo rather than its customary role of “Disruptor”.  To understand why, remember who owns the right to issue a medallion: the New York City government.  The current plans to issue 2,000 more medallions could net the still cash-strapped city something like $2 billion over the next few years.  And they control the laws about who can – and can’t – pick up a fare in New York.  Think they are going to let a “Disruptive technology” alter their existing and highly lucrative model?

If so, I have a bridge in Brooklyn I would like to sell you.  All we need to do is find a taxi to take us there. 

Two excerpts from the article “The American Police State: A sociologist interrogates the criminal-justice system, and tries to stay out of the spotlight,” about the research of Alice Goffman, a sociologist at the University of Wisconsin-Madison:

1. Starting in the mid-1970s, the United States stiffened its laws on drugs and violent crime and ratcheted up the police presence on city streets. The number of people in American jails and prisons has risen fivefold over the past 40 years (see chart above). There are now roughly six million people under criminal-justice supervision. “In modern history,” Goffman writes, “only the forced labor camps of the former U.S.S.R. under Stalin approached these levels of penal confinement.”

2. The crackdown on the drug economy coincided with a welfare overhaul that cut aid to poor families. Those seeking work in the drug trade, says Goffman, were arrested “on a grand scale.” The prison population grew fivefold between the early 1970s and 2000.

More black men are ensnared in the criminal-justice system today than were enslaved before the Civil War. Goffman and others view the situation as a setback to the advances that African-Americans made in the civil-rights movement. One recent book calls mass incarceration “The New Jim Crow.”

Walter Olson

Today (Nov. 23) is Repudiation Day, a special holiday recognized by law in Frederick County, Maryland, where I live. In 1765, judges here “became the first to repudiate the British Stamp Act designed to maintain the costs of keeping British troops in America. [They] decided they were not going to charge the tax and refused to stamp the documents … The late Judge Edward Delaplaine called [them] the ‘12 immortal judges.’” More at the Wikipedia entry and in this 2006 column by Joe Volz at the Frederick News-Post (via Brian Griffiths, Red Maryland/Baltimore Sun). 

Can you think of any other holiday that celebrates judicial resistance to overweening government and onerous taxation? I can’t. 

Scientists claim blue light more effective than caffeine...


(Third column, 13th story, link)

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Senate Minority Leader Mitch McConnell said on a conference call organized by Karl Rove’s Crossroads organization for large donors and their advisers on Oct. 30 that the Tea Party movement, in his view, is a “nothing but a bunch of bullies” that he plans to “punch … in the nose.”

On the call, according to a donor who was on it, McConnell personally named Sens. Mike Lee (R-UT) and Ted Cruz (R-TX) as Tea Party conservatives he views as problematic for him. “The bulk of it was an attack on the Tea Party in general, Cruz in particular,” the source, a prominent donor, said in a phone interview with Breitbart News.

But the most memorable line came at the end of the call.

“McConnell said the Tea Party was ‘nothing but a bunch of bullies,’” the source said. “And he said ‘you know how you deal with schoolyard bullies? You punch them in the nose and that’s what we’re going to do.’”

Rove, as well as American Crossroads President and CEO Steven J. Law who also serves as the president of sister group Crossroads GPS, were also on the call. Rove “talked in a slightly gentler way, or let’s say, a more diplomatic way,” the source said. “But the message was pretty well the same: That if we’re going to save this thing, we have to back real Republicans.”

Pointing to how Senate Majority Leader Harry Reid just invoked the “nuclear option,” breaking 225-year old Senate rules to slip through President Obama’s liberal nominees, an aide to a Tea Party lawmaker said that McConnell’s focus on trying to go after the Tea Party has jeopardized Senate Republicans’ chances at actually beating Democrats. “Under Sen. McConnell's watch, Republicans today just got rolled over by Democrats who pushed the button on the nuclear option, destroying years of well-established Senate order,” the aide said in an email to Breitbart News. “Perhaps if he focused less on destroying the Tea Party and more on defeating Democrats, he'd have more to show for his leadership.”

Rove spokesman Jonathan Collegio denies that anything was said about Cruz, Lee, or the Tea Party in general but admits the call did take place and that “some discussion” about the government shutdown and the Senate Conservatives Fund took place.

“Your source is ascribing things to the call that simply were never said,” Collegio said in an email. “There was no ‘anti-tea party donor call.’ There was a call, and there was some discussion about the government shutdown and the Senate Conservatives Fund (note this was one day after SCF launched a dishonest ad about McConnell), but nothing about the Tea Party or Sens. Cruz or Lee.”

Collegio declined to provide a transcript or recording of the call to Breitbart News. McConnell’s office has not commented on the matter.

REPORT: McConnell Calls Tea Party 'Bunch of Bullies' who need a 'punch in nose'...


(Third column, 5th story, link)

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Everyone gather 'round as I regale you with a tale of stock exchange regulation and global finance bloggers!

Wait! Come back!

I'm sorry. Before your eyes glaze over again, let me entice you with a better opening sentence.

An American market blogger found himself on the receiving end of a 8,000 euro fine for quoting another blogger. In real money, that works out to an almost $11,000 fine. And all for quoting another blogger's best guess on a French bank's leverage ratio.

Mike "Mish" Shedlock is a US blogger who covers global markets and his story begins this way.

On August 15, 2011, I posted BNP Paribas leveraged 27:1; Société Générale Leveraged 50:1; Sorry State of Affairs of U.S. Banks; Global Financial System is Bankrupt

In that post I quoted Jean-Pierre Chevallier on his Business économiste monétariste béhavioriste blog, that BNP Paribas leveraged: 27!

I also cited Chevallier's Société Générale leveraged: 50!

Société Générale took exception to the numbers and came up with its own set of numbers. According to SG, its leverage was 9.3%.

Chevallier revamped his math after SG's initial noisemaking and Shedlock issued an addendum to his own post.

Société Générale disputes the numbers and new calculations using the banks' numbers are 28:1 or perhaps 23:1 not 50:1 as noted on Forex Crunch.

My position has not changed much. Something is seriously wrong at Société Générale. Banks do not plunge out of the blue on rumors. I do not know the precise leverage, but shares are acting as if Société Générale has severe capital constraints (which of course they will deny) and/or other major problems.

That only seemed to irritate SG more. It contacted the SEC and basically informed the American regulatory body that whatever numbers it's presented were to be taken as fact. The SEC passed this complaint on to Shedlock, adding (paraphrased by Shedlock) "French banks [are] notorious about filing frivolous complaints."

Shedlock received a few more letters (in French) which urged him to respond to the complaints (but only in French), which he duly ignored. Later, a French blogger compiling his own post on the issue (entitled: Gross Delirium: The AMF sanctions bloggers rather than financial corporations!) contacted Shedlock and offered his assistance. One of Shedlock's friends broke down the French bank's complaints into plain English.

The French authorities accuse Chevallier of 'knowingly disseminating false information' about SocGen and you to have disseminated it further on 'Chevallier's urging', although you should have known better and it was your duty to check if his numbers were right (that is the basis for fining him 10,000 and you 8,000 euros).

The French blogger's post pointed out that Chevallier didn't "falsify" anything. He merely used a standard calculation for leverage ratios, one that disregarded "risk weighting" of various assets. Shedlock himself found a Wall Street Journal article that put SG's leverage ratio at 23-24 times its equity, still considerably higher than SG's own figures.

None of this mattered to the French bank, which accused the bloggers' calculations of possibly "influencing" its share price. While the SEC may have passed on the complaint with an eyeroll, the AMF, which regulates the French stock market, took the accusations at face value and issued fines to both bloggers. Not that the AMF is going to have much luck collecting these fines. Chevallier is appealing the verdict and suing AFP (France's largest newspaper) for making "false and defamatory accusations." Shedlock, conversely, is doing nothing.

The Witch hunt is now over and I was fined nearly as much as Chevallier. It's absurd enough to fine someone for a quote, and even more so when the facts are accurate.

The AFM has no jurisdiction over me, so they won't collect. As a US citizen living in the US, I am not subject to the absurdities of French laws, or French witch hunts. All they get from me is a vow to never go to France.

Good idea, considering French law apparently provides regulatory bodies with the power to fine bloggers for publishing their opinions on French banks, even when these opinions are backed up by reasonable calculations. And Shedlock is almost certainly protected under the SPEECH Act, which protects Americans against foreign judgments that would violate the First Amendment here. There doesn't seem to be much "regulation" going on in this situation. (And any French legislation that touches on the internet is routinely terrible.) Conceivably, SG could leverage itself Lehman-style and financially beat into submission anyone who points out this fact by running and complaining to the nearest subservient "authority."

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Among the many dangers of America’s War on Drugs is that it has unleashed a tsunami of government power, led to a militarization of law enforcement agencies addicted to the funding that comes from waging the government’s war, filled America’s prisons with non-violent drug offenders, and resulted in assaults on the private property of innocent Americans through government abuses of civil forfeiture laws.  For example, the federal government recently used civil forfeiture laws to seize all of the money from a Detroit-area grocery store’s bank account and in 2009 seized a small, family-owned hotel in Massachusetts. In both of those cases, the small, family-owned businesses had no connection to drugs or the drug business, but became innocent victims of America’s War on Drugs the American People, Many of Whom Are Innocent.”

The latest innocent victim of America’s cruel, shameful and longest War is a 30-year old man named Norman Gurley, who was arrested this week for a “secret compartment full of nothing” as Reason described it, or for “not trafficking drugs” as Brian Anderson described. As the news video above explains it, Gurley was stopped for speeding in Ohio, but then state troopers arrested Gurley, confiscated his car, put him in jail, and charged him with a felony crime under the state’s new “hidden compartment” law. No drugs were found in Gurley’s vehicle or in his possession. Here’s how Brian Anderson describes what happened:

Taking a page from the Gestapo handbook, the state of Ohio has recently enacted a law that makes a certain type of modification on cars a felony. The “hidden compartment” law makes it illegal to create any type of secret stash within a vehicle, which could be used to transport controlled substances. It doesn’t matter if there are any illegal drugs present, just having the hidden compartment is grounds for arrest and a class 4 felony. 30-year old Norman Gurley will go down in history as the first person arrested under this Constitutionally abrasive law.

Clearly the state troopers had nothing more than the “illegal” compartment or they would have gleefully offered that evidence. This is a bad law and another reason why we should abandon our failed war on drugs. Our prisons are filled to capacity with people charged with nothing more than possession of drugs. Do we really need to spend more precious tax dollars to house people for possessing nothing?

In a related and tragic case that went to trial last year, see the Wired.com article “Alfred Anaya Put Secret Compartments in Cars. So the DEA Put Him in Prison.” Here’s a summary from a CD post in September:

Alfred Anaya was a genius at installing secret compartments in cars. If they were used to smuggle drugs without his knowledge, he figured that wasn’t his problem. He was wrong. The DEA put him in federal prison for more than 24 years with no possibility of parole. He’ll be 64 years old when he’s released from prison.

Bottom Line (modified from this quote about the “educational octopus“), inspired by Norman Gurley’s felony drug arrest for not trafficking drugs and Alfred Anaya cruel 24-year sentence for customizing cars:

The Drug War Octopus

A government-sponsored War on Drugs will increasingly foster and spread the doctrine of state supremacy as the War is waged on the citizenry. Once that doctrine of state supremacy has been accepted by the people, it becomes an almost superhuman task to break the stranglehold of the government’s War on Drugs over the life of the average, and many times, innocent citizen. The government’s Drug War has the citizen’s body, property, vehicles and mind in its clutches. An octopus would sooner release its prey. A tax-supported Drug War is the complete model of the totalitarian state.

RUSSELL SIMMONS: Obamacare has 'saved hundreds of thousands, if not millions of lives'...


(Third column, 7th story, link)

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Related stories:

Days before launch, website failed to handle even 500 users...
Connecticut only state enrolling more in private insurance than Medicaid...
Sticker shock hits health exchange shoppers...
Administration Extends Enrollment Deadline...

On John Goodman’s Health Policy Blog, John Graham has a post titled “Can You Hear Me Now? Another Health Market That Really Works” about the market-based, creative destruction that is disrupting the hearing aid industry. Advances in technology and market competition have dramatically lowered costs from $3,000 for a traditional hearing aid to only $3 for some online hearing apps.

The hearing aid industry has historically been high margin and low volume. Traditionally, the manufacturer would sell a pair of hearing aids to an audiologist for $1,000, earning a gross margin of 43%. At a retail price of $3,000, after buying the device and incurring sales and other costs, the audiologist’s gross margin has been 55%.

But that is all changing. Not only are online vendors and innovating hearing-aid manufacturers cutting costs and improving quality and service times, but digital developers are offering online hearing apps via iTunes and other virtual stores for less than $3.99 (and some for free or “freemium”).

It has taken a long time, but the price of hearing aids is in the process of falling dramatically. How has this happened? Technological innovation, of course, but there is more. There’s no shortage of technological innovation in U.S. health care. However, because third-party payers, that is, health insurers and governments, determine prices, there is no mechanism for customers to signal value to providers.

This is not the case for hearing aids: Although some states have mandated insurance coverage for hearing aids, this is usually limited to disabled children. The big market for hearing aids is seniors, and Medicare does not cover hearing aids. This is another case of a phenomenon observed elsewhere by NCPA Senior Fellow Devon Herrick: Where patients pay directly for medical care (cosmetic surgery and Lasik eye surgery), prices fall like they do in every other market.

Seniors who want highly personalized service from an audiologist in his own practice can get it, and they will pay for it. Those who want to order online can save money by doing that. Those who want to get their old hearing aids repaired can make that choice. And the most adventurous seniors, who don’t mind running an earpiece into an iPhone, can get a functional hearing aid almost for free. We are on the verge of enjoying universal access to hearing aids — but only because the government restrained itself from interfering and let the market operate.

Yesterday, we wrote about the DOJ responding to a FISA Court order that it declassify a FISA Court ruling on the interpretation of Section 215 of the PATRIOT Act (related to the bulk collection of metadata), in which the DOJ effectively told the court that it wasn't going to obey. This was the extent of the DOJ's reasoning:

After careful review of the Opinion by senior intelligence officials and the U.S. Department of Justice, the Executive Branch has determined that the Opinion should be withheld in full and a public version of the Opinion cannot be provided

Basically, yes you told us to declassify it, but we've decided that we won't. Now, of course, the FISA Court itself is well aware what's in that particular February ruling, and since it ordered it to be declassified, it doesn't seem to think there's a major reason to keep it secret. So, it took all of a day for the FISA Court to order the DOJ to at least explain itself better:

The government has provided no explanation of this conclusion.

Accordingly, it is hereby ORDERED that, no later than December 20, 2013, the government shall submit a detailed explanation of its conclusion that the Opinion is classified in full and cannot be made public, even in a redacted form.

Of course, in keeping with FISC tradition, this is a pretty tame response to the DOJ basically giving a giant middle finger to the FISC's earlier order. And, again, the FISC knows darn well what's in the ruling that the DOJ refuses to make public, because it's the FISC's own ruling. So they seem to think that there's good reason to declassify it. Hopefully, the FISC will actually, for once, stand up to the DOJ, but I'm not holding my breath.

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Jason Bedrick

Last week I noted that it was “long past time for the U.S. Department of Justice to drop its embarrassing lawsuit which would keep black kids in failing schools.” The Louisiana Department of Education released a study that completely undermined the DOJ’s case against the state’s school voucher program, showing that the program increased racial integration in most of the schools under federal desegregation orders and had a miniscule impact in the remainder.

Today, Michael Warren of the Weekly Standard reports that the DOJ has dropped part of its fight against school choice in Louisiana:

The Obama administration’s Justice Department has dropped a lawsuit aiming to stop a school voucher program in the state of Louisiana. A ruling Friday by a United States district court judge revealed that the federal government has “abandoned” its pursuit of an injunction against the Louisiana Scholarship Program, a state-funded voucher program designed to give students in failing public schools the opportunity to attend better performing public or private schools. 

“We are pleased that the Obama Administration has given up its attempt to end the Louisiana Scholarship Program with this absurd lawsuit,” said Louisiana governor Bobby Jindal, a Republican, in a statement. “It is great the Department of Justice has realized, at least for the time being, it has no authority to end equal opportunity of education for Louisiana children.”

The move may have resulted from the bad press or a sudden acceptance of common sense, but more likely it was a simply legal maneuver to prevent the Black Alliance for Educational Options and the Goldwater Institute, representing parents of voucher recipients, from intervening in the lawsuit as defendants. As Warren reports:

On Friday, Judge Ivan Lemelle of the U.S. district court of the Eastern District of Louisiana ruled the parents could not intervene in the case because the feds are “no longer seeking injunctive relief at this time.” Lemelle explained that in the intervening months since the Justice Department filed suit, it had made clear both in a supplemental filing and in its opposition to the parent group’s motion to intervene that it was not seeking in its suit to end the voucher program or take away vouchers from students.

Lemelle continued: “The Court reads these two statements as the United States abandoning its previous request that the Court ‘permanently enjoin the State from issuing any future voucher awards to students unless and until it obtains authorization from the federal court overseeing the applicable desegregation case.’”

Lemelle will hold an oral hearing on Friday, November 22, during which Justice will make its case for the federal review process of the voucher program. In his statement on Friday’s ruling, Jindal criticized the federal government’s efforts.

“The centerpiece of the Department of Justice’s ‘process’ is a requirement that the state may not tell parents, for 45 days, that their child has been awarded a scholarship while the department decides whether to object to the scholarship award. The obvious purpose of this gag order would be to prevent parents from learning that the Department of Justice might try to take their child’s scholarship away if it decides that the child is the wrong race,” said Jindal. “The updated Department of Justice request reeks of federal government intrusion that would put a tremendous burden on the state, along with parents and teachers who want to participate in school choice.”

In other words, the DOJ is still seeking the legal authority to prevent low-income kids from escaping failing public schools if the feds say they have the wrong skin color.

Not content with only enraging coffee connoisseurs, Keurig will soon be expanding its K-cup empire with a new line of instant soups that are sure to have foodies shaking their heads in disgust too. First to the market will be an instant version of Campbell's chicken and noodle soup, using a combination of a K-cup for the broth, and a separate packet for the dried noodles and veggies.

Read more...

Dear American Heart Association and American College of Cardiology:

I’m writing to thank you for issuing your new expanded guidelines on prescribing statins.  I must admit, I was hopping mad when I first read about them.  I mean seriously, we’re talking about a drug with lots of nasty side-effects that prevents maybe one heart attack (not necessarily one death) for every 100 people who take it – and that’s only for men who already have heart disease.   So you can understand my anger when I read paragraphs like these in an online article by New York Post:

The nation’s first new guidelines in a decade for preventing heart attacks and strokes call for twice as many Americans — one-third of all adults — to consider taking cholesterol-lowering statin drugs.

The guidelines, issued Tuesday by the American Heart Association and American College of Cardiology, are a big change. They offer doctors a new formula for estimating a patient’s risk that includes many factors besides a high cholesterol level, the main focus now. The formula includes age, gender, race and factors such as whether someone smokes.

“The emphasis is to try to treat more appropriately,” said Dr. Neil Stone, the Northwestern University doctor who headed the cholesterol guideline panel. “We’re going to give statins to those who are the most likely to benefit.”

Well heck, you guys, I knew even before I continued reading that “treat more appropriately” would somehow translate to “give statins to even more people.”  And you didn’t disappoint me:

Doctors say the new approach will limit how many people with low heart risks are put on statins simply because of a cholesterol number. Yet under the new advice, 33 million Americans — 44 percent of men and 22 percent of women — would meet the threshold to consider taking a statin. Under the current guidelines, statins are recommended for only about 15 percent of adults.

Only about 15 percent of adults may not sound like much, but as you and I both know, that’s only because adults includes people in their twenties and thirties.  One-fourth of American adults over the age of 45 are already taking statins, and since I read elsewhere that the new guidelines could double the number of statin-takers, I figure that means your long-term goal is to sell statins to at least half of the over-45 population.  We all know why:

Roughly half the cholesterol panel members have financial ties to makers of heart drugs, but panel leaders said no one with industry connections could vote on the recommendations.

“It is practically impossible to find a large group of outside experts in the field who have no relationships to industry,” said Dr. George Mensah of the heart institute. He called the guidelines “a very important step forward” based on solid evidence, and said the public should trust them.

Riiiiiight, we should all trust the panel of experts who have financial ties to statin-makers.  I’ll rank that one right up there with “Read my lips – no new taxes!” and “If you like your current healthcare plan, you can keep it – period!”  If any of you members of the panel ever decide to give up medicine, you should seriously consider running for office.

Anyway, as if I weren’t already suspicious enough of the new guidelines, I read these tidbits in a New York Times article online:

Last week, the nation’s leading heart organizations released a sweeping new set of guidelines for lowering cholesterol, along with an online calculator meant to help doctors assess risks and treatment options. But, in a major embarrassment to the health groups, the calculator appears to greatly overestimate risk, so much so that it could mistakenly suggest that millions more people are candidates for statin drugs.

Mistakenly suggest? Heh-heh-heh … as we programmers like to say, “That’s not a bug.  That’s a feature.”

The problems were identified by two Harvard Medical School professors whose findings will be published Tuesday in a commentary in The Lancet, a major medical journal. The professors, Dr. Paul M. Ridker and Dr. Nancy Cook, had pointed out the problems a year earlier when the National Institutes of Health’s National Heart, Lung, and Blood Institute, which originally was developing the guidelines, sent a draft to each professor independently to review.

This week, after they saw the guidelines and the calculator, Dr. Ridker and Dr. Cook evaluated it using three large studies that involved thousands of people and continued for at least a decade. They knew the subjects’ characteristics at the start — their ages, whether they smoked, their cholesterol levels, their blood pressures. Then they asked how many had heart attacks or strokes in the next 10 years and how many would the risk calculator predict.  The answer was that the calculator overpredicted risk by 75 to 150 percent, depending on the population.

On Saturday night, members of the association and the college of cardiology held a hastily called closed-door meeting with Dr. Ridker, who directs the Center for Cardiovascular Disease Prevention at Brigham and Women’s Hospital in Boston. He showed them his data and pointed out the problem. On Sunday, officials from the organizations struggled with how to respond.

Here’s how I’d suggest you respond:

“What we said was that if you like your insurance, you can keep your insurance, period, as long as it meets certain conditions we’ll write into the law later.  And besides, it wasn’t the law we passed that canceled your insurance; it was your insurance company.  And we actually did you a favor by passing a law that canceled your insurance because your insurance was substandard.  But even though it wasn’t the law we passed that canceled your lousy insurance and we actually did you a favor by canceling your lousy insurance, we’re now going to fix the law we passed that didn’t cancel your lousy insurance so you can keep your lousy insurance for another year.”

Wait … sorry.  That was my advice to someone else who got caught lying.  In your case, I’d suggest going with something like “Dr. Ridker’s study subjects didn’t have nearly as many heart attacks as our risk calculator predicted because he accidentally studied unusually healthy people.”

The chairmen of the guidelines panel said they believed the three populations Dr. Ridker and Dr. Cook examined were unusually healthy and so their heart attack and stroke rates might be lower than expected.

Good work.

Anyway, the New York Times article goes on to explain that under the new guidelines, “your average healthy Joe” would end up being told to take statins.  And that’s why, in spite of my initial anger over your brazen attempt to sell more statins, I’m now writing to thank you.

What prompted my change of heart (pun intended) was receiving an email from someone who liked one of my old blog posts – the one in which I thanked the USDA for giving my kids a competitive advantage in life by ordering schools to serve crappy grain-based meals to the other kids and thus suppress their brain development.  That in turn got me thinking about the movie Idiocracy, in which a soldier with an average IQ participates in a botched experiment and wakes up hundreds of years later to discover that he’s now the smartest guy on the planet.

That’s when I realized how much your new guidelines will benefit me personally.  You see, as a software programmer, I’m what’s known as a “knowledge worker.”   My livelihood depends entirely on my ability to memorize, conceptualize, and think my way through complex problems.  In my field, experience is considered a major asset, largely because solving a software problem often involves recalling how we solved a similar problem in the past.  It’s no coincidence that most of the other programmers I work with are in their 40s or 50s.

So as I was chuckling to myself about a couple of the scenes in Idiocracy, it occurred to me:  How much more valuable would I be if my fellow programmers all started taking statins and became a bit stupid?  Give them a few years on a high dose of Lipitor, and I daresay I could triple my billing rate.  I’d be the only one remaining with enough cognitive ability to tackle the really tough assignments.

I could probably even get away with relaxing my programming standards.  Since I’m not a government contractor, I test and test and test the software I design before rolling it out – partly because I’m persnickety by nature, but largely because in private industries, people who launch mission-critical software systems that crash and burn tend to get fired.  But if your new treatment guidelines convince everyone over age 45 to start taking statins, I’m pretty sure I could avoid the blame for any lousy software I created.  I suspect the conversations would go something like this:

“Naughton!”

“Yes, boss?”

“The foreign incoming royalties module of the payment distribution system keeps crashing!  Did you write that module?”

“Well, I … uh … No, sir.  It was Crockett.”

“Crockett!”

“Yes, sir?”

“Did you write the foreign incoming royalties module?”

“Uh … I don’t remember.  Maybe.”

“Well, fix it!”

“But I don’t remember the logic.”

“Well, damnit, get Naughton to help you.”

“If I’m going to help Crockett fix the mess he made, I’m going to need another bump in my billing rate.”

“Yeah, yeah, okay.  Just promise you won’t quit.”

So while I know providing me with job security wasn’t your intention, I’m grateful nonetheless.

By the way, would it be possible for you to convince the federal government to subsidize statins and provide them to needy people in the developing world, sort of like the USDA does with grains?  It would be awesome to know I won’t lose my programming gig to some guy in India.

Juan Carlos Hidalgo

Chile went to the polls yesterday in what was perhaps the most important presidential election since the return of democracy in 1990. Many foreign observers focused on the curiosity that the two leading candidates were both daughters of Air Force generals who chose opposing sides during the military coup that toppled socialist president Salvador Allende in 1973. But what is at stake in this election wasn’t Chile’s past, but its future.

Let’s first recapitulate where Chile stands today: Thanks to the free market reforms implemented since 1975 by the military government of Augusto Pinochet – that were subsequently deepened by the democratic center-left governments that ruled the country since 1990 – Chile can boast the following accomplishments:

• It’s the freest economy in Latin America and it stands 11^th in the world (ahead of the United States) in the Economic Freedom of the World report.
• It has more than tripled its income per capita since 1990 to $19,100 (PPP), which is the highest in Latin America.
• According to the IMF, by 2017 Chile will reach an income per capita of $23,800, which is the official threshold to become a developed country.
• According to the UN Economic Commission on Latin America and the Caribbean (ECLAC), Chile has the most impressive poverty reduction record in Latin America in the last two decades. The poverty rate went down from 45% in the mid-1980s to 11% in 2011, the lowest in the region.
• It has the strongest democratic institutions of Latin America according to the Rule of Law Index of the World Justice Project.
• It’s the least corrupt country in Latin America according to Transparency International.
• Along with Costa Rica and Uruguay, it has the best record in Latin America on political rights and civil liberties, according to Freedom House.
• High income inequality, which has always been a sore in the eyes of many, has decreased in the last decade.

With such an impressive record, it’s quite puzzling that the leading candidate, former president Michelle Bachelet, is running again under a platform calling for changes that would significantly alter the Chilean model by increasing the role of the government in the economy. In particular, Bachelet is proposing free higher education to everyone, the abolition of for-profit private schools and universities, the introduction of a state-owned pension fund in the country’s private pension system, higher taxes on businesses and professionals, and even a new constitution.

Bachelet came in first in yesterday’s election with 46.7% of the vote – short of the 50% necessary to avoid a runoff. On December 15^th she’ll have to face again the center-right candidate Evelyn Matthei who came in second with 25%.

It’s very likely that Bachelet will win the runoff, but her governing coalition – which for the first time includes the Communist Party – came short of the two-thirds majority needed to change the constitution. However, her coalition does have enough votes to push for her legislative initiatives on taxes, education and pensions.

It is worth noting that, despite talk of Bachelet enjoying massive support among Chileans, not only did she fail to avoid a runoff, but she actually received fewer votes yesterday (3,070,012) than what she got in the first round of 2005 (3,190,691). A lot has to do with the fact that yesterday’s was Chile’s first presidential election with voluntary voting. Approximately 50% of Chileans able to vote didn’t show up to the polls. This means that Bachelet received the vote of only 22% of registered voters, hardly an overwhelming mandate for radical changes.

This doesn’t mean that Bachelet won’t push for those changes though. After all, her coalition captured a majority of the seats in Congress. Unfortunately, a large segment of Chile’s society seems to suffer from a “high expectations trap,” which involves the danger that a false sense of prosperity sets in before the country actually becomes rich. What we have seen in recent years is that new middle class has become the driving force behind demands for the further expansion of the welfare state.

The future of the successful Chilean model will be at stake in the next 4 years.

Jeffrey A. Miron

Only a heartless libertarian could possibly object to bans on child labor, right? After all, no one wants to live in some Dickensian dystopia in which children toil endlessly under brutal conditions.

Unless, of course, bans harm, rather than help, both children and their families. And in a new working paper, economists Prashant Bharadwaj (UCSD), Leah Lakdawala (Michigan State), and Nicholas Li (Toronto), find just that.  They

… examine the consequences of India’s landmark legislation against child labor, the Child Labor (Prohibition and Regulation) Act of 1986. … [and] show that child wages decrease and child labor increases after the ban. These results are consistent with a theoretical model … in which families use child labor to reach subsistence constraints and where child wages decrease in response to bans, leading poor families to utilize more child labor. The increase in child labor comes at the expense of reduced school enrollment.

And it gets worse.  The authors

… also examine the effects of the ban at the household level. Using linked consumption and expenditure data, [they] find that along various margins of household expenditure, consumption, calorie intake and asset holdings, households are worse off after the ban.

Good intentions are just that; intentions, not results.  The law of unintended consequences should never be ignored.

America’s Energy Advantage (AEA), a group of US chemical companies and manufacturers that use lots of natural gas as an energy source and feedstock, warns that we have entered a “danger zone” of higher gas prices, and the trade group wants to restrict the exports of natural gas. In a letter sent to the Department of Energy last week, AEA recommends that “the Department should suspend its disposition of liquefied natural gas (LNG) export applications and assess the implications of further approvals on the public interest, before lasting harm is done to our economy.”

Further, the trade association argues that:

The benefits of this newfound natural gas abundance to our economy – robust job creation, manufacturing investment, affordable consumer prices and lower utility bills – are in the public interest of all Americans, and the export volume of this valuable national resource should be considered in this light. American consumers and job creators should have first claim on this natural resource.

Wow, who’d a-thunk it? A coalition of corporate-welfare-seeking crony capitalists engages in rent-seeking to preserve and enhance their own corporate profits, but repackages and presents their efforts as a noble quest for the public interest.

Further, these crony capitalists love unrestricted access to the global marketplace and overseas markets when that access benefits them and increases their sales and profits. But then those same multinational companies suddenly turn protectionist and engage in rent-seeking activities to restrict or limit access to overseas markets for other US companies, when those export restrictions benefit and enhance the profitability of a small group of well-organized American manufacturers.

It’s truly shameful that the companies in AEA are wastefully spending resources to make the case that they are somehow have a claim to the resources (natural gas) that belong to other US companies who have extracted those resources from miles below the ground, that AEA members didn’t invest a penny of their own capital to produce, and that AEA members didn’t employ a single worker to develop.